UAE Corporate Tax: Business Restructuring Relief Conditions Explained

Business restructurings are common in a global trading hub like the UAE. However, the new UAE corporate tax regime presents certain challenges to the transactions involving business restructurings. Companies undergoing a business restructuring have to incur a taxable gain or loss.

The UAE corporate tax law (CT Law) provides relief for certain business restructuring transactions through the Business Restructuring Relief provision. Under the business restructuring relief, no gain or loss will arise when there is a transfer of business between two wholly independent parties.

The Federal Tax Authority (FTA) has released a new guide, explaining the categories of transactions that qualify for the Relief as well as the conditions for availing of the Relief.

The best corporate tax consultants in Dubai can help you demystify the Business Restructuring Relief provision. In this blog, you can learn more about the conditions as described in the FTA Guide:

What is the Business Restructuring Relief Provision?

The objective of the Business Restructuring Relief provision is to eliminate the UAE Corporate Tax impact of certain transactions carried out as part of the restructuring or reorganization of a Business. The Relief in Article 27 of the CT Law allows certain types of restructuring transactions to take place in a tax-neutral manner.

However, the Restructuring Relief is available only if the relevant conditions are met and the Transferor has elected for the relief to apply. Corporate tax advisers in Dubai can

Transactions under the Scope of Restructuring Relief

Business Restructuring Relief applies to two categories of transactions. They are:

• If there is a transfer of an entire Business or an independent part of the Business from one Taxable Person to another
• If there is a transfer of an entire Business from one or more Taxable Persons to another, and the Transferor then ceases to exist

Conditions to Avail of Business Restructuring Relief

Even though the Business Restructuring Relief allows certain types of restructuring transactions to take place in a tax-neutral manner, it can be availed upon meeting certain conditions such as:

• The transfer is undertaken in accordance with and meets all the conditions imposed by, the applicable legislation of the UAE
• The Transferor and the Transferee are Resident Persons, or Non-Resident Persons that have a Permanent Establishment in the UAE
• Neither the Transferor nor the Transferee is an Exempt Person
• Neither the Transferor nor the Transferee is a Qualifying Free Zone Person
• The Financial Year of Transferor and Transferee ends on the same date
• The Transferor and Transferee prepare their Financial Statements using the same Accounting Standards
• The transfer is undertaken for valid commercial or other non-fiscal reasons that reflect economic reality

Clawback of Business Restructuring Relief

The FTA can claw back the relief if, within two years, the Transferee ultimately disposes of the transferred Business or the ownership of the Transferor or Transferee changes. Moreover, the transfer of the Business or the independent part of the Business will be treated as having taken place at Market Value on the date of the transfer. Corporate tax consultants in Dubai can help you in this regard.

Tax Gian can Advise you on Business Restructuring Relief

Business restructuring relief helps companies eliminate the risk of taxable gains or losses. However, business owners need the assistance of expert corporate tax advisers in Dubai to leverage it in line with the provisions of the CT Law. Tax Gian, a brand of Jitendra Tax Consultants (JTC), can help you navigate the complexities of the UAE CT Law.

If you want to know if your company can avail of the Business Restructuring Relief, talk to Tax Gian’s highly qualified tax professionals. We can support you with our in-depth knowledge and experience. Please get in touch with one of our corporate tax consultants in Dubai to ensure your company is meeting all the necessary requirements as per the CT Law.