The emirates Ministry of Finance issues a decision regarding the tax, The Ministry of Finance has issued three new ministerial decisions for the purposes of Federal Decree-Law No. 47 of 2022 regarding the taxation of corporations and businesses.
These ministerial decisions are as follows: 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
Younis Haji Al-Khoury, the Undersecretary of the Ministry of Finance, stated that "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 organisation," and he emphasised that "the decisions reflect the Ministry's commitment to reduce the burden of compliance on taxpayers," adding that "the decisions reflect the Ministry's commitment to reduce the burden of compliance
UAE Ministry of Finance
transportation amongst the members of the organisation
The Ministerial Resolution on Transfers within a Qualifying Group provides further detail on how to claim corporate tax reduction on transfers of assets and liabilities between members of a qualifying group. This resolution was brought about because there was a lack of clarity regarding how this relief could be claimed. It explains the necessity for the entity to make an election in its tax return to apply the facility, while at the same time complying with the applicable record-keeping standards. The decision to limit the use of the facility to transportation within the qualifying group is definitive and cannot be reversed; it will have implications for all tax periods that follow.
The decision also elucidates the implications of the simultaneous exchange of assets or liabilities, as well as the tax effects in the event that cancellation of the facilities (the right of recovery) occurs due to the transfer of assets and liabilities or related group companies to the eligible group within two years of the date of the original transfer. Specifically, the decision clarifies the implications of the simultaneous exchange of assets or liabilities.
Restructuring facilities
The Business Restructuring Facilities Decision, on the other hand, elucidates the criteria under which mergers and other transactions can be carried out without the result of any corporate tax obligations being incurred as a direct consequence. When a company or an independent portion of that company is sold, merged, or transferred to another legal entity in return for shares or stakes in another property, these facilities are applicable.
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. [Case in point:] when exchanging the business for shares and a limited amount of another resource such as cash. By a third party that is not either the transferor or the transferee, so long as it is received or issued by an entity that is either owned by the transferor or the transferee, respectively. Additionally, the decision elucidates the process for the withdrawal of the facilities in the event that the business or ownership shares are transferred within two years of the date of the initial reorganisation.
income determination
As for the general rules for determining income, they help the taxable person to simplify the process of calculating taxable income. This is because the decision specifies the required adjustments for calculating taxable income, which includes determining the realised and unrealized gains or losses that are referred to in the financial statements. In addition, the general rules for determining income help the taxable person to simplify the process of calculating taxable income.
The rules also provide guidelines for adjusting changes in the valuations of assets and liabilities as a result of transfers involving related parties, qualifying groups, or business restructuring facilities. In addition, they define the circumstances for applying the verification basis if the taxpayer chooses to do so.
This choice should be made during the first tax period, and it is considered definitive except in exceptional cases that are decided by the Federal Tax Authority. Businesses that prepare their financial statements using an accrual basis have the option of determining their profits and losses using verification in respect to specific assets and liabilities.
