16 July 2026 · MD 302/2024
What MD 302 of 2024 Changed
Ministerial Decision No. 302 of 2024 replaced the earlier Ministerial Decision No. 116 of 2023 and refined how the UAE participation exemption and the related foreign permanent-establishment exemption actually work in practice. Two changes stand out: where a Participating Interest qualifies through the AED 4 million acquisition-cost route rather than the 5% ownership route, certain ownership-linked tests that used to apply are relaxed, making that route genuinely usable rather than a technicality; and the asset-composition test — which checks a participation is not itself mostly holding non-qualifying assets — now applies mainly to Related-Party participations rather than to every stake. The decision also clarified how different types of participation are treated. The overall effect is a more predictable, workable exemption for genuine Dubai holding structures, which is why it matters even to businesses that never read the decision itself — it shapes what evidence and testing their exemption claim actually needs.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
What was refined
MD 302 of 2024 did not rewrite the core exemption in Article 23 — the 5%/AED 4 million ownership test, the 12-month holding period and the 9% subject-to-tax test all remain the foundation. What it did was replace the earlier Ministerial Decision No. 116 of 2023 with refined mechanics: relaxing certain ownership-linked conditions specifically where the AED 4 million cost route is used, narrowing the asset-composition test to Related-Party participations, and clarifying how the exemption interacts with the separate foreign permanent-establishment exemption for branches and other overseas presences.
- Replaced Ministerial Decision No. 116 of 2023.
- Core Article 23 conditions (ownership, 12 months, 9%) are unchanged.
- AED 4m cost route gets relaxed ownership-linked testing.
- Asset-composition test narrowed to related-party participations.
- Clarified treatment alongside the foreign permanent-establishment exemption.
Better for holding companies
For a genuine Dubai holding structure, the practical effect is fewer edge cases where a real, arm's-length investment gets caught by a test designed to police artificial arrangements. Before the change, the asset-composition test could, in principle, reach ordinary third-party investments; narrowing it to related-party participations means an unrelated foreign shareholding is less likely to be second-guessed on that basis, while related-party structures — where the risk of engineering the numbers is higher — remain under closer scrutiny. That is a more proportionate, and more predictable, rule for investors structuring around the exemption in good faith.
- Fewer edge cases catching genuine arm's-length investments.
- Related-party participations remain under closer scrutiny by design.
- More predictable qualification for real Dubai holding structures.
- Aligns treatment with the foreign permanent-establishment exemption.
- Reduces structuring uncertainty for inbound and outbound investors.
From MD 116 of 2023 to MD 302 of 2024
MD 116 of 2023 was the first ministerial decision to flesh out the participation exemption conditions after Federal Decree-Law No. 47 of 2022 introduced Article 23. As UAE corporate tax moved from law into practice, the Ministry of Finance identified places where the original mechanics were unnecessarily strict for genuine holding structures — particularly around the AED 4 million cost route and the reach of the asset-composition test. MD 302 of 2024 is the response: not a change in policy direction, but a refinement that keeps the exemption's guardrails while removing friction for legitimate investors.
- MD 116 of 2023 first detailed the exemption conditions.
- MD 302 of 2024 refined, rather than reversed, that approach.
- Changes target friction points identified in early practice.
- Signals an evolving, still-maturing corporate tax regime.
Applying the current rules to your structure
Exiloz keeps structures aligned with the version of the rules actually in force — testing whether a participation relies on the 5% or AED 4 million route, applying the relaxed ownership-linked tests where the cost route is used, and confirming whether the asset-composition test is even in scope given the related-party position. For groups that structured before MD 302 of 2024 came in, we review whether the current rules now treat their participations more favourably than the position they originally documented.
- Confirms which ownership route each participation relies on.
- Applies the relaxed ownership-linked tests where the cost route is used.
- Checks whether the asset test is in scope at all.
- Revisits pre-2024 structures against the current, more workable rules.
Related guides
Frequently Asked Questions
Common questions on how Ministerial Decision 302 of 2024 changed the participation exemption.
What did MD 302 of 2024 replace?
It replaced Ministerial Decision No. 116 of 2023, which was the original decision detailing the conditions for the participation exemption and the related foreign permanent-establishment exemption. MD 302 of 2024 refines those mechanics rather than changing the underlying policy in Article 23 of Federal Decree-Law No. 47 of 2022.
How does the AED 4m route change things?
Where a Participating Interest qualifies through the AED 4 million acquisition-cost route rather than the 5% ownership route, certain ownership-linked tests that used to apply are relaxed. That makes the cost route a genuinely practical alternative for investors holding a smaller percentage of a large business, rather than a route that is technically available but hard to actually rely on.
Does the asset test still apply?
Yes, but its reach is narrower after the 2024 decision — it now applies mainly to Related-Party participations rather than to every stake. An unrelated, arm's-length foreign shareholding is therefore less likely to be tested against asset composition than a participation held through or alongside a related party.
Do the core ownership, holding-period and 9% tests still apply?
Yes, unchanged. MD 302 of 2024 refined specific mechanics — the ownership-linked tests under the AED 4m route and the scope of the asset test — but the foundational conditions in Article 23 (5%/AED 4m ownership, 12-month holding, 9% subject-to-tax) remain exactly as originally legislated.
Does MD 302 of 2024 also affect the foreign permanent-establishment exemption?
Yes. The decision covers both the participation exemption and the foreign permanent-establishment exemption together, and clarifies how the two interact for businesses with both foreign shareholdings and foreign branches or other overseas presences.
Should I revisit a structure I set up before 2024?
It can be worth revisiting. If a participation was structured or documented under the earlier Ministerial Decision No. 116 of 2023 rules, the current, more relaxed treatment under MD 302 of 2024 may now apply more favourably, particularly for stakes qualifying through the AED 4 million cost route.
Is MD 302 of 2024 likely to change again?
UAE corporate tax is still a relatively young regime, and the move from MD 116 of 2023 to MD 302 of 2024 shows the rules are being refined as practice develops. It is sensible to check the current position periodically rather than assume a structure documented years ago still reflects the latest rules.
Can Exiloz apply the current rules?
Yes. We apply Ministerial Decision No. 302 of 2024 to your specific participations — confirming which ownership route applies, whether the relaxed tests help your position, and whether the asset-composition test is even in scope — rather than relying on the earlier, stricter rules.
Apply the 2024 rules
Exiloz applies Ministerial Decision No. 302 of 2024 to each of your participations, so your holding structure qualifies for the exemption cleanly under the current rules.