The Ministry of Finance (MoF) has issued amendments to Ministerial Decisions on Tax Groups and Participation and Foreign Permanent Establishment Exemptions under Federal Decree-Law No. 47 of 2022 on Corporate Taxation. The updated decisions, No. 301 of 2024 and No. 302 of 2024, introduce administrative reliefs and clarifications to enhance compliance and strengthen the UAE's reputation as a global business hub.
Key updates apply to Tax Periods starting from January 1, 2025, and include:
Tax Groups
- Simplified Compliance: Eases requirements for foreign juridical persons considered UAE residents and UAE-established entities managed outside the UAE to prove non-tax residency in other jurisdictions.
- Arm’s Length Principle: Removes the need to calculate taxable income using this principle if the Tax Group earns income eligible for a Foreign Tax Credit.
- Pre-Grouping Tax Losses: Offers flexibility for Tax Groups to forfeit such losses, reducing compliance burdens.
Participation and Foreign Permanent Establishment Exemptions
- Double Taxation Relief: Ensures income from ownership transfers under Qualifying Group Relief or Business Restructuring Relief is not double-taxed, even when claw-back provisions apply.
- Asset Test Adjustment: Limits the asset test for the Participation Exemption (Article 23(2)(d)) to related parties, simplifying compliance for businesses investing in funds and similar structures.
- Loss Treatment Guidance: Clarifies tax loss adjustments for Participations within or outside a Tax Group and liquidation loss treatment.
- Permanent Establishment Exemptions: Specifies that tax losses of a foreign Permanent Establishment must be fully offset before its transferred profits can benefit from the Participation Exemption.
Younis Haji AlKhoori, Under-Secretary of the MoF, emphasized that the amendments simplify compliance, reduce administrative burdens, and foster a dynamic, investor-friendly tax environment, further cementing the UAE's status as a global business and investment hub.
News Source: Emirates News Agency
