Understanding the Conditions for Exemption under Corporate Tax Law

The Minister of State for Financial Affairs has issued Ministerial Decision No. 105 of 2023 to establish the conditions for a person to continue to be deemed exempt or to cease being exempt under the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Below are the key points to understand about the decision:

 1. Conditions of Deeming the Person as an Exempt Person in Case of Liquidation or Termination: The decision stipulates that if a person is undergoing a liquidation or termination procedure, they can continue to be deemed as an exempt person from the date the procedure starts until the date it is completed. To be eligible for this exemption, the person must submit a notification to the Authority within twenty business days from the beginning of the procedures. However, the exemption will cease on the day following the completion of the liquidation or termination procedure. The person's liquidation or termination procedure will be applied according to the applicable legislation in the State.

 2. Conditions of Deeming the Person as an Exempt Person in Case the Failure to Meet the Conditions is of a Temporary Nature: If a person fails to meet the conditions to be deemed as an exempt person due to a situation or event beyond their control, which they could not reasonably have predicted or prevented, they may continue to be deemed as an exempt person if they meet the following conditions.

a. The person must apply to the Authority to continue to be treated as exempt within twenty business days from the date they fail to meet the conditions to be exempt under the relevant provisions of the Corporate Tax Law.

b. The person must reasonably expect to rectify the failure to meet the conditions within twenty business days from the submission of the application.

c. The person must provide evidence to support the appropriate procedures to monitor compliance with the relevant conditions of the Corporate Tax Law within twenty business days from the date of the request by the Authority or any other period as determined by the Authority.

d. The period specified in point (b) of this clause may be extended by an additional twenty business days if the failure to rectify is beyond the person's reasonable control.

e. The Authority shall review the application and notify the person of its decision within twenty business days of the submission of the application, or such other time period required to review the application provided that the person has been notified.

 3. Instances for Ceasing to Deem the Person as an Exempt Person from a Different Date: If it can be reasonably concluded that the main purpose, or one of the main purposes, of a person's cessation as an exempt person is to obtain a Corporate Tax advantage that is not consistent with the intentions or purposes of the Corporate Tax Law, the person shall cease to be deemed as an exempt person from the day they fail to meet the conditions to be exempt under the relevant provisions of the Corporate Tax Law.

 4. Publication and Application of this Decision: This Decision shall be published and come into effect on the date of its publication, i.e., 4th May 2023.

In summary, Ministerial Decision No. 105 of 2023 sets out the conditions under which a person may continue to be deemed as an exempt person or cease to be deemed as an exempt person for the purposes of the Corporate Tax Law. It is important for corporations and businesses to understand these conditions to ensure compliance with the law and avoid any penalties.