02 Jan 2025
The UAE Ministry of Finance has announced significant amendments to the existing Ministerial Decisions by releasing the updated Ministerial Decision No. (301) of 2024 concerning Tax Groups and an updated Ministerial Decision No. (302) of 2024 regarding the Participation Exemption and Foreign Permanent Establishment Exemption for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. These updates are part of the UAE’s commitment to reinforce its position as a global business hub by simplifying tax processes and enhancing compliance measures for businesses under the Corporate Tax regime.
Effective for Tax Periods commencing on or after 1 January 2025, the updated Ministerial Decisions offer significant clarifications and administrative relief for businesses forming Tax Groups. These amendments aim to ease the compliance burden for businesses, particularly those forming Tax Groups, by simplifying the requirements for foreign juridical persons that are considered Resident Persons in the UAE, as well as juridical persons established in the UAE but that are effectively managed and controlled outside the UAE, by facilitating the compliance procedures required to demonstrate that they are not tax residents in another jurisdiction. The changes ensure that businesses with foreign permanent establishments or ownership transfers will benefit from clearer tax guidelines, reducing the risks of double taxation.
Key Highlights
- Tax Groups: The updated decision clarifies the situations in which Tax Groups must calculate taxable income attributed to one of their members in line with the arm's length principle. Notably, the requirement to calculate such income is removed if the Tax Group earns income eligible for a Foreign Tax Credit. Additionally, Tax Groups with Pre-Grouping Tax Losses may opt to forfeit these losses, offering greater flexibility and reducing compliance burdens under the Corporate Tax regime.
- Participation Exemption: The updated decision ensures that income involved in ownership transfers under Qualifying Group Relief or Business Restructuring Relief will not be subject to double taxation, even in cases where claw-back provisions apply.
- Foreign Permanent Establishments: The Foreign Permanent Establishments whose assets and liabilities are transferred to companies can benefit from the Participation Exemption only after the Participation’s profits have fully offset the aggregate tax losses of the Permanent Establishment, aligning their treatment with other Participations and enhancing the equity of the Corporate Tax regime.
These changes are expected to provide relief to businesses, making the UAE even more attractive for both local and international investments.
At AMCA, we stay on top of the latest regulatory changes to ensure our clients navigate the evolving landscape efficiently. Whether you are preparing for the new tax measures or need assistance with compliance, AMCA is here to help.
Stay ahead of the latest tax changes! Contact AMCA today for a free 30-minute consultation call and ensure your business is fully compliant with the new regulations.
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