The UAE Ministry of Finance has published three new decisions in accordance with Federal Decree-Law No. 47 of 2022 on corporate and commercial taxation. These include Ministerial Decision No. 132 of 2023 on transfers within a qualifying group, Ministerial Decision No. 133 of 2023 on company restructuring assistance, and Ministerial Decision No. 134 of 2023 on the basic criteria for computing taxable income.
Simplifying taxable income determination
Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, announces measures to simplify the process of determining taxable income and provide tax relief for intra-group transfer of assets or liabilities within qualifying groups, aiming to ease compliance burdens on taxpayers and foster economic growth.
Transfers within a Qualifying Group
The decision outlines the procedure for claiming corporate tax relief on transfers of assets and liabilities within qualifying groups. Entities must elect the relief in their tax returns and meet record-keeping requirements. The election is irrevocable and applies to all future tax periods. The decision addresses simultaneous exchanges of assets or liabilities and the consequences if the relief needs to be revoked due to the departure of relevant assets, liabilities, or group companies from the qualifying group within two years.
Business Restructuring Relief
The decision provides conditions under which business mergers and other restructuring transactions can occur without incurring corporate tax liability. Relief is available when a business or a portion of it is transferred or merged into another entity in exchange for shares or ownership interests. If the transferer elects relief, no gain or loss is included in the taxable income calculation. Relief also applies when the business is exchanged for shares and a limited amount of other consideration. The decision outlines the mechanism for clawing back relief if subsequent transfers occur within two years of the original restructuring.
General Rules for Determining Taxable Income
The decision streamlines the calculation of taxable income for UAE businesses. It covers adjustments necessary for the income calculation, including recognizing realized and unrealized gains or losses reported in financial statements. It clarifies the conditions for applying the realization basis and provides guidelines for adjusting changes in values on assets and liabilities resulting from transfers involving related parties, qualifying groups, or business restructuring relief.
Realization Basis for Accrual Basis Accounting
Businesses using accrual basis accounting can opt to recognize gains and losses on a realization basis for specific assets and liabilities. The election is irrevocable, except for exceptional circumstances approved by the Federal Tax Authority
