Introduction

Welcome to the April 2025 edition of MNV Associates’ Tax Newsletter!

In this month’s edition, we bring you crucial updates on corporate and indirect tax developments in the UAE. Our goal is to provide you with a comprehensive digest of the latest tax news, legislative changes, and enforcement actions in the United Arab Emirates.

Corporate Tax

Ministerial decision No 84 of 2025: New Audit Requirements for UAE Businesses under Corporate Tax Law

The Ministry of Finance has issued an updated ministerial decision mandating the cases where taxpayers are required to prepare and maintain audited financial statements for compliance with the UAE Corporate Tax Law. The Decision replaces the earlier Ministerial Decision No. 82 of 2023.

New Requirements for Tax Groups

The new Decision requires all tax groups to prepare audited special purpose financial statements, thereby removing the requirement to prepare audited FS only if the consolidated revenue exceeded AED 50 million.

Guidance for Free Zone Distributors

The updated decision provides that Qualifying Free Zone Persons involved in the distribution of goods would need to comply with additional procedures to be specified by the Federal Tax Authority.

Audit Threshold for Non-Residents

The new decision has clarified that in case of non-residents, only revenue derived through a Permanent Establishment or nexus in the UAE will be considered.

Cabinet Decision No. 34 of 2025: Updates on Qualifying Investment Funds (QIFs), and Real Estate Investment Trusts (REITs)

Cabinet Decision No. 34 of 2025 replaces Cabinet Decision No. 81 of 2023. The key amendments made include changes in exemption conditions for QIFs and REITs.

QIFs: Non-compliance with the ‘diversity of ownership’ condition no longer jeopardizes the QIF status of an Investment Fund. However, the income becomes taxable in the hands of juridical investors.

The scope of ‘diversity of ownership’ has been expanded to include parameters such as voting rights, board composition, profit entitlements, and business control.

REITs: Several refinements have been made to additional conditions:

Condition 1 – The term “immovable property” has replaced “real estate asset”

Condition 2A – A REIT and its related parties must not subscribe to the shares floated

Condition 2B – Federal and Local Governments have been removed from the list

Condition 3 – Must be based on average value of rental income-generating immovable property

Taxability of REITs and QIF

REITs: Treated as exempt from Corporate Tax

QIFs: Treated as exempt from Corporate Tax

Taxability of investor in QIFs and REITs

QIFs: Investors are not subject to tax on income earned by QIF, except in specific scenarios

REITs: Investors are subject to tax on income earned by REIT on the immovable properties

Indirect Tax

Public Clarification VATP042 – Value of Supply in Barter Transactions

The Federal Tax Authority has issued Public Clarification VATP042, providing guidance on determining the value of supply in barter transactions.

Barter transactions refer to situations where goods and or services are exchanged without full monetary payment. VAT continues to apply to each supply involved in the exchange.

Valuation of the supply

If the Market value is Determined:

The VAT is charged on the total consideration received – which includes any cash payment, and the fair market value of goods or services received in exchange.

When Market Value Cannot be Directly Determined:

The value should be based on the price that a similar supply would reasonably achieve in the UAE.

When No Comparable Market Value Is Available:

The value should be determined using the replacement cost.

Tax Invoicing Requirements in Barter Transactions

In a barter transaction, each party involved is considered to be making a taxable supply. If both parties are VAT registrants, each must issue a tax invoice to the other.

Public Clarification VATP041 – SWIFT Messages for Financial Institutions

The Federal Tax Authority has issued VAT Public Clarification VATP041, which replaces VATP036. It provides updated guidance on the documentation of imported services for the financial sector.

SWIFT Charges Under UAE VAT Law

UAE Financial Institutions often incur international charges from foreign banks through the SWIFT communication system. These charges are classified as “Concerned Services” when received from outside the UAE.

Under the Reverse Charge Mechanism, the recipient is treated as making a taxable supply to itself and is responsible for accounting for VAT.

Recognizing the operational difficulty of issuing invoices for high-volume SWIFT transactions, the FTA permits the use of Qualifying SWIFT Messages as sufficient documentary evidence.

Qualifying SWIFT Message:

To be accepted as a valid VAT record, the SWIFT message must clearly reflect:

The name and address of the overseas bank

The name of the UAE financial institution receiving the service

The date of the transaction

The SWIFT message reference number

Transaction reference number

A description of the transaction

The consideration charged and the currency used

Impact on Financial Institutions

UAE Financial Institutions are no longer required to issue individual self-billed tax invoices for each SWIFT transaction. They can rely on the qualifying SWIFT messages as sufficient evidence for input tax recovery.