UAE announces changes to Corporate Tax Rules

The Ministry of Finance (MoF) has issued updated Ministerial Decisions No. (301) and No. (302) of 2024, introducing significant amendments to Tax Groups and Participation Exemptions under Federal Decree-Law No. 47 of 2022 on Corporate Tax.

These changes aim to enhance compliance and maintain the UAE’s appeal as a global business hub.

Effective for tax periods starting on or after 1 January 2025, the updates provide administrative relief and clarify compliance requirements for businesses. Notably, foreign entities managed outside the UAE will benefit from streamlined procedures to confirm non-tax residency.

Key changes include simplifying taxable income calculations for Tax Groups, removing the arm’s length principle requirement when eligible for Foreign Tax Credits, and allowing Tax Groups to forfeit pre-grouping tax losses.

For Participation Exemptions, the amendments ensure income from ownership transfers is not double-taxed, clarify asset test requirements, and address liquidation loss treatments.

Additionally, foreign Permanent Establishments can now benefit from exemptions after offsetting accumulated tax losses.

Younis Haji AlKhoori, Under-Secretary of the MoF, emphasised that the amendments reinforce the UAE’s commitment to a business-friendly tax environment, boosting compliance and growth opportunities for investors.