In an effort to enhance tax transparency and improve the business environment in the country, the UAE Ministry of Finance has announced a Cabinet decision regarding the treatment of joint ventures. This decision, approved by the Federal Tax Authority, allows joint ventures to be treated as taxable entities under Federal Decree-Law No. (47) of 2022 concerning corporate tax.

According to the corporate tax law, joint ventures are subject to the principle of tax transparency, meaning that the joint venture itself is not taxed. Instead, tax is imposed on the partners based on their respective shares. However, the law provides partners the option to request that the joint venture be treated as a taxable entity, similar to any other legal person.

Notably, the new decision stipulates that when partners in a joint venture approve the tax treatment request, it will be recognized as a legal entity and a resident person. This allows the joint venture to receive the same tax treatment as other legal entities. Additionally, the decision clarifies the taxable base for the joint venture to ensure clear tax compliance.

The aim of this measure is to promote tax equity, enabling joint ventures to benefit from the exemptions and tax facilitations available to legal entities under the corporate tax law.