The Ministry of Finance (MOF) of the UAE has provided the following two clarifications for the determination of the conditions under which a taxable person (person) may continue to be considered an exempt person:
- the liquidation or termination of the business or commercial activity; and
- non-compliance with the conditions for exemption from income tax is temporary.
Liquidation or termination of business or business activity
The eligibility rules provide that a person may continue to be deemed as an exempt person from the beginning date of the liquidation or termination procedure of the business or the business activity until the date it is completed, provided that a notification has been submitted to the Federal Tax Authority (FTA) within 20 business days from the date of the beginning of the procedure. The person shall cease to be deemed as an exempt person on the day following the date of the completion of the liquidation or termination procedure.
Non-compliance with conditions for exemption from income tax is temporary
The person may continue to be deemed as an exempt person from corporate tax where all the following conditions are met:
- failure to meet the conditions to be deemed as an exempt person is due to a situation or an event beyond the person's control, which could not be reasonably predicted or prevented;
- the person has made an application to the FTA to continue to be treated as an exempt person within 20 business days from the date it fails to meet the conditions to be exempt;
- the person is reasonably expected to rectify the failure to meet the conditions within 20 business days from the submission of the application to the FTA; and
- upon request by the FTA, the person provides evidence to support putting in place appropriate procedures to monitor compliance with the relevant conditions of the corporate tax law, within 20 days from the date of the request by the FTA or any other period as may be determined by the tax authority.
The period of 20 business days may be extended by an additional 20 business days if the failure to rectify the situation or the events is beyond the person's reasonable control.
The Ministry of Finance's Decision No. 105 of 2023 determining the conditions under which a person may continue to be considered an exempt person was issued on 4 May 2023.
It is available on UAE Ministry of Finance website: Ministerial Decision No. 116 of 2023