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UAE issues three new Ministerial decisions on corporate tax

IFM_Corporate Tax
The exemption will prevent a double corporate tax on the profits of one entity and eliminate international double taxation

The UAE Ministry of Finance has announced three new Ministerial Decisions under Federal Law No. 47 of 2022 on Corporate and Corporate Taxation. These include Ministerial Decision No. 114 of 2023 on Accounting Standards and Methods; Ministerial Decision No. 115 of 2023 on Pensions and Social Security Funds; and Ministerial Decision No. 116 of 2023 on Exemption from Participation.

During an interaction with Zaywa, 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,” he said.

The Pension and Social Security Funds Decision establishes further conditions for the UAE’s corporate income tax exemption for private regulated pension funds and social security funds. The decision ensures alignment with international tax practices, so that the exempt status of private pension or social security funds in the UAE is also recognized for international investments and benefits from double taxation treaties can be obtained.

In addition, the decision sets out details of maximum contributions per beneficiary and annual certification of compliance by an auditor to ensure the integrity of the exemption.

The Accounting Standards and Methods Decision provides clear guidance for companies preparing their financial statements, which serve as a starting point for calculating taxable income for corporate tax purposes.

The decision confirms that the International Financial Reporting Standards (IFRS) are the applicable accounting standards in the UAE and must be applied by larger companies with a turnover of more than AED 50,000,000.

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