The United Arab Emirates Ministry of Finance has released three new Ministerial Decisions for Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses namely Ministerial Decision No. 114 of 2023 on the Accounting Standards and Methods, Ministerial Decision No. 115 of 2023 on Pensions and Social Security Funds, and Ministerial Decision No. 116 of 2023 on Participation Exemption.
In a statement released on Tuesday, Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, said: “The three new decisions aim to enhance the flexibility of UAE’s Corporate Tax regime and ensure a supportive business environment for all sectors. The decisions cover several important aspects related to private regulated pension funds and social security funds normally exempt from corporate tax in other countries.”
“Designating International Financial Reporting Standards as the applicable accounting standards and further simplifying accounting processes for SMEs reflects the Ministry of Finance’s commitment to imposing a minimal compliance burden for businesses in scope of the Corporate Tax regime. In addition, the participation exemption will prevent double corporate tax on the profits of one entity and eliminate international double taxation,” Al Khouri added.
The decision on Pensions and Social Security Funds sets out further conditions for private regulated pension funds and social security funds in the UAE to be exempt from Corporate Tax.
On the other hand, the decision on Accounting Standards and Methods provides clear guidelines for businesses preparing their Financial Statements that will be used as the starting point to calculate taxable income for corporate tax purposes.
Meanwhile, the decision on Participation Exemption provides for Corporate Tax exemptions on dividends, profit distributions, and capital gains from a Participating Interest, which is defined as a 5 percent or greater ownership interest in another entity’s shares or capital, held for at least 12 months.