Ministerial Decision Ministerial Decision No. 116 of 2023 Ministry of Finance

MD 116/2023 — Participation exemption (repealed)

Ministerial Decision No. 116 of 2023 on Participation Exemption for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses

Repealed Issued 10 May 2023

Official Arabic text (opens in a new tab) English translation (unofficial) (opens in a new tab)

Replaced by MD 302/2024 — Participation exemption and foreign PE exemption from 11 December 2024 — read the current text →

Official Arabic title
قرار وزاري رقم (116) لسنة 2023 — إعفاء المشاركة لأغراض المرسوم بقانون اتحادي رقم (47) لسنة 2022 في شأن الضريبة على الشركات والأعمال
Document type
Ministerial Decision
Number
116
Issued by
Ministry of Finance
Administered by
Federal Tax Authority
Issued
10 May 2023
Entry into force
Effective from the day following its publication (Art. 14); the Official Gazette publication date is not stated in the text. Issued 10 May 2023.
Applies to
Taxable Persons holding Participating Interests, for Tax Periods that commenced before 1 January 2025.
Current position
Repealed by Ministerial Decision No. 302 of 2024 (Art. 15), issued 10 December 2024; it continues to apply to Tax Periods that commenced before 1 January 2025. MD 302/2024 applies to Tax Periods commencing on or after 1 January 2025.
Topics
Corporate Tax ·
Official text
Official Arabic text · English translation (unofficial)

Factual summary

Set the detailed rules of the participation exemption under Art. 23 of the Corporate Tax Law: which instruments count as ownership interests, how holdings are aggregated, the subject-to-tax test at a rate of not less than 9%, the conditions for foreign holding companies, and the AED 4,000,000 minimum acquisition cost alternative. It also made acquisition and disposal costs non-deductible and capitalised, set the liquidation-loss rules, and required recapture of used foreign permanent establishment losses.

What it means in practice Professional insight

Who: groups that claimed the participation exemption for Tax Periods starting before 1 January 2025. What to check: the 9% subject-to-tax evidence, the ownership or AED 4,000,000 cost test, and the treatment of acquisition costs; later periods follow MD 302/2024.

Key provisions

  • Art. 2 For Art. 23 of the Corporate Tax Law, an ownership interest includes Ordinary, Preferred and Redeemable Shares, Membership and Partner Interests and other rights to profits and liquidation proceeds, but only if classified as equity under the Accounting Standards applied by the holder; Islamic Financial Instruments count if classified as equity under the standards of the Accounting and Auditing Organization for Islamic Financial Institutions.
  • Art. 6 A Participation meets the subject-to-tax condition if it is resident throughout the Tax Period in a jurisdiction levying a tax on a similar basis to Corporate Tax at a rate not less than 9%; alternatively it may show the Authority an effective rate of not less than 9% on its income or profits, or on its accounting net profits recalculated on the Corporate Tax Law basis (Art. 6(5)); a Participation in a jurisdiction without such a tax also qualifies if a tax on income, equity or net worth gives an effective rate of not less than 9% on its accounting profits under the Accounting Standards (Art. 6(6)).
  • Art. 7 For Art. 23(3)(a), a holding-company Participation must be directed and managed abroad, meet its local filing duties, have adequate personnel and premises and carry on only incidental or ancillary activities; it meets the condition of Art. 23(3)(b) if on average 50% or more of its income in the relevant and preceding Tax Period consists of Dividends, capital gains and other income from Participating Interests.
  • Art. 8 Under Art. 23(11), a Participating Interest exists where the aggregated acquisition cost of the ownership interests is equal to or exceeds AED 4,000,000, counting contributions, consideration and capitalised acquisition costs at historical values; if the threshold is not met for an interrupted period of at least 12 months, previously exempt income is included in Taxable Income (Art. 8(6)).
  • Art. 10 Expenditure on acquiring or disposing of a Participating Interest (professional fees, due diligence, litigation, commissions, stamp and registration duties, valuation and refinancing costs) is not deductible and is capitalised into the acquisition cost; interest on acquiring and holding it is deductible subject to Chapter Nine of the Corporate Tax Law.
  • Arts. 12, 13 A Participation is liquidated when it ceases to have legal existence, and the liquidation loss is the acquisition cost less the fair value of liquidation proceeds, with adjustments; a Tax Loss of a Foreign Permanent Establishment that was used must be fully offset by its later Taxable Income before the Art. 24 exemption is elected or Art. 23 applies after its incorporation.
  • Repeal Repealed by Ministerial Decision No. 302 of 2024 (Art. 15), but continues to apply to Tax Periods that commenced before 1 January 2025.

What changed

  1. 10 May 2023 Issued
  2. Entry into force: Effective from the day following its publication (Art. 14); the Official Gazette publication date is not stated in the text. Issued 10 May 2023.
  3. 11 December 2024 Replaced by MD 302/2024 — Participation exemption and foreign PE exemption: Repeals Ministerial Decision No. 116 of 2023; it continues to apply to Tax Periods that commenced before 1 January 2025.

Relationship chain

Law → decisions made under it → amendments → guidance and announcements; oldest first within each level.

  1. 3 October 2022 Federal Decree-Law FDL 47/2022 — Corporate Tax Law In force — amended
    1. 30 December 2022 Cabinet Decision CD 116/2022 — AED 375,000 rate band — Made under Art. 3(1) In force
    2. 10 March 2023 Ministerial Decision MD 43/2023 — Persons that do not register for Corporate Tax — Made under it In force
    3. 29 March 2023 Ministerial Decision MD 68/2023 — Government Entity businesses treated as a single Taxable Person — Made under Art. 5(6) In force
    4. 3 April 2023 Ministerial Decision MD 73/2023 — Small Business Relief — Made under Art. 21 In force — amended
      1. August 2023 Official guide FTA guide CTGSBR1 — Small Business Relief — Official guide Current version
      2. 29 July 2026 Ministerial Decision MD 131/2026 — SBR extended to 2029 — Amends Art. 2(2) In force
        1. 7 August 2026 Official announcement MoF news 7 Aug 2026 — SBR to 2029 — Announcement Current version
    5. 7 April 2023 Cabinet Decision CD 37/2023 — Qualifying Public Benefit Entities (list updated September 2026) — Made under it In force — amended
    6. 7 April 2023 FTA Decision FTA Decision 5/2023 — When a Corporate Tax period can be changed — Made under Art. 58 In force
    7. 7 April 2023 FTA Decision FTA Decision 6/2023 — Deadline to deregister for Corporate Tax — Made under Art. 52(1) In force
    8. 7 April 2023 FTA Decision FTA Decision 7/2023 — Exempt persons' registration and exemption applications (repealed) — Made under Art. 4(1) Repealed
    9. 10 April 2023 Ministerial Decision MD 82/2023 — Who had to prepare audited financial statements (repealed) — Made under Art. 54(2) Repealed
    10. 10 April 2023 Ministerial Decision MD 83/2023 — When a stranded individual does not create a Permanent Establishment — Made under Art. 14(7)(a) In force
    11. 27 April 2023 Ministerial Decision MD 97/2023 — Who must keep a transfer pricing master file and local file — Made under Art. 55(2) In force
    12. 4 May 2023 Ministerial Decision MD 105/2023 — When a Person stays exempt, or stops being exempt from a different date — Made under Art. 4(6) In force
    13. 8 May 2023 Cabinet Decision CD 49/2023 — When an individual's business is subject to Corporate Tax — Made under Art. 11(6) In force
    14. 9 May 2023 Ministerial Decision MD 114/2023 — Accounting standards and the cash basis for Corporate Tax — Made under Art. 20 In force
    15. 10 May 2023 Ministerial Decision MD 115/2023 — Private pension and social security funds — Made under Art. 4 In force
    16. 10 May 2023 Ministerial Decision MD 116/2023 — Participation exemption (repealed) — Made under Arts. 23, 24 Repealed
    17. 16 May 2023 Ministerial Decision MD 120/2023 — Transitional adjustments for assets held before the first Tax Period — Made under Arts. 20, 61 In force
    18. 22 May 2023 Ministerial Decision MD 125/2023 — Tax Group (repealed) — Made under Arts. 40–42 Repealed
    19. 23 May 2023 Ministerial Decision MD 126/2023 — General interest deduction limitation rule — Made under Art. 30 In force
    20. 24 May 2023 Ministerial Decision MD 127/2023 — Unincorporated partnerships, foreign partnerships and family foundations (repealed) — Made under Arts. 16, 17 Repealed
    21. 25 May 2023 Ministerial Decision MD 132/2023 — Transfers of assets and liabilities within a Qualifying Group — Made under Art. 26 In force
    22. 25 May 2023 Ministerial Decision MD 133/2023 — Business Restructuring Relief — Made under Art. 27 In force
    23. 29 May 2023 Ministerial Decision MD 134/2023 — General rules for determining Taxable Income — Made under Art. 20 In force
    24. 30 May 2023 Cabinet Decision CD 56/2023 — Non-resident nexus through UAE real estate (repealed) — Made under Arts. 11, 12 Repealed
    25. 30 May 2023 Cabinet Decision CD 55/2023 — Qualifying Income of a Qualifying Free Zone Person (repealed) — Made under Art. 18 Repealed
      1. 1 June 2023 Ministerial Decision MD 139/2023 — Qualifying and excluded activities for free zone persons (repealed) — Made under Arts. 1, 4 Repealed
    26. 10 July 2023 Cabinet Decision CD 75/2023 — Corporate Tax administrative penalties — Made under it In force — amended
      1. 22 February 2024 Cabinet Decision CD 10/2024 — AED 10,000 penalty for late Corporate Tax registration — Amends Art. 1 In force
    27. 18 July 2023 Cabinet Decision CD 81/2023 — Conditions for qualifying investment funds and REITs (repealed) — Made under Art. 10(1) Repealed
    28. 16 August 2023 FTA Decision FTA Decision 11/2023 — Annual declaration for exempt persons — Made under Art. 53(5) In force
    29. 16 August 2023 FTA Decision FTA Decision 12/2023 — Tax Groups of government-owned subsidiaries — Made under Art. 40(2) In force
    30. 16 August 2023 FTA Decision FTA Decision 13/2023 — Converting foreign-currency amounts to AED for Corporate Tax — Made under Art. 43 In force
    31. 25 October 2023 Cabinet Decision CD 100/2023 — Qualifying Income of a Qualifying Free Zone Person — Made under Art. 18 In force
      1. 27 October 2023 Ministerial Decision MD 265/2023 — Qualifying and excluded activities for free zone persons (repealed) — Made under Arts. 4, 7 Repealed
      2. 28 August 2025 Ministerial Decision MD 229/2025 — Qualifying and excluded activities for free zone persons — Made under Arts. 4, 7 In force
        1. 29 August 2025 Ministerial Decision MD 230/2025 — Recognised price reporting agencies for qualifying commodity trading — Made under it In force
        2. 22 December 2025 Ministerial Decision MD 336/2025 — Dubai VARA added as a Competent Authority for free zone fund and wealth management — Made under Art. 1 In force
        3. 2 June 2026 FTA Decision FTA Decision 6/2026 — Free-zone distributors: auditor's agreed-upon procedures report — Made under it In force
    32. 15 December 2023 FTA Decision FTA Decision 16/2023 — Registering unincorporated partnerships and partners' shares (repealed) — Made under Arts. 16, 51 Repealed
    33. 1 March 2024 FTA Decision FTA Decision 3/2024 — CT registration deadlines — Made under Art. 51(1) In force
    34. 13 August 2024 Public Clarification CTP003 — first Corporate Tax period — Clarifies Arts. 57–58 Current version
    35. 25 September 2024 FTA Decision FTA Decision 7/2024 — First Corporate Tax return and payment deadline moved to 31 December 2024 — Made under Arts. 48, 53 Spent
    36. 28 October 2024 Ministerial Decision MD 261/2024 — Unincorporated partnerships, foreign partnerships and family foundations — Made under Arts. 16, 17 In force
      1. 19 May 2025 FTA Decision FTA Decision 5/2025 — Compliance for partnerships and family foundations — Made under Art. 4(3) In force
    37. 9 December 2024 Ministerial Decision MD 301/2024 — Tax Group rules — Made under Arts. 40–42 In force
    38. 10 December 2024 Ministerial Decision MD 302/2024 — Participation exemption and foreign PE exemption — Made under Arts. 23, 24 In force
    39. 31 December 2024 Cabinet Decision CD 142/2024 — Top-up Tax on multinational enterprises (Pillar Two) — Made under it In force
      1. 28 March 2025 Ministerial Decision MD 88/2025 — OECD commentary and guidance adopted for the UAE top-up tax (repealed) — Made under it Repealed
      2. 22 June 2026 Ministerial Decision MD 96/2026 — Updated OECD commentary and guidance adopted for the UAE top-up tax — Made under it In force
      3. 16 July 2026 FTA Decision FTA Decision 12/2026 — Top-up Tax registration and deregistration — Made under it In force
      4. 3 August 2026 Ministerial Decision MD 133/2026 — Who files the Pillar Two Information Return — Made under it In force
    40. 25 March 2025 Ministerial Decision MD 84/2025 — Who must prepare audited financial statements for Corporate Tax — Made under Art. 54(2) In force
      1. 16 July 2025 FTA Decision FTA Decision 7/2025 — Audited aggregated financial statements for Tax Groups — Made under Art. 2(2) In force
    41. 27 March 2025 Cabinet Decision CD 34/2025 — Qualifying investment funds, REITs and qualifying limited partnerships — Made under Art. 10(1) In force
      1. 14 April 2025 Ministerial Decision MD 96/2025 — 10% minimum free float for REITs listed in May 2025 — Made under Art. 4(1) In force
      2. 18 September 2025 FTA Decision FTA Decision 8/2025 — Compliance deadlines for qualifying investment funds and their investors — Made under Arts. 2, 3, 4 In force
    42. 27 March 2025 Cabinet Decision CD 35/2025 — When a non-resident has a nexus in the UAE — Made under Art. 11(4)(c) In force
    43. 2 May 2025 Cabinet Decision CD 55/2025 — Exemption for foreign entities owned by exempt persons — Made under Art. 4(1) In force
    44. 14 May 2025 Cabinet Decision CD 63/2025 — Unincorporated Partnership taxed in its own right — Made under Art. 16(8) In force
    45. 23 June 2025 Ministerial Decision MD 173/2025 — Depreciation for investment property at fair value — Made under Art. 20(3) In force
    46. 31 December 2025 Cabinet Decision CD 215/2025 — Research and development (R&D) tax credit — Made under it In force
      1. 18 March 2026 Ministerial Decision MD 24/2026 — R&D tax credit rates, qualifying activities and expenditure rules — Made under Arts. 5, 6, 7 In force
    47. 12 January 2026 Cabinet Decision CD 1/2026 — Corporate Tax exemption for certain sports entities — Made under Art. 4(1) In force
    48. 8 September 2026 FTA Decision FTA Decision 15/2026 — Applying for Corporate Tax exemption — Made under Art. 51(2) In force

Official sources

Official Arabic text (opens in a new tab) English translation (unofficial) (opens in a new tab)

Related services: Corporate Tax

Last verified against official sources: 26 October 2026 · اقرأ بالعربية

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General information, not tax advice. Each record is checked against the official source; where they differ, the official Arabic text prevails.