The UAE Ministry of Finance has recently announced updates to its corporate tax framework, aiming to enhance compliance and clarity. The Cabinet Decision No. (74) of 2023 introduces the Executive Regulation of Federal Decree-Law No. (28) of 2022 on Tax Procedures, known as the New Tax Procedures Law. This decision replaces the existing Executive Regulation and aligns with the New Tax Procedures Law, which became effective on March 1, 2023.
The new provisions cover various aspects, including guidelines for maintaining accounting records and commercial books, registration and de-listing procedures for tax agents with emphasis on effective communication in English or Arabic. The decision also addresses tax agents’ rights and responsibilities, procedures for handling tax evasion crimes through reconciliation, and conditions for tax payment and refunds, as well as the obligations of trustees in bankruptcy cases.
Additionally, there are updated requirements for Qualifying Investment Funds under Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses. To qualify as exempt from corporate tax, investment funds need to meet specific criteria. During the first two financial years, there is flexibility in ownership criteria to promote diversified ownership. However, Real Estate Investment Trusts (REITs) are excluded from these conditions.
For other investment funds to be eligible, their primary business activities should focus on investments, with ancillary activities constituting no more than 5% of their total annual revenue. The share of ownership interests held by a single investor and related parties should not exceed 30 or 50% of their annual revenue, depending on the number of investors involved.
Furthermore, these funds should be overseen by an investment manager with at least three investment professionals in their employment, and day-to-day management should not be controlled by investors to qualify for the exemption.
For REITs, specific criteria apply for exemption, such as the value of real estate assets (excluding land) exceeding Dh100 million, a minimum of 20% of the REIT’s share capital being publicly listed or owned by institutional investors, and maintaining an average real estate asset percentage of at least 70% annually.