Three new decisions were issued by the Ministry of Finance in the United Arab Emirates, under Federal Decree No. 47 of 2022 related to UAE corporate tax.
These ministerial decisions include Ministerial Resolution No. 132 of 2023 related to the transfer of assets within the eligible group, Ministerial Resolution No. 133 of 2023 related to business restructuring facilities, and Ministerial Resolution No. 134 of 2023 related to general rules for determining taxable income.
The objectives of the new decisions regarding UAE corporate tax
The three new decisions aim to facilitate and streamline the process of determining taxable income. They also provide tax incentives for asset transfers or obligations among qualified group members, as well as for specific transactions related to restructuring and organization. This decision reflects the Ministry of Finance’s commitment to alleviating the compliance burdens associated with tax compliance for taxpayers, in line with international best practices, while maintaining a conducive business environment in the United Arab Emirates and promoting economic growth.
Content of UAE corporate tax decisions
In relation to transferring within the qualified group:
The ministerial decision regarding the transfer of assets within the qualified group provides additional information on how companies can claim tax facilitation concerning the transfer of assets and obligations among members of the qualified group.
The decision emphasizes the necessity for entities to make a clear election in their tax return to apply these facilitations and comply with relevant record-keeping requirements.
The election to apply the facilitations in transfer operations within the qualified group is considered final and cannot be revoked, and it will be applied to all subsequent tax periods.
Furthermore, the decision clarifies the effects of the simultaneous exchange of assets or obligations and the tax consequences in case the facilitations (right of recovery) are cancelled due to the transfer of assets, obligations, or companies associated with the qualified group within a period of up to two years from the original transfer date.
Learn more about the details of Ministerial Decision No. 132 of 2023 regarding the transfer of assets within the qualified group.
Facilities for Business Restructuring:
The issued decision regarding the facilities for business restructuring outlines the conditions under which mergers and other transactions can be carried out without incurring any corporate tax obligations.
These facilities apply when transferring or merging businesses or parts thereof to another entity in exchange for shares or other ownership interests. When the transferred company chooses to apply these facilities, there is no requirement to include any gains or losses in the taxable income account.
The facilities can also be applied when exchanging businesses for shares and a limited amount of another resource, such as cash, or when obtaining shares or issuing them by a non-transferred company, as long as they are received or issued by an entity owned by the transferred company accordingly.
The decision also explains the withdrawal mechanism from the facilities in the event of transferring businesses or ownership interests within a period of up to two years from the date of the original restructuring operation.
Learn more about the details of Ministerial Decision No. 133 of 2023 regarding the facilities for business restructuring.
General rules for determining taxable income:
The general rules for determining taxable income for UAE corporate tax law contribute to simplifying the process of calculating taxable income. The decision specifies the necessary adjustments to calculate taxable income, including determining realized and unrealized gains and losses referred to in the financial statements.
The rules also clarify the conditions for applying the verification basis when chosen by the taxpayer, and provide guidance for adjusting changes in the value of assets and liabilities resulting from transfer transactions involving related parties, qualified groups, or business restructuring facilities.
Companies that prepare their financial statements on an accrual basis may choose to determine profits and losses based on the verification basis for specific assets and liabilities. This choice must be made during the first tax period and is usually irrevocable, except in exceptional cases determined by the Federal Tax Authority.
Learn more about the details of Ministerial Decision No. 134 of 2023 concerning the general rules for determining taxable income.
How AHG can help you
AHG can provide assistance and support in light of recent ministerial decisions regarding UAE corporate tax by:
- AHG can help companies in dealing with these new regulations and simplify the process of determining taxable income. This includes providing guidance and assistance on eligibility criteria and requirements to benefit from tax privileges related to the transfer of assets and liabilities within the qualified group, as well as facilitating specific transactions for restructuring and reorganization purposes.
Drawing on our expertise in tax compliance and best practices, AHG can assist taxpayers in reducing compliance burdens, maintaining a conducive business environment in the United Arab Emirates, and promoting economic growth.
- AHG can provide guidance on the effects of transferring assets or liabilities, including the implications of revoking facilitations (recovery right) within two years from the original transfer date. This includes simultaneous exchange transactions of assets or liabilities and the associated tax consequences.
- AHG can provide support regarding business restructuring facilitations. Companies can benefit from these facilitations when transferring all or part of their business to another legal entity in exchange for shares or ownership interests, without the need to include any gains or losses in the taxable income statement.
Know more about UAE corporate tax from her:
To access the Cabinet resolutions, ministerial decisions, and explanatory guidelines regarding the UAE Corporate Tax Law, please visit the website of the Ministry of Finance: www.mof.gov.ae
Overall, AGH helps companies in the UAE take advantage of new UAE corporate tax decisions to improve their financial management, increase efficiency and make better decisions.