The\nUAE Ministry of Finance has issued three new Ministerial Decisions for the purposes of Corporate Tax. These include Ministerial\nDecision No 125 of 2023 on Tax Grouping, Ministerial Decision No 126 of\n2023 on General Interest Deduction Limitation Rule, and Ministerial Decision No\n127 of 2023 on Unincorporated Partnerships. <\/p>\n\n\n\n
His Excellency, Younis Haji Al Khouri, Undersecretary\nof the Ministry of Finance, said: “The new decisions reflect how the UAE’s\ncorporate tax regime maintains flexibility and ensures straightforward tax\nprocesses to enable compliance, while reinforcing the UAE’s position as a\nleading business and investment hub. With tax grouping, groups are treated as\nif they were one entity which alleviates the administration and compliance\nburden. The interest capping rules provide clarity to businesses when expensing\ndebt financing costs and are built on OECD best global practice. Finally, the\ndecision on unincorporated partnerships clarifies that an unincorporated\npartnership is not subject to corporate tax, unless it is a corporate entity, meaning\nthat individual partners will be taxed on their share of the income carried on\nby the partnership.” <\/p>\n\n\n\n
Tax Grouping<\/strong><\/p>\n\n\n\n The\nDecision on Tax Grouping further clarifies the conditions under which UAE\nresident entities that are 95% or more commonly owned can form or join a Tax\nGroup and be treated as a single entity for Corporate Tax purposes. Under the\ndecision, the UAE Parent Company must own at least 95% of the voting rights and\nshares in each UAE entity. Also, all members of the tax group must be\nconsidered UAE residents for Corporate Tax purposes.<\/p>\n\n\n\n Forming\na Tax Group simplifies the calculation and reporting of Taxable Income by\nallowing the Parent Company to file a single Tax Return based on the aggregated\ntaxable profit or loss of the group, with transactions between the members of\nthe Tax Group being generally disregarded. The decision also clarifies the\nnotification procedures if a Subsidiary leaves a Tax Group or if the Tax Group\nceases to meet the qualifying conditions.<\/p>\n\n\n\n General Interest\nDeduction Limitation Rule<\/strong><\/p>\n\n\n\n The\nGeneral Interest Deduction Limitation Rule sets out the maximum cap of interest\nthat can be deducted by businesses that are not banks, insurance providers or\nnatural persons (individuals) undertaking a business or\nbusiness activity in the UAE. <\/strong><\/p>\n\n\n\n In\nline with international standards, the net interest expenditure that can be\ndeducted is capped at the higher of <\/strong>30% of adjusted earnings\nbefore interest, tax, depreciation, and amortisation (EBITDA); or <\/strong>a safe harbour\namount of AED12 million. Tax Groups with members who are banks and\/or insurance\nproviders must exclude these members’ income and expenditure when determining\nthe 30% EBITDA threshold.<\/strong><\/p>\n\n\n\n In\nrecognition of the importance of infrastructure projects to the country, long-term\ninfrastructure projects meeting relevant conditions will not face restrictions\non interest expenditure deductibility under the General Interest Deduction\nLimitation Rule. Furthermore, in line with the UAE\u2019s commitment to maintain its\nstatus as a leading commercial and financing hub, interest incurred on debt\ninstruments entered into before the Law was published to the general public on 9\nDecember 2022 will not be subject to the limitation rule.<\/p>\n\n\n\n Unincorporated\nPartnerships<\/strong><\/p>\n\n\n\n Under\nthis decision, (and unless an election is made) an Unincorporated Partnership will\nnot be considered a taxable person in its own right provided it is not a Juridical\nPerson (corporate entity). Where a Unincorporated Partnership elects to be\ntreated as a Taxable Person in its own right, its decision is irrevocable once\napproved, and any change in the partnership composition must be notified to the\nFederal Tax Authority within 20 business days. A Foreign Partnership that is treated\nas an Unincorporated Partnership must submit an annual declaration confirming that it is not taxed under foreign jurisdiction laws, and each partner is\ntaxed individually based on their share of income. The decision also sets out\nthat for a Family Foundation to be treated as a Unincorporated Partnership\nwhere one or more of its beneficiaries are public benefit entities, it must\nconfirm that either the public benefit entity does not derive income treated as\nTaxable Income, or, if they do, that such income is distributed to the\nrespective beneficiaries within six months from the end of the relevant Tax\nPeriod.<\/p>\n\n\n\n All Cabinet and Ministerial Decisions and guidelines relating to Corporate Tax can be viewed on the Ministry of Finance’s website: www.mof.gov.ae.<\/p>\n","protected":false},"excerpt":{"rendered":" The UAE Ministry of Finance has issued three new Ministerial Decisions for the purposes of Corporate Tax. These include Ministerial Decision No 125 of 2023 on Tax Grouping, Ministerial Decision No 126 of 2023 on General Interest Deduction Limitation Rule, and Ministerial Decision No 127 of 2023 on Unincorporated Partnerships. His Excellency, Younis Haji Al …<\/p>\n","protected":false},"author":5,"featured_media":47188,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,4],"tags":[],"class_list":["post-53950","post","type-post","status-publish","format-standard","has-post-thumbnail","","category-economy","category-news"],"_links":{"self":[{"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/posts\/53950","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/comments?post=53950"}],"version-history":[{"count":1,"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/posts\/53950\/revisions"}],"predecessor-version":[{"id":53951,"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/posts\/53950\/revisions\/53951"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/media\/47188"}],"wp:attachment":[{"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/media?parent=53950"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/categories?post=53950"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.uaebarq.ae\/en\/wp-json\/wp\/v2\/tags?post=53950"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}