Ministerial Decision No. 301 of 2024: Tax Group Provisions under UAE Corporate Tax Law (Effective from 10 December 2024)
Date of Issue: 9 December 2024
Effective Date: 10 December 2024
The UAE Ministry of Finance has issued Ministerial Decision No. 301 of 2024, providing comprehensive rules for the formation, operation, and management of Tax Groups under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law). This Decision replaces Ministerial Decision No. 125 of 2023 and is effective for Tax Periods starting on or after 1 January 2025.
Key Highlights of Ministerial Decision No. 301 of 2024:
1. Formation and Continuity of Tax Groups
- Tax Groups can be formed by a Parent Company and one or more Subsidiaries, provided they are Resident Persons and not tax residents elsewhere.
- Ownership requirements must be continuously met during the Tax Period.
- Share capital includes nominal issued and paid-up capital, Membership, or Partnership Capital.
2. Resident Person Requirement
- All members must be Resident Persons under UAE law and not tax residents in other jurisdictions.
- If a member becomes a tax resident elsewhere, they are deemed to exit the Tax Group from the start of that Tax Period.
3. Transactions Prior to Forming/Joining Tax Groups
- Transactions that led to deductible losses prior to joining a Tax Group will not be eliminated until such losses are reversed.
- Tax Groups must account for income related to these transactions up to the amount of the prior deducted loss.
4. Application and Effective Dates of Tax Group Formation
- Applications to form or join a Tax Group must be submitted before the end of the relevant Tax Period.
- Newly established entities may join an existing Tax Group from the date of incorporation if qualifying as a Subsidiary or replacing Parent Company.
5. Treatment of Assets, Liabilities, and Financial Position
- Internal transactions between group members, including valuation adjustments and provisions, must be properly accounted for under Tax Group provisions.
6. Utilization of Pre-Grouping Tax Losses
- Pre-Grouping Tax Losses may be utilized to offset Taxable Income, limited to:
- – The Taxable Income attributable to the Subsidiary.
- – The maximum amount allowable under Corporate Tax Law.
- Unused Tax Losses can be carried forward and must be used before Tax Group’s own carried forward losses.
- Provisions are included for the forfeiture of unutilized losses under specific conditions.
7. Transfer Pricing and Arm’s Length Principles
- Tax Groups must calculate and disclose Taxable Income attributable to specific members where:
- – Pre-Grouping Tax Losses or Net Interest Expenditure are being utilized.
- – New members join an existing Tax Group.
- – Members benefit from tax incentives.
- Failure to comply may result in forfeiture of pre-Grouping Tax Losses and Net Interest Expenditure.
8. Business Restructuring within Tax Groups
- Business transfers within Tax Groups, including complete transfers of business, are covered, ensuring continuity of Tax Groups under specific scenarios.
- No need to elect for Business Restructuring Relief when applicable under these provisions.
9. Intra-Group Transactions and Business Restructuring
- Transfers of assets or liabilities within a Tax Group that would qualify for relief under normal rules are disregarded for tax purposes, as though tax-neutral transfers apply automatically.
10. Notification and Compliance
- Tax Groups must notify the Federal Tax Authority (FTA) within 20 business days when:
- – A Subsidiary exits the Tax Group.
- – The Tax Group ceases to exist due to non-compliance with qualifying conditions.
11. Financial Statements on Exit or Dissolution
- Members leaving a Tax Group or upon dissolution must prepare standalone Financial Statements, adopting the same accounting basis as the Tax Group and using the Tax Group’s carrying values as opening balances.
12. Repeals and Transitional Provisions
- Ministerial Decision No. 125 of 2023 is repealed but continues to apply for Tax Periods before 1 January 2025.
- Ministerial Decision No. 301 of 2024 applies from Tax Periods commencing on or after 1 January 2025.
Conclusion:
Ministerial Decision No. 301 of 2024 offers clarity and enhanced governance for Tax Groups under UAE Corporate Tax Law, providing businesses with a structured framework for group taxation, loss utilization, internal transactions, and restructuring. Businesses considering Tax Group formation should review eligibility, ownership structures, and compliance requirements in light of this Decision to optimize tax efficiencies while ensuring adherence to legal provisions.
KGRN Chartered Accountants is ready to assist businesses with Tax Group formation, compliance planning, restructuring advice, and ongoing Corporate Tax obligations. Contact us for detailed assistance and advisory services.
