Conditions for Continuation or Cessation to be Deemed as an Exempt Person

The UAE Ministry of Finance has issued Ministerial Decision No. 105 of 2023 Determination of the Conditions under which a Person may Continue to be Deemed as an Exempt Person or Cease to be Deemed as an Exempt Person from a Different Date for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

Article (2) states that

A Person can be deemed as an Exempt Person during their liquidation or termination procedure provided:

• a notification must be submitted to the Authority within 20 business days from the start of the procedure.
• the applicable legislations of the State should be followed during the liquidation or termination procedure.

Article (3) states that

The Person can continue to be deemed as an Exempt Person in Case of failure to meet the Conditions which is of a Temporary Nature subject to the below conditions:

• The failure to meet the conditions is due to an unforeseeable situation or event beyond control.
• The Person applies to the Authority within 20 business days of failing to meet the conditions.
• It is reasonably expected that they can rectify the failure to meet the conditions within 20 business days.
• The Person provides evidence to the Authority of putting in place appropriate procedures to monitor compliance within 20 business days of a request by the Authority.
• The above period specified can be extended by an additional 20 business days if the failure to rectify is beyond the Person's control.

The Authority will review the application and notify the Person of its decision within 20 business days, or within a different time period if required, provided that the Person has been notified.

Article (4) states that

A Person shall cease to be deemed as an Exempt Person:

If it can be concluded that the main purpose or one of the main purposes of the cessation is to obtain a Corporate Tax advantage that is not consistent with the intentions or purposes of the Corporate Tax Law.

This cessation will start from the day the Person fails to meet the conditions to be exempt under the relevant provisions of the Corporate Tax Law.

By: CA Vaishnavi Raghuwanshi