Set the conditions for forming and maintaining a corporate tax group between a parent company and its subsidiaries, the treatment of intra-group transactions and pre-grouping losses, and the 20-business-day notification when a member leaves; repealed by Ministerial Decision No. 301 of 2024 but still applies to tax periods that began before 1 January 2025.
Ministerial Decision No. 125 of 2023 was the first set of operating rules for Corporate Tax groups under Articles 40 to 42 of the Corporate Tax Law (Federal Decree-Law No. 47 of 2022). It was issued on 22 May 2023 and came into effect the day after publication. It has been superseded: Ministerial Decision No. 301 of 2024 repealed it for Tax Periods commencing on or after 1 January 2025, while providing that it continues to apply to Tax Periods that commenced before that date. The first Tax Group periods of most groups, those starting between 1 June 2023 and 31 December 2024, are therefore governed by this decision.
Articles 2 and 3 set the membership tests. The Article 40(1) conditions must be met continuously throughout the Tax Period; share capital means nominal issued and paid-up capital or membership or partnership capital; Parent and Subsidiaries must be Resident Persons not treated as resident elsewhere under a tax treaty, and a member that becomes treaty-resident elsewhere leaves the group from the start of that Tax Period. A foreign-incorporated company that is UAE resident by management and control, or a UAE company managed from abroad, must hold a confirmation from the foreign tax authority or competent authority that it is not resident there.
Article 5 fixes timing: the application to form or join a group must be submitted before the end of the Tax Period for which grouping is requested, and a newly incorporated Subsidiary or replacement Parent may join from its date of incorporation. Article 4 prevents elimination of intra-group transactions where a member deducted a loss on them before grouping, until that loss is reversed. Article 6 extends elimination to transactions between Subsidiaries and to valuation adjustments and provisions.
Article 7 limits pre-grouping Tax Losses of a Subsidiary to the lesser of the group Taxable Income attributable to that Subsidiary and the Article 37(2) cap, and requires them to be used before the group's own carried-forward losses. Article 8 requires the group to compute member-level Taxable Income on an arm's length basis, and disclose intra-group dealings, where a member has pre-grouping losses, foreign tax credits, tax incentives or pre-grouping Net Interest Expenditure.
Articles 10 and 11 treat mergers and transfers inside the group as internal: a member transferring its whole Business to another member stays in the group until it ceases to exist, no Business Restructuring election is needed, and income on intra-group transfers is not taken into account, subject to the Article 42(10) claw-back. Article 12 requires the group to notify the FTA within 20 business days when a Subsidiary leaves or the group ceases to meet the conditions. Article 13 requires a departing Subsidiary or former Parent to prepare standalone financial statements on the group's accounting basis using the group's carrying values as opening values.
Parent Companies and Subsidiaries that formed or joined a Corporate Tax group for Tax Periods commencing before 1 January 2025 under Article 40 of the Corporate Tax Law, and members leaving such groups in those periods. Later periods are governed by Ministerial Decision No. 301 of 2024.
| Article 2 | The Article 40(1) conditions must be met continuously throughout the Tax Period; share capital means the nominal issued and paid-up share capital or Membership or Partnership Capital of each Subsidiary. |
| Article 3 | Parent and Subsidiary must be Resident Persons not treaty-resident elsewhere; a member becoming resident elsewhere leaves from the start of that Tax Period; foreign-incorporated or foreign-managed members must hold a foreign tax authority or competent authority confirmation of non-residence. |
| Article 4 | Intra-group transactions are not eliminated to the extent a member recognised a deductible loss on them before grouping, until that loss is fully reversed, and related income is included up to the loss previously deducted. |
| Article 5 | The application to form or join a Tax Group must be submitted before the end of the Tax Period in which grouping is requested; a newly established Subsidiary or replacement Parent may join from incorporation. |
| Article 6 | Transactions to be eliminated include those between Subsidiaries and valuation adjustments and provisions between members, and any accounting value change flowing from an eliminated gain or loss. |
| Article 7 | Pre-grouping Tax Losses of a Subsidiary offset group Taxable Income only up to the lesser of the income attributable to that Subsidiary and the Article 37(2) limit, and are used before the group's own carried-forward losses. |
| Article 8 | Where a member has pre-grouping losses, foreign tax credit income, tax incentives or pre-grouping Net Interest Expenditure, the group computes that member's attributable Taxable Income under Article 34 and discloses intra-group and related-party dealings as the FTA requires. |
| Articles 10–11 | A member transferring its whole Business to another member stays in the group until it ceases to exist, no Article 27 election is needed, and income on intra-group transfers that would qualify under Article 26 or 27 is not taken into account, subject to the Article 42(10) claw-back. |
| Article 12 | The Tax Group must notify the FTA within 20 business days of a Subsidiary leaving or the group ceasing to meet the conditions of Article 40 or the decision. |
| Article 13 | A departing Subsidiary or former Parent prepares standalone financial statements on the group's accounting basis, adopting the group's recorded values as opening values of assets and liabilities. |
The decision sets no penalty of its own. Failure to notify the FTA within 20 business days of a Subsidiary leaving or the group ceasing to qualify, and failures in record keeping or filing for the group, fall under the administrative penalties in Cabinet Decision No. 75 of 2023.
Group clients that formed a Tax Group in 2023 or 2024 still account for those periods under this decision, so we keep it in the library alongside the 2024 replacement. In practice the rules that mattered most for our clients were the timing rule in Article 5, which meant the grouping application had to be lodged before the end of the first Tax Period rather than with the first return, and the 20-business-day notification in Article 12 when a Subsidiary was sold or ceased to be 95% owned. Where a client's group included a company incorporated abroad but managed from Dubai, we obtained the foreign tax authority confirmation required by Article 3 before applying. For any FTA query on a 2023 or 2024 group return we check the position against this text, and for periods from 1 January 2025 we apply Ministerial Decision No. 301 of 2024.
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