The UAE’s Ministry of Finance has unveiled three new decisions related to corporate tax, aiming to enhance the flexibility of the country’s corporate tax regime and foster a business-friendly environment across all sectors.
Exemptions for Private Regulated Pensions and Social Security Funds
One of the decisions lays out additional conditions for private regulated pensions and social security funds in the UAE to be exempt from corporate tax, aligning with international tax practices. It covers maximum contributions per beneficiary and requires an annual confirmation of compliance by a statutory auditor.
Accounting Standards for Financial Statements
The ministry has also provided guidelines for businesses to prepare their financial statements, which will be used to calculate taxable income for corporate tax. International Financial Reporting Standards (IFRS) must be used by businesses with revenues exceeding Dh50 million, while small and medium businesses with revenues not exceeding this threshold have the option of using IFRS. Businesses with less than Dh3 million revenue can use cash basis accounting.
Exemptions for Participation Interests
The final decision provides corporate tax exemptions on dividends, profit distributions, and capital gains from a participating interest, defined as a 5 per cent or more ownership interest in another entity’s shares or capital held for at least 12 months. This exemption applies if the subsidiary is in a jurisdiction with a corporate tax rate of at least 9 per cent or can demonstrate an effective tax rate of at least 9 per cent on profits, income, or equity.
These new decisions are a reflection of the Ministry of Finance’s commitment to imposing a minimal compliance burden on businesses, while also ensuring a supportive business environment for all sectors.
- UAE Ministry of Finance has made new decisions regarding corporate tax.
- These decisions concern exemptions for private regulated pensions and social security funds, the basis of preparing financial statements, and conditions for claiming participation exemption.
- The moves aim to boost the flexibility of the UAE’s corporate tax regime and foster a supportive business environment.
