The Ministry of Finance has published Ministerial Decisions No. (301) and No. (302) of 2024 that introduce significant changes to Tax Groups and Participation Exemptions under Federal Decree-Law No. 47 of 2022 on Corporate Tax. Effective for tax periods commencing on or after 1 January 2025, these updates seek to improve compliance and sustain the reputation of the UAE as a global business hub.
PC: Arabian Business
Key Tax Groups Changes
The recent amendments have streamlined various provisions related to the calculation of taxable income for Tax Groups. One significant change is the removal of the application of the arm’s length principle under the Foreign Tax Credits, which effectively reduces the compliance burden on organizations. In addition, the amendments now allow Tax Groups to surrender pre-grouping tax losses, providing enhanced administrative relief and making the overall process more efficient. These changes are also discussed in relation to the participation exemptions, which have been further refined.
Enhancements to Participation Exemptions for Shareholders
The amendments also provide much-needed clarification on the Participation Exemptions. Key provisions have been introduced to ensure that income arising from ownership transfers will no longer be subject to double taxation, addressing a major concern for businesses. Furthermore, the amendments offer greater clarity on the asset test requirements and provide specific guidance on the treatment of losses incurred during liquidation. These clarifications help ensure that businesses can navigate the tax system with more certainty and ease.
Benefits for Foreign Entities and Permanent Establishments
Other overseas businesses whose establishments will benefit from the reduced procedure to validate the non-tax residency status. It reduces administrative burdens associated with internationally operating businesses significantly. Another area is where foreign Permanent Establishments would now become exempt after setting off previously incurred tax losses, therefore making the tax environment even more attractive for global business ventures.
Supporting a Business-friendly Environment
Younis Haji AlKhoori, Under-Secretary of the MoF, said that such amendments reflect the UAE’s commitment to a business-friendly tax regime. By tackling key concerns and simplifying compliance requirements, the new regulations are expected to promote growth opportunities for businesses and investors while maintaining the country’s appeal as a competitive global investment destination.
These updates demonstrate the proactive stance taken by the UAE regarding its corporate tax policy. By implementing these changes, the country is ensuring it stays in line with the best international practices and standards. At the same time, the UAE continues to prioritize the interests of businesses, both domestically and on the global stage, fostering an environment that supports economic growth and competitiveness.
