In line with Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, the UAE Ministry of Finance has published changes to Ministerial Decisions addressing Tax Groups.

Under the same Decree-Law, these revisions also handle the Participation Exemptions and Foreign Permanent Establishment Exemptions, These changes aim to give administrative relief and important clarifications, so helping companies to follow tax laws and so strengthening the UAE's reputation as a major worldwide corporate hub.

The Ministry released the revised Ministerial Decision Nos. (301) and (302) of 2024 including notable revisions meant to enhance the UAE's economic environment, Undersecretary of the Ministry of Finance, Younis Haji AlKhoori underlined that these changes show the UAE's ongoing dedication to provide a vibrant, tax environment suitable for investors. He underlined that streamlining compliance processes and generating development prospects will help the UAE maintain its global business and investment center's position even more.

The updated Ministerial Decision relates to tax years starting on or following January 1, 2025. Among the main amendments, the new clauses streamline the requirements for foreign juridical people categorized as UAE residents as well as for juridical entities founded in the UAE but essentially run under control or management outside the nation. The revisions seek to reduce compliance by letting these companies show that they are not more effectively tax residents of another country.

One of the most obvious changes is how Tax Groups calculate taxable income for companies inside their groups. Clarifying the need of Tax Groups computing income due to a member depending on the arm's length principle This requirement will however be void if the Tax Group generates revenue eligible for a Foreign Tax Credit. For many UAE companies, this change streamlines tax computations and lessens the compliance load.

Another important change relates to tax groups whose accumulated tax losses before group founding. These companies now have more freedom by choosing to renounce these pre-grouping tax losses. Under the UAE's Corporate Tax system, this adjustment is meant to lessen administrative and compliance load.

The revised Ministerial Decision also covers companies gaining advantage from the Foreign Permanent Establishment Exemption and Participation Exemption, Although claw-back rules apply, these changes which relate to tax periods beginning from January 1, 2025-ensure that income resulting from qualified ownership transfers or business restructuring relief will not be subject to double taxation, This clause guarantees firms engaged in ownership transfers more transparency so they may profit from tax savings in certain circumstances.

The change to the asset test for the Participation Exemption will only apply to related parties, therefore relieving firms participating in funds and similar structures of compliance process. Furthermore, the updated ruling clarifies the treatment of liquidation losses and provides further direction on how to manage changes to tax losses experienced by participation inside or outside of a tax group.

Especially remarkable are the modifications to the Foreign Permanent Establishment Exemption, They make clear that companies can gain from the Participation Exemption only the total tax losses of a foreign permanent establishment have entirely offset their earnings, This change guarantees that all entities are handled more consistently and helps to match the treatment of foreign permanent establishments with other participation, therefore improving the equity of the UAE's Corporate Tax system.

By offering much-needed clarity, lowering administrative burdens, and strengthening the nation's tax system as a competitive advantage for companies and investors, these changes generally represent a major step in improving the UAE's business environment.