Understanding the New UAE Corporate Tax Rules – Cabinet & Ministerial Decisions Explained

Introduction
With the implementation of Federal Decree-Law No. 47 of 2022 on Corporate Tax (CT), supported by Cabinet Decisions and Ministerial Decisions, businesses in the UAE must stay updated on the evolving regulatory framework.

Key Updates

1. Qualifying Free Zone Person (QFZP) Regime – Cabinet Decision No. 55 of 2023 and Ministerial Decision No. 139 of 2023 outline conditions for Free Zone entities to benefit from the 0% rate on qualifying income.
2. Pillar Two Compliance – Large multinational groups are subject to OECD’s global minimum tax rules, requiring careful structuring and compliance.
3. Small Business Relief – Ministerial Decision No. 73 of 2023 provides relief for entities with revenue under AED 3 million until 2026.
4. Interest Deduction Limitations – Consistent with OECD BEPS rules, deductions for net interest expense are capped, ensuring alignment with global tax standards.

Impact on Financial Reporting
Businesses must prepare tax reconciliations in line with IAS 12 (Income Taxes), ensuring deferred tax assets and liabilities are properly recognized.

Conclusion
The UAE Corporate Tax regime is designed to align with international best practices while safeguarding the country’s competitive edge. Companies must ensure compliance not only with the FTA requirements but also with IFRS standards to maintain financial accuracy and transparency.