UAE announces rules on tax grouping and interest capping

UAE announces rules on tax grouping and interest capping

The UAE Ministry of Finance (MoF) has issued three new ministerial decisions for corporate tax, which is set to come into effect for businesses whose financial year starts on or after June 1, 2023. “The new decisions reflect how the UAE’s corporate tax regime maintains flexibility and ensures straightforward tax processes to enable compliance while reinforcing the country’s position as a leading business and investment hub,” said Younis Haji Al Khouri, Under-Secretary of the Ministry of Finance. The decision further clarifies the conditions under which UAE resident entities that are 95 per cent or more commonly owned can form or join a tax group and be treated as a single entity for corporate tax purposes. “With tax grouping, groups are treated as if they were one entity which alleviates the administration and compliance burden,” said Al Khouri. said the UAE parent company must own at least 95 per cent of the voting rights and shares in each UAE entity under the tax grouping rule. The creation of a tax group simplifies the calculation and reporting of taxable income by allowing the parent company to file a single tax return based on the aggregated taxable profit or loss of the group,