Key Updates on UAE Tax Groups – Ministerial Decision No. 301

The UAE Ministry of Finance (MoF) introduced Ministerial Decision No. 301 of 2024, effective for tax periods commencing on or after 1 January 2025, to provide clearer guidelines for tax groups under the UAE Corporate Tax Law. This decision revises and clarifies provisions from Ministerial Decision No. 125 of 2023, offering critical insights for businesses operating as tax groups.

Here are the key updates and their implications for businesses:

Key Highlights

• Applicability: This decision applies to tax periods starting on or after 1st January 2025, superseding Ministerial Decision No.125 of 2023. However, the previous decision will continue to apply to tax periods that commenced before 1st January 2025.

• Definitions Update: This decision updates to include a clear definition of "Financial Statements," which includes the complete set of financial reports including income, comprehensive income, balance sheet, changes in equity, and cash flow statement.

• Revised Resident Person Definition: The decision updates the term "Resident Person" by removing the references to documentation requirements for foreign juridical persons or UAE entities with effective management abroad.

• Formation and Joining of Tax Groups: The decision emphasizes that applications to form or join a tax group must be submitted before the end of the relevant tax period.

• Utilization of Pre-Grouping Tax Losses: This decision clarifies that businesses must utilize to the fullest extent possible pre-grouping tax losses before carrying forward any remaining balances. This change ensures that tax groups benefit fully from their tax losses.

• Arm’s Length Principle and Transfer Pricing: Updates to transfer pricing documentation requirements now specify that the taxable income for any new member joining the group must be calculated if the group has unused tax losses. Additionally, the previous provision related to foreign tax credits has been removed.

• Forfeiture of Net Interest Expenditure (NIE): The new decision outlines stricter rules regarding the forfeiture of carried-forward NIE. Specifically, if a tax group (1) fails to calculate the taxable income attributable to a group member and (2) utilizes less pre-grouping NIE than could have been applied under Article 30, then the carried-forward NIE of that member will be forfeited. Both conditions must occur simultaneously for the forfeiture to apply.

Key Takeaways

This decision brings much-needed clarity and additional rules for managing tax groups under the UAE Corporate Tax Law. Businesses should pay close attention to these updates, especially regarding the utilization of pre-grouping tax losses and the forfeiture of unused Net Interest Expenditure. Proper management of these changes will be crucial for maximizing tax benefits and ensuring compliance with the law.Clarifications must relate to:

What You Should Do Next

Businesses operating as tax groups should review the updated provisions in this decision and assess how they affect their current structures and tax positions. It is important to ensure that applications for joining or forming a tax group are submitted on time and to revisit any strategies around tax loss utilization and NIE management.

For businesses seeking assistance in navigating these changes or ensuring compliance with the new rules, AMCA is here to help. Our expert tax advisors are ready to assist you in understanding the implications of this decision and optimizing your tax strategy under the UAE Corporate Tax Law.

Contact AMCA today to discuss how we can help you manage your tax group’s obligations and maximize your benefits under the updated provisions.

For further clarification or assistance with your tax group management, get in touch with AMCA to ensure your business is fully compliant and prepared for the upcoming changes.