New UAE CT Guide: Conditions for a Qualifying Group Relief

The UAE Corporate Tax Law (CT Law) outlines provisions on the Qualifying Group Relief, which is intended to facilitate the transfer of capital assets or liabilities between two Taxable Persons within a Qualifying Group, ensuring no gain or loss for CT purposes.

Taxable persons looking for more insights on the relief can turn to the new Guidance released by the Federal Tax Authority (‘FTA’). The Guidance is aimed at helping the taxable persons in understanding the provisions of the Qualifying Group Relief under the UAE CT Law. The best corporate tax consultants in Dubai can advise you on how to avail of the relief.

This blog provides you with the conditions for availing the Qualifying Group Relief. Let us dive in:

What is the Qualifying Relief?

The Qualifying Group Relief allows tax-neutral restructuring of assets and liabilities where there is no change in the overall ownership of the assets or liabilities from a group perspective. However, the relief can be availed in cases where both the Transferor and Transferee are members of the same Qualifying Group, and the Transferor has elected for the relief.

The relief is also subject to conditions that ensure that any gain or loss will be subject to Corporate Tax if, within two years, the Transferee ultimately disposes of the asset or liability outside of the Qualifying Group, or the Transferor or Transferee leaves the Qualifying Group. Consult with corporate tax advisers in Dubai for more clarity on the Qualifying Group Relief.

The Conditions for Availing the ‘Qualifying Group Relief’

The FTA Guide on Qualifying Group Relief describes certain conditions to avail of the relief as under:

Condition 1: Transferor and transferee are Juridical Persons

  • A juridical person with a separate legal entity can become a Qualifying Group Member (e.g. private or public joint stock companies or limited liability companies (LLC), incorporated partnerships etc.)
  • Natural persons or unincorporated partnerships are not eligible for the relief as they lack a separate distinct legal personality
  • The relief can be availed by a juridical person who is a partner in an Unincorporated Partnership or by a juridical person who is held by an Unincorporated Partnership

Condition 2: Transferor and transferee are Taxable Persons

The juridical person needs to be a taxable person to qualify for the Qualifying Group Relief. A taxable person is a resident person or a non-resident person that has a Permanent Establishment in the UAE.

Condition 3: Direct, indirect or common ownership of at least 75%

The Transferor and Transferee will be considered as members of the same Qualifying Group upon meeting the following conditions:

  • The Transferor holds a direct or indirect ownership interest of at least 75% in the Transferee, or
  • The Transferee holds a direct or indirect ownership interest of at least 75% in the Transferor, or
  • A third Person holds a direct or indirect ownership interest of at least 75% in the Transferor as well as the Transferee

Condition 4: Exempt Person and Qualifying Free Zone Person

The qualifying relief applies to taxable persons excluding Exempt Persons and Qualifying Free Zone Persons (QFZP). Free Zone Persons that are not QFZP can still be a part of the Qualifying Group. Resident Persons opting for Small Business Relief cannot claim the Qualifying Group Relief.

Condition 5: Financial Year

The Financial Year of all members of the group must end on the same date. Consequently, all members of the Qualifying Group should have a Tax Period that ends on the same date. Corporate tax consultants in Dubai can help you with the financial year.

Condition 6: Accounting Period

All members need to prepare their Financial Statements using the same Accounting Standards. As per the UAE Corporate Tax Law, a Taxable Person is required to prepare Financial Statements based on IFRS. if the Revenue of the Taxable Person does not exceed AED 50 million, they may choose to apply IFRS for SMEs instead. The condition would not be met if one Taxable Person uses IFRS and another Taxable Person uses IFRS for SMEs.

Hire the Best Corporate Tax Service Providers in Dubai, UAE

The FTA guide on Qualifying Group Relief outlines the key conditions for availing the Relief. Companies may face various practical challenges regarding group relief. Highly qualified corporate tax professionals in Dubai can help you navigate such challenges.

Tax Gian, a brand of Jitendra Tax Consultants (JTC), has a team of experienced corporate tax consultants in Dubai. We can support you with our in-depth knowledge and experience. Please get in touch with one of our corporate tax advisers in Dubai to ensure your company is meeting all the necessary requirements as per the CT Law.

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