“Ministerial Decisions for Tax Simplification and Transfer within Qualified Groups in UAE”

The Ministry of Finance issued three new ministerial decisions for the purposes of Federal Decree-Law No. 47 of 2022 regarding corporate and business tax, namely Ministerial Resolution No. 132 of 2023 regarding transfer within the eligible group, Ministerial Resolution No. 133 of 2023 regarding business restructuring facilities, and Ministerial Resolution No. 134 for the year 2023 regarding the general rules for determining taxable income.

income determination

The Undersecretary of the Ministry of Finance, Younis Haji Al-Khoury, said: “The three new decisions issued aim to simplify the process of determining taxable income, as well as provide tax facilities for transferring assets or liabilities between members of the same qualified group, or when conducting specific transactions for restructuring and organization,” stressing that “The decisions reflect the Ministry’s commitment to reduce the burden of compliance on taxpayers, in accordance with international best practices, and to maintain an appropriate business environment in the UAE.”

transportation within the group

The Ministerial Resolution on Transfers within a Qualifying Group provides more detail on how to claim corporate tax relief on transfers of assets and liabilities between members of a qualifying group. It explains the need for the entity to make an election in its tax return to apply the facility, while complying with the relevant record-keeping requirements. The choice to apply the facility to transportation within the qualifying group is final and irrevocable and applies to all subsequent tax periods.

The decision also clarifies the implications of the simultaneous exchange of assets or liabilities and the tax effects in the event of cancellation of the facilities (the right of recovery), due to the transfer of assets and liabilities or related group companies to the eligible group within two years from the date of the original transfer.

Restructuring facilities

For his part, the Business Restructuring Facilities Decision clarifies the conditions under which mergers and other transactions can be carried out without resulting in any corporate tax obligations. These facilities apply when transferring or merging a business or an independent part of it to another legal entity in exchange for shares or stakes. another property.

And when the taxable person chooses the carrier of the assets and liabilities to apply the facilities, then there is no need to include any gains or losses in the taxable income account, and the facilities can also be applied when exchanging the business for shares and a limited amount of another resource such as cash, or when obtaining or issuing shares By a party other than the transferor or the transferee, as long as it is received or issued by an entity owned by the transferor or the transferee, respectively. The decision also clarifies the mechanism for withdrawing the facilities in the event that the business or ownership shares are transferred within two years from the date of the original restructuring.

income determination

As for the general rules for determining income, they help the taxable person to simplify the process of calculating taxable income, as the decision specifies the required adjustments for calculating taxable income, including determining the realized and unrealized gains or losses referred to in the financial statements.

The rules also clarify the conditions for applying the verification basis if chosen by the taxpayer, and provide guidance for adjusting changes in the values ​​of assets and liabilities as a result of transfers involving related parties, qualified groups, or business restructuring facilities.

Businesses that prepare their financial statements on an accrual basis can choose to determine profits and losses on the basis of verification in respect of specific assets and liabilities, and this choice should be made during the first tax period, and it is considered definitive except in exceptional cases decided by the Federal Tax Authority.