Add a bookmark to get started

24 May 20233 minute read

Ministerial Decision establishes conditions to retain exempt status for corporate income tax purposes

The UAE Ministry of Finance has issued Ministerial Decision No. (105) of 2023 (Decision), which establishes the conditions under which a person can be considered an exempt person or cease to be deemed as such under Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (CIT Law).

According to the decision, persons undergoing liquidation or termination procedures can continue to be regarded as exempt persons from the start of these procedures until their completion. To maintain the exempt status, the person must submit a notification to the Federal Tax Authority (FTA) within twenty (20) business days of the commencement of the procedures. However, once the relevant procedures are finalized, the exempt person designation ceases.

In cases where a person fails to meet the conditions for exemption due to unforeseen circumstances beyond their control, they can still be deemed exempt if certain conditions are met. These include submitting an application with the FTA within twenty (20) business days of failing to meet the conditions, with a reasonable expectation of rectifying the failure within twenty (20) business days from the submission of the application.

Furthermore, upon request of the FTA, persons must provide evidence demonstrating the implementation of appropriate procedures to monitor compliance with the relevant conditions.

The FTA will review the application and make a decision within twenty (20) business days of its submission. If the failure to meet the conditions is beyond the person's reasonable control, the timeframe for rectification may be extended by an additional twenty (20) business days.

The decision also addresses situations where a person ceases to be considered an exempt person from a different date. If it can be reasonably concluded that the cessation is primarily aimed at obtaining a corporate tax advantage that contradicts the intentions of the CIT law, the person will no longer be deemed an exempt person starting from the day they fail to meet the conditions for exemption.

 

Key takeaway
Ministerial Decision No. (105) of 2023 outlines the relevant conditions and procedures under which a person may continue to be an exempt person, or cease to be an exempt person in the event of liquidation or termination, or in case of a temporary failure to meet the conditions to be considered an exempt person. The decision also covers situations where a person can retroactively lose its exempt status if it can be reasonably concluded that the main purpose or one of the main purposes of obtaining the exemption was to obtain a corporate tax advantage.
Print