The UAE Ministry of Finance consistently introduces a series of new Ministerial Decisions under Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses. These decisions have a collective objective of bolstering the regulatory framework governing corporate and business taxation in the UAE. By offering clearer guidelines and procedures, they enable businesses to adhere to the requirements specified in the Federal Decree-Law. These decisions reflect the UAE government’s steadfast dedication to upholding a fair and transparent tax system, while simultaneously fostering an environment conducive to business growth and development within the country. Below, you will find descriptions of a three Ministerial Decisions introduced.
– Ministerial Decision No. 114 of 2023 focuses on accounting standards and methods. It designates International Financial Reporting Standards (IFRS) as the applicable accounting standards in the UAE. Larger businesses with revenues exceeding AED 50,000,000 are required to use IFRS, while small and medium businesses with revenues not exceeding AED 50,000,000 have the option to use IFRS for SMEs. Furthermore, businesses with less than AED 3,000,000 in revenue can choose to use cash basis accounting. The decision also clarifies the concept of consolidated financial statements for tax grouping purposes.
–Ministerial Decision No. 115 of 2023 sets out conditions for private regulated pension funds and social security funds in the UAE to be exempt from corporate tax. The decision ensures alignment with international tax practices, allowing the UAE’s private pension or social security funds to maintain their exempt status when investing internationally. It also establishes maximum contributions per beneficiary and mandates annual confirmation of compliance by a statutory auditor.
– Ministerial Decision No. 116 of 2023 focuses on participation exemption. It provides corporate tax exemptions on dividends, profit distributions, and capital gains derived from a Participating Interest. A Participating Interest refers to a 5% or greater ownership stake in another entity’s shares or capital, held for at least 12 months. The exemption applies if the subsidiary is located in a jurisdiction with a corporate tax rate of at least 9% or can demonstrate an effective tax rate of at least 9% on profits, income, or equity. The decision also specifies that various ownership interest types, such as preferential shares, ordinary shares, and redeemable shares, as well as membership and Partner Interest, qualify for the relief if the aggregated acquisition cost of the ownership interests is equal to or exceeds AED 4,000,000.
For further information on the other Ministerial Decisions related to the taxation of corporations and businesses under Federal Decree-Law No.(47) of 2022, please visit the Ministry of Finance website: https://mof.gov.ae/tax-legislation/
This article, together with any commentary, does not constitute legal advice. It is provided solely for information purposes on a complimentary basis, without consideration of any specific objectives, circumstances, or facts. It reflects then current views of the writer which may modify in time and based on differing objectives, circumstances, or facts. Access to this article does not form any attorney- client relationship.
The business and economic landscape of Kuwait just changed. With the ratification of the first law of 2024: Law Regarding the Amendment of Article 24 of the Commercial Law and Article 31 of the Public Tenders Law (1/2024) (the “Foreign Company Amendments Law”) on 21 January 2024, foreign companies now… Read more
The Kingdom of Saudi Arabia has introduced a series of groundbreaking premium residency options. Dr. Majid bin Abdullah Alkassabi, Chairman of the Premium Residency Center announced five distinctive categories—special talent, gifted, investor, entrepreneur, and real estate owner residencies. This strategic move, harmonizing with Vision 2030's objectives, positions Saudi Arabia as… Read more
The Egyptian Competition Authority (the “ECA”) has traditionally been known for its aggressive stance towards historically tolerated anti- competitive acts. To live up to its slogan, “a stronger economy…for a better life”, it recently began shifting its focus to awareness-raising (in parallel with enforcement), a much-needed step in a market… Read more
Recently, Kuwait has initiated some significant economic liberalization initiatives. Kuwait’s National Assembly enacted major reforms to the Commercial Law and Public Tenders Law, effectively removing the longstanding requirement for foreign companies to operate through local agents within the country. On July 16, 2023, the Financial and Economic Affairs Committee of… Read more
On 5 December 2023, the Ministry of Investment of Saudi Arabia (“MISA”), in collaboration with the Ministry of Finance and the Zakat, Tax and Customs Authority (“ZATCA”), officially announced a 30-year tax relief program as an incentive to attract foreign global companies to establish their regional headquarters (“RHQ”) in the… Read more
The Executive Regulations of Federal Law No. 15 of 2020 on Consumer Protection have recently been enacted through Federal Cabinet Resolution No. 66 of 2023 in the United Arab Emirates. These regulations, which took effect on 14 October 2023, offer crucial insights into the Consumer Protection Law (Federal Law No.… Read more