The Ministry of Finance (MoF) has issued amendments to Ministerial Decisions through updated Ministerial Decision No. (301) of 2024 on Tax Groups and Ministerial Decision No. (302) of 2024 on Participation Exemption and Foreign Permanent Establishment Exemption under Federal Decree-Law No. 47 of 2022 on Corporate Taxation. These changes, effective for tax periods beginning on or after January 1, 2025, aim to enhance compliance processes and reinforce the UAE’s position as a leading global business hub.
The amendments provide administrative relief and clearer guidelines for businesses forming Tax Groups. They simplify compliance requirements for foreign juridical persons considered Resident Persons in the UAE and for UAE-based juridical persons managed outside the UAE, easing the process to demonstrate non-tax residency in another jurisdiction.
For Tax Groups, the amendments eliminate the requirement to calculate taxable income under the arm’s length principle if the group earns income eligible for a Foreign Tax Credit. They also introduce an option to forfeit Pre-Grouping Tax Losses, reducing compliance burdens and increasing flexibility under the Corporate Tax regime.
The revised Participation Exemption rules ensure income transfers under Qualifying Group Relief or Business Restructuring Relief are protected from double taxation, even when claw-back provisions apply. Additionally, the asset test under Article 23(2)(d) of the Participation Exemption now applies solely to related parties, simplifying compliance for businesses investing in funds and similar structures.
For Foreign Permanent Establishments, assets and liabilities transferred to companies can benefit from the Participation Exemption only after their profits fully offset aggregate tax losses. This change aligns their treatment with other Participations and enhances equity within the Corporate Tax framework.
“These amendments reaffirm the UAE’s commitment to enhancing a dynamic and investor-friendly tax environment, simplifying compliance, and increasing growth opportunities,” said Younis Haji AlKhoori, Under-Secretary of the Ministry of Finance. “This approach strengthens the UAE’s position as a global destination for businesses and investments.”
These updates reflect the UAE’s ongoing efforts to streamline tax administration and create a supportive framework for corporate growth and economic diversification.
