The Ministry of Finance issued recent updates in regards to the New Corporate Tax regime.
The UAE Ministry of Finance has issued Ministerial Decision No (125) of 2023 on Tax Grouping
The UAE Parent Company must own at least 95% of the voting rights and shares in each UAE
All members of the tax group must be considered UAE residents for Corporate Tax purposes.
Forming a Tax Group simplifies the calculation and reporting of Taxable Income
• The Parent Company can file a single Tax Return based on the aggregated taxable profit or
loss of the group
• Transactions between the members of the Tax Group are generally disregarded.
The UAE Ministry of Finance has issued Ministerial Decision No (126) of 2023 on General
Interest Deduction Limitation Rule
The net interest expenditure that can be deducted is capped at the higher of 30% of adjusted
earnings before interest, tax depreciation, and amortisation (EBITDA); or safe harbour amount
of 12 million.
Tax Groups with members who are banks and/or insurance providers must exclude these
members income and expenditure when determining the 30% EBITDA threshold.
• Long-term infrastructure projects meeting relevant conditions will not face restrictions on
interest expenditure deductibility.
• Interest incurred on debt instruments entered into before the Law was published to the
general public on 9 December 2022 will not be subject to the limitation rule.
The UAE Ministry of Finance has issued Ministerial Decision No (127) of 2023 on
Unless an election is made, an Unincorporated Partnership will not be considered a taxable
person in its own right provided it is not a Juridical Person (corporate entity)
Where an Unincorporated Partnership elects to be treated as a Taxable Person in its own right,
its decision is irrevocable once approved, and any change in the partnership composition must
be notified to the Federal Tax Authority within 20 business days.
• For a Family Foundation to be treated as an Unincorporated Partnership where one or more
of its beneficiaries are public benefit entities, it must confirm that either the public benefit
entity does not derive income treated as Taxable Income.
• Or if they do, that such income is distributed to the respective beneficiaries within six months
from the end of the relevant Tax Period.
The Ministry of Finance has announced Ministerial Decision No (120) of 2023 on Transitional Rules for Corporate Tax. The decision applies to certain assets and liabilities held by businesses before the Corporate Tax Law comes into effect, such as:
a. Immovable property
b. Intangible assets
c. Financial assets
d. Financial liabilities
Businesses can adjust their tax treatment of assets and liabilities based on specific rules and must decide how to do that when they submit their first Tax Return Their choice would be permanent except in special circumstances
There is further flexibility for the real estate sector Companies with immovable property recorded on a historical cost basis, before the Corporate Tax comes into effect, can select the basis of relief, using either a time appointment method; or bvaluation method
The Ministry of Finance issues Ministerial Decision No. (83) of 2023 on Situations where the Presence of Natural Persons in the UAE Could/Could Not Give Rise to a Permanent Establishment for the Non Resident Person for the purposes of Corporate Tax, those situation include:
a. Their presence is due to unforeseen temporary exceptional circumstances; and where they have no intention of staying in the UAE once these circumstances cease.
b. The decision further specifies – What constitutes a temporary and exceptional presence in
c. The decision aims to – Provide further clarity and prevent tax avoidance and double non taxation in alignment with global best practices
The Ministry of Finance has announced Ministerial Decision No (97) of 2023 on The Requirements of Maintaining Transfer Pricing Documentation.
Federal Decree Law No (47) of 2023 on the Taxation of Corporations and Businesses enforces transfer pricing rules and documentation requirements to ensure that the pricing of transactions between related parties and connected persons, such as companies that are part of the same multinational enterprise (MNE) group, are not influenced by their relationships.
The Decision specifies instances where taxpayers must maintain transfer pricing documentation, specifically a master file and a local file:
a. Including if they have revenues in a relevant tax period of at least AED200 million.
b. Or they are part of a MNE group with a total consolidated group revenue of at least AED 3.15 billion in the relevant tax period.
The Ministry of Finance has announced the issuance of UAE Cabinet Decision No. (49) of 2023 on Treatment of Resident and Non-resident Individuals Undertaking a Business or Business Activity, for Corporate Tax Law purposes, the decision aims to:
a. Clarify the application of the Corporate Tax regime for individuals
b. Ensure that only business or business-related activity income is taxed.
The decision also clarifies that:
The Ministry of Finance has announced Ministerial Decision No (105) of 2023 on Determination of Conditions under which a Person may continue or Continue or Cease to be Deemed an Exempt Person.
The rules to ensure that businesses remain eligible for a Corporate Tax exemption:
The steps to apply for Corporate Tax Exemption:
The Ministerial Decision addresses cases where a business no longer meets exemption conditions primarily to gain a corporate tax advantage. In such cases, the business will cease to be considered exempt on the date it no longer fulfils the exemption conditions.
The Ministry of Finance has announced Ministerial Decision No (116) of 2023 on Participation Exemption The decision provides for Corporate Tax exemptions on:
The exemption applies if:
The Ministry of Finance has announced Ministerial Decision No (115) of 2023 on Pensions and Social Security Funds
The decision sets out further conditions for private regulated pensions funds and social security funds in the UAE to be exempt from Corporate Tax
The Ministry of Finance has announced Ministerial Decision No (114) of 2023 on Accounting Standards and Methods.
The decision provides clear guidelines for businesses preparing their Financial Statements that will be used as the starting point to calculate taxable income for Corporate Tax purposes.
This article was published on 30 May 2023
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