The UAE Ministry of Finance (MoF) announced amendments to Ministerial Decisions under Federal Decree-Law No. 47 of 2022 on Corporate Taxation. The Ministerial Decision No. (301) of 2024 on Tax Groups and Ministerial Decision No. (302) of 2024 on Participation Exemption and Foreign Permanent Establishment Exemption introduces key provisions for businesses forming Tax Groups. These amendments will be effective for tax periods starting on or after January 1, 2025.
These amendments offer significant administrative reliefs, and essential clarifications to simplify compliance requirements, enhance tax procedures, and strengthen the UAE’s position as global business hub.
Simplified Tax Obligations for Foreign Juridical Persons and UAE-based Juridical Persons
The key provisions of the amendments to ministerial decisions simplified the compliance obligations for foreign juridical persons deemed as UAE resident persons and UAE-based juridical persons, streamlining the compliance processes to verify that they are non-tax residents in other countries or jurisdictions.
Clarification on Tax Group Income Calculation
The amendments clarify the instances under which the Tax Groups are required to calculate the taxable income of one of their members under the arm’s length principle. The requirement to calculate such income will be eliminated if the income of the tax group is eligible for Foreign Tax Credit. In addition, tax groups can also be permitted to relinquish their pre-grouping tax losses offering flexibility and reducing compliance burdens for tax groups under Corporate Tax regulations.
Assurance For Double Taxation Prevention on Participation Exemption
The updated participation exemption regulations ensure income generated from ownership transfers under Qualifying Group or Business Restructuring relief will be prevented from double taxation, even in circumstances where clawback provisions apply.
Moreover, the asset test of participation exemption Article 23(2)(d) will only be applicable for related parties, lightening the load for businesses that invest in funds or similar structures.
The amendments also clarify adjustments to tax losses incurred due to Participations, to determine they are included or excluded in the Tax Group and provide guidance on treatment of liquidation losses.
Treatment of Foreign Permanent Establishments
For foreign permanent established, it is stated that the assets and liabilities that are transferred to entities will be able to benefit from participation exemption only if the profits of the participation fully counterbalance the Permanent Establishment’s aggregate tax losses, harmonizing the treatment of all participants and enhancing equity under the corporate tax regulations.
The under-secretary of the Ministry of Finance, Younis Haji AlKhoori, stated, “These amendments reaffirm the UAE’s commitment to enhancing a dynamic and investor-friendly tax environment, simplifying compliance, and increasing growth opportunities. This approach strengthens the UAE’s position as a leading global hub for business and investment.”
The UAE’s ongoing efforts showcase its accountability to align with international tax standards, and strengthen tax procedures, while at the same time encouraging businesses by offering a supportive framework for growth, economic diversification and development.
