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The UAE Ministry of Finance (MOF) introduced significant updates to the country’s Corporate Tax regulations through a series of guides and ministerial decisions during the last quarter of 2024. These updates are aimed at enhancing tax compliance, streamlining business operations, and fostering a more transparent environment. The key updates, introduced through the Corporate Tax Guide on Tax Returns, Ministerial Decision No. 261 of 2024, Ministerial Decision No. 301 of 2024, and Ministerial Decision No. 302 of 2024, reflect the UAE’s commitment to aligning its corporate tax framework with international standards.
The Corporate Tax Guide on Tax Returns, introduced in November 2024, offers a comprehensive resource for businesses to navigate the complexities of return filings. A major feature of this guide is the clarification on the disclosure of transactions involving related parties and connected persons. The guide introduces new thresholds for the disclosure that weren’t previously outlined. Businesses must complete the Related Party Schedule if total transactions exceed AED 40 million, with individual transactions over AED 4 million also requiring a disclosure. Additionally, the Connected Persons Schedule is necessary if aggregate payments or benefits exceed AED 500,000. These measures enhance transparency with corporate tax regulations.
Ministerial Decision No. 261 of 2024 outlines the treatment of unincorporated partnerships under the Corporate Tax Law. Unincorporated partnerships can opt to be treated as taxable persons by applying to the Federal Tax Authority (FTA), with the decision becoming irrevocable once approved. Foreign partnerships are considered unincorporated if they are not taxed similarly in their home jurisdiction and if partners are individually taxed. Family foundations meeting certain conditions, such as not generating taxable income for public benefit beneficiaries, can also be treated as unincorporated partnerships.
Ministerial Decision No. 301 of 2024 simplifies tax grouping for foreign companies with a Place of Effective Management (PoEM) in the UAE by removing the requirement for confirmation from home tax authorities. This reduces administrative barriers for multinational companies. The decision also clarifies the timeline for replacing parent companies within Tax Groups and allows more flexibility in using pre-tax grouping losses and net interest expenditures. The arm’s length principle now applies only when using unutilised pre-tax grouping losses or net interest expenditures, streamlining compliance for international businesses.
Ministerial Decision No. 302 of 2024 refines the Participation Exemption and Foreign Permanent Establishment Exemption rules. Ownership interests over AED 4 million qualify for tax exemptions, including dividends and capital gains, if the entity’s jurisdiction applies a minimum 9% corporate tax rate. For foreign permanent establishments, a minimum 9% corporate tax rate is required, with tax losses needing to be offset against profits before claiming exemptions.
In conclusion, the updates introduced mark a significant step toward creating a more transparent and business-friendly tax environment. These changes simplify compliance, reduce administrative burdens, and promote investment while aligning the UAE’s tax framework with global standards. By streamlining processes, the UAE strengthens its position as a hub for international trade and business operations. These reforms ensure compliance and encourage businesses to operate efficiently, supporting the UAE's broader economic objectives.
Reference/ Citation
- Tax Returns - Corporate Tax Guide | CTGTXR1.
- Ministerial Decision No. [301] of 2024 on Tax Group for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
- Ministerial Decision No. (302) of 2024 on 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.
- Ministerial Decision No. (261) of 2024 on Unincorporated Partnership, Foreign Partnership and Family Foundation for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
