What's changed for UAE business in 2025

The UAE Ministry of Finance has made it easier for businesses to form tax groups. The main changes are: making it easier to calculate taxable income for tax groups, getting rid of the arm's length principle when you're eligible for foreign tax credits, and letting tax groups forfeit pre-tax losses. All details you can find here:

• Ministerial Decision No. (301) of 2024 on Tax Groups for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
• Ministerial Decision No. (302) of 2024 on the Participation Exemption and Foreign Permanent Establishment Exemption for the purposes of the same Decree-Law

New regulations have clarified how taxable income is calculated for different tax groups, especially for foreign companies operating in the UAE. For example:

• If the tax group makes income that's eligible for a foreign tax credit, then the requirement to calculate that income is removed.
• Tax groups with pre-grouping tax losses can choose to give up those losses, which gives them more flexibility and reduces compliance costs.

The changes will affect tax periods starting on or after January 1st, 2025.

You don't need to tell the tax authorities about changes to their business within 20 days anymore, like when new partners join or existing ones leave.
This changes will affect tax periods starting on or after January 1st, 2025.

In new Ministerial Decision No. (261) of 2024 also has some changes in tax status. The new law allows foreign partnerships to be treated as "tax-transparent" if they're treated that way in their home countries. This means that individual partners don't need to check their tax status with the FTA.
The law also allows individuals who own family foundations in the UAE to apply for a tax-transparent status. This means family foundations get some additional tax benefits, which aligns them with the current Corporate Tax framework.

The changes will affect tax periods starting on or after January 1st, 2025.

New guidelines (301 and 302) make it clearer about the participation exemption. It means you can exclude some income from taxes if it's related to owning shares in other companies. This helps avoid double taxation.
Also, foreign companies can benefit from this exemption. The changes will affect tax periods starting on or after January 1st, 2025.

All companies need to follow transfer pricing rules to ensure transactions with connected parties happen at arm's length. They need detailed documentation to back up their pricing strategies, in line with global tax compliance standards.

In October FTA updated the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax (“Executive Regulation”). The new rules started on 15 November 2024.
Here are some important changes:

• Article 30 (Export of Goods): The rules for getting 0% tax on exported goods are way easier now.
• Article 31 (Export of Services): Narrowed the list of conditions for services subject to VAT.
• Article 42 (VAT Treatment of Financial Services): Investment fund management and digital asset transactions (crypto) services are now exempt from VAT.
• Article 46 (Tax on Composite Supplies): The VAT treatment of composite goods maked clear. Now, if there's no main component, the VAT is calculated based on the total nature of the product.

First Abu Dhabi Bank (FAB) can now offer its investment funds to help companies in the UAE save for their employees' end-of-service benefits. It's part of the new government Alternative EOSB Savings Scheme (Savings Scheme).
Key changes:

• New savings plan: The government created a new way for companies to save money for when their employees leave their jobs.
• More choices for employees: Employees now have more options for how their savings are invested, based on their own needs and how much risk they're comfortable with.
• Government support: The government is working with FAB and other organizations to make this program happen.

The UAE government has decided to crack down on illegal employment from November 1, 2024.

Now, employers who hire workers without valid residency permits face hefty fines ranging from AED 100,000 to AED 1 million. Fines for breaking visa rules started returning on November 1st, 2024. These fines are given to people who have not yet arranged their visas.

Well, this year has brought a lot of changes. Businesses need to stay on top of these changes because they could be hit with unexpected fines and end up losing money. It's hard to stay informed on your own - it takes a lot of energy and resources. It may be best to leave it to the experts.

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