This resolution is a significant step towards fostering business growth in various sectors of the UAE and plays a vital role in ensuring the fair and effective application of the tax system.

Maintaining Eligibility for Corporate Tax Exemption

The newly introduced resolution outlines the business requirements to retain eligibility for corporate tax exemption, even if they fail to meet the relevant exemption conditions that are stated in the corporate tax law decree. It addresses situations such as companies undergoing liquidation or closure, mandating that they inform the Federal Tax Authority within 20 working days from the start of the liquidation or closure procedures.

A Fair and Effective Tax System

Undersecretary of the Ministry of Finance, His Excellency Younis Haji Al Khoori, emphasized that the decision establishes a fair and effective tax system, facilitating business growth in the UAE. This resolution offers clarity regarding the circumstances under which an individual or entity may continue to be considered exempt or cease to be exempt from a specified date. It also addresses cases where individuals may still be considered exempt, such as when they encounter unforeseen or unavoidable emergency or exceptional circumstances.

Procedures for Maintaining Exemption

In cases where an exempted person or entity no longer meets the exemption conditions, the resolution states that they must submit an application to the Federal Tax Authority within 20 working days from the date they become ineligible. They are also required to rectify and address the issue within 20 working days from the submission of the application. In situations beyond their control, an extension of an additional 20 working days may be granted to comply with the requirements.

Preventing Abuse of the Tax System

The ministerial decision makes it clear that if it is determined that terminating the exemption was done intentionally to gain an unfair advantage regarding corporate tax, it will be considered an abuse of the tax system. In such cases, the person or entity will cease to be considered exempt from the day they no longer meet the exemption conditions.

The UAE Ministry of Finance’s introduction of Ministerial Resolution No. (105) of 2023 marks a significant development in regulating corporate tax exemptions in the country. Compliance with the outlined procedures and avoidance of abusing the tax system will be essential for individuals and entities seeking to maintain their corporate tax exemptions in the UAE. As Dubai’s most dynamic and truly international Free Zone, IFZA is committed to supporting the community’s compliance with the latest regulation. We began the implementation of several activities that aimed to empower members to face the upcoming changes to our business ecosystem. If you have any questions stay tuned to our website for future additions of CT-related knowledge events.