The UAE Ministry of Finance has introduced new updates to make tax compliance easier for businesses, especially those forming tax groups.
These changes simplify requirements for foreign companies considered UAE residents and UAE-based companies managed from outside the country. The updates make it easier for these businesses to prove they aren’t tax residents elsewhere.
Key updates Include:
- Taxable Income Clarifications: Tax groups no longer need to calculate taxable income for members if the group earns income eligible for foreign tax credits.
- Flexibility for Pre-Grouping Losses: Businesses can now choose to forfeit losses incurred before forming a tax group, reducing compliance challenges.
- Clearer Participation Exemptions: Income from ownership transfers under group or business restructuring relief won’t face double taxation, even with claw-back rules.
The new rules apply to tax periods starting January 1, 2025. They also simplify the participation exemption process, ensuring only related parties are subject to asset tests, benefiting businesses investing in funds.
Additionally, the amendments clarify rules for:
- Adjusting tax losses within or outside tax groups.
- Treating liquidation losses.
- Applying participation exemptions for foreign permanent establishments after profits offset prior tax losses.
Younis Haji AlKhoori, Undersecretary of the Ministry of Finance, said: “These updates underline the UAE’s commitment to creating a business-friendly tax environment, supporting growth, and strengthening the UAE’s status as a global business hub.”
