- The UAE Federal Tax Authority has released a guide on “qualifying group relief” under the UAE corporate tax (CT) law in order to provide an overview of the relief, including, inter alia, its scope, eligibility, compliance requirements, interaction with other provisions of the CT law, etc.
- The qualifying group relief allows assets or liabilities to be transferred between two taxable persons that are members of the same qualifying group without creating a gain or loss for CT purposes i.e., the qualifying group relief allows tax neutral restructuring of assets and liabilities where there is no change in the overall ownership of assets or liabilities from a group perspective.
- The relief is only available where both the transferor and the transferee are members of the same qualifying group and the transferor has elected for the qualifying group relief.
- The transferor and the transferee are treated as members of the same qualifying group where: (i) the transferor and the transferee are taxable juridical persons; (ii) either the transferor or the transferee has a direct or indirect ownership interest of at least 75% in the other person, or at least 75% shares in both the transferor and the transferee are directly or indirectly owned by the same person; (iv) neither the transferor nor the transferee are an exempt or a qualifying free zone person; and (vi) the transferor and the transferee must have financial years ending on the same date and prepare their financial statements using the same accounting standards.
- Qualifying group relief applies only to the transfer of assets or liabilities held on capital account and recorded on the balance sheet of the transferor. As an example, inventory transferred as part of routine business operations is not within the scope of qualifying group relief.
- The relief is subject to conditions that ensure that any gain or loss will be subject to CT if, within two years, the transferee eventually disposes of the asset or liability outside of the qualifying group, or either the transferor or the transferee leave the qualifying group.