Among 3 decisions it issued including «transfer within the qualifying group» and business restructuring facilities
«Finance»: General rules for determining income subject to corporate tax
The Finance Decision specifies the adjustments required to calculate taxable income, including gains or losses. Archival
Younis Haji Al-Khouri: "The Ministry is committed to reducing the burden of compliance for taxable persons, in accordance with international best practices."
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The Ministry of Finance issued three new ministerial decisions for the purposes of Federal Decree-Law No. 47 of 2022 on corporate and business tax, namely Ministerial Resolution No. 132 of 2023 on transport within the eligible group, Ministerial Resolution No. 133 of 2023 on business restructuring facilities, and Ministerial Resolution No. 134 of 2023 on the general rules for determining taxable income.
Determination of income
The Undersecretary of the Ministry of Finance, Younis Haji Al Khouri, said: "The three new decisions issued aim to simplify the process of determining taxable income, as well as providing tax facilities for the transfer of assets or liabilities between members of the same eligible group, or when conducting specific restructuring and reorganization transactions," stressing that "the decisions reflect the ministry's commitment to reducing the burden of compliance for taxable persons, in accordance with international best practices, and maintaining a favorable business environment in the UAE."
In-group transport
The Ministerial Decision on Transfer within the Eligible Group provides further details on how to claim corporate tax concessions on transfers of assets and liabilities between eligible group members. It explains the need for the entity to make a choice in its tax return to apply the facility, while complying with the relevant record-keeping requirements. The choice to apply facilitation to transport within the eligible group is irrevocable and applies to all subsequent tax periods.
The resolution also clarifies the implications of simultaneous exchanges of assets or liabilities and the tax implications in the event of cancellation of the facility (right of redemption), due to the transfer of assets, liabilities or related group companies to the eligible group within two years from the date of the original transfer.
Restructuring Facilities
For its part, the Business Restructuring Facilities Resolution clarifies the conditions under which mergers and other transactions can be carried out without resulting in any corporate tax liabilities, and these facilities apply when transferring or merging a business or an independent part thereof to another legal entity in exchange for shares or other ownership shares.
When the taxable person chooses to transfer assets and liabilities, the facility does not need to be included in the taxable income account, and the facility may also apply when exchanging a business for shares and a limited amount of another resource such as cash, or when shares are acquired or issued by a party other than the carrier or transferee, as long as they are received or issued by an entity owned by the carrier or transferee respectively, as the resolution clarifies the mechanism for retracting Facilities in case of transfer of business or ownership shares within two years from the date of the original restructuring.
Determination of income
The General Rules for Determining Income help the Taxable Person to simplify the process of calculating Taxable Income, as the resolution specifies the adjustments required to calculate taxable income, including the determination of realized and unrealized gains or losses referred to in the financial statements.
The Rules also set out the conditions for applying the verification basis if selected by the Taxable Person and provide guidance for adjusting changes in asset and liability values as a result of transfers involving related parties, qualified groups or business restructuring facilities.
A business that prepares its financial statements on an accrual basis can choose to determine profits and losses on the basis of verification of specific assets and liabilities, and this selection should be made during the first tax period, and is considered conclusive except in exceptional cases determined by the Federal Tax Authority.