The latest decisions have been taken with the objective of making the country’s Corporate Tax structure more adaptable, thereby creating a more conducive business environment across all sectors. Starting from June 1, the UAE will implement its Corporate Tax system.

The ministerial resolutions provide further information on the requirements for exempting privately regulated pensions and social security funds. They also outline the principles for creating financial statements and the methods for consolidating them within a tax group, as well as establishing the conditions for claiming participation exemption.

1. Pensions and Social Security Funds

The UAE has introduced additional regulations for private regulated pensions and social security funds to be exempted from Corporate Tax. These regulations aim to align the UAE’s tax practices with international standards, ensuring that the exempted status of UAE private pension or social security funds is recognised when investing abroad, and availing double tax treaty benefits. 

2. Accounting Standards and Methods

Companies Earning Over Dh50 million in Revenue

The ruling has affirmed that the International Financial Reporting Standards (IFRS) are the relevant accounting standards in the UAE and must be adopted by bigger companies that earn more than Dh50 in Revenue.

SMEs with revenues Below Dh3 Million

They can choose to adopt IFRS. Furthermore, to ease the burden of compliance, it has been affirmed that SMEs with less than Dh3 million in revenue can utilise the cash basis accounting method.

3. Participation Exemption

Exemption on:

• Dividends

• Profit distributions

• Capital gains from a participating interest – The defined content refers to a situation where an individual or entity holds a minimum of 5% of another entity’s shares or capital for a period of at least 12 months.

If a company’s subsidiary is based in a location where the Corporate Tax rate is at least 9%, or can prove that it has an effective tax rate of at least 9% on its profits, income, or equity, then it is eligible for an exemption.

Relief will apply to various ownership types:

• Preferential

• Ordinary

• Redeemable shares

• Membership

• Partner interests 

In situations where the total cost of acquiring ownership interests is equal to or greater than Dh4 million, UAE-based businesses that have invested in foreign entities meeting certain criteria will not be subjected to any Corporate Tax on those investments.

Contact us

If you require aid or have any inquiries regarding Corporate Tax, kindly get in touch with Dawia Family Office for assistance and we will be pleased to assist you. We have the ability to provide support for any inquiries related to taxes and can also aid in submitting them.

Sources

Ministry of Finance issues decision on transitional rules for corporate tax

UAE announces 3 new decisions relating to corporate tax

UAE announces 3 new decisions relating to corporate tax – News | Khaleej Times

UAE corporate tax is ‘progressive and inclusive,’ says Emaar founder Alabbar – Arabian Business.

UAE introduces new corporate tax laws to assist firms in adapting once law takes effect in June