“Finance”: General rules for determining income subject to corporate tax

Federal Decree-Law No. of 2022 on Corporate and Business Tax. For the purposes of 47 the Ministry of Finance issued three new Ministerial Resolutions of 2023 namely Ministerial Resolution No. 132, Transfer within the Eligible Group, Ministerial Resolution No. 2023 of 2023. 133 Business restructuring facilities and 2023 Ministerial Resolution no. 134, general rules for determination of taxable income.

Income determination

Younis Haji Al-Khouri, Deputy Secretary of the Ministry of Finance, said: The three new decisions published aim to simplify the process of determining taxable income, as well as provide tax relief for the transfer of assets or debts between qualified group members. , or when conducting specific transactions for restructuring and organization, “These decisions reflect the Ministry’s commitment to reduce the burden of compliance on taxpayers and maintain an appropriate business environment in the UAE, in line with international best practices.”

Transport within the group

The Ministerial Resolution on Transfers in a Qualifying Group provides further details on how to claim corporate tax relief on transfers of assets and liabilities between members of a qualifying group. This explains the need for the company to make an election on its tax return to use this facility, while complying with the relevant record keeping requirements. The choice to avail the facility of transport within the qualifying group is final and irrevocable and applies to all subsequent tax periods.

The decision also clarifies the implications of a simultaneous transfer of assets or liabilities and the tax consequences of cancellation of facilities (right of redemption) due to transfer of assets and liabilities or related group entities to an eligible group. Two years from the date of original transfer.

Rehabilitation facilities

For his part, the Business Reorganization Facilities Decision clarifies the conditions under which mergers and other transactions can be carried out without resulting in any corporate tax obligations. These facilities are applicable when a business or an independent part thereof is transferred or merged with another legal entity. Shares or exchange for shares is another asset.

When a taxable person chooses a carrier of assets and liabilities and avails the facility, there is no need to include any profit or loss in the taxable income account and the facility can be availed even when the business is converted into shares. A limited amount of another source, such as cash, or when shares are received or delivered by a party other than the transferor or transferee, unless received or delivered by a company owned by the transferor or transferee respectively. Clarifies mechanism for withdrawal of facilities if business or ownership shares are transferred within two years from date of original restructuring.

Income determination

As for the general rules for determining income, they help the taxable person to simplify the process of calculating taxable income, as the decision specifies the adjustments necessary to calculate taxable income, including determining realized and unrealized gains or losses shown in the financial statements. .

The rules also clarify the conditions for applying the verification basis if the taxpayer chooses, and provide guidance for adjusting changes in the values ​​of assets and liabilities resulting from transfers involving related parties, qualified parties or business restructuring facilities.

Businesses that prepare their financial statements on the accrual basis may elect to determine profits and losses based on verification of specific assets and liabilities, and this election must be made in the first tax period and is considered definitive except in exceptional cases. Cases decided by the Federal Tax Commission.