The UAE Ministry of Finance, on 30th May 2023, issued three Ministerial Decisions concerning transfers within a qualifying group, business restructuring relief and general rules for determining taxable income.
According to the Ministerial Decision No. 132 of 2023, For claiming corporate tax relief on the transfer of assets and liabilities within a Qualifying Group an election to apply the relief must be made by the Transferor at the time of submission of the Tax Return for the Tax Period in which a transfer occurs. The election to apply the relief for transfers within a qualifying Group is irrevocable and will apply to all future periods.
Further, both the Transferor and the Transferee must maintain a record of the agreement to transfer the asset or liability.
Further, it is clarified that any subsequent transfer of assets and liabilities outside the qualifying group and after the transferor and transferee ceases to be a member of the same qualifying group, any gain or loss arising from such transfer will be taxable.
According to the Ministerial Decision No. 133 of 2023, There is no corporate tax liability on business mergers and other restructuring transactions. The relief is available when the business or an independent part of a business is transferred or merged into another legal entity in exchange for shares or other ownership interests. Other forms of consideration for the transfer are allowed but only up to the lower of 10% of the nominal value of ownership interest issued or net book value of assets and liabilities transferred. For claiming the relief an election must be made by the Transferor in the form and manner as prescribed by the Authority.
Further, both the Transferor and the Transferee must maintain a record of the agreement to transfer the Business or the independent part of the Business at the value prescribed.
According to the Ministerial Decision No. 134 of 2023, The Ministry of Finance prescribes general rules for determining taxable income and streamlining the process of calculating the taxable income for UAE businesses.
The decision set out adjustments needed for the calculation of taxable income, including adjustments relating to related party’s transactions, recognition of realized and unrealized gains or losses, transfer within qualifying groups, business restructuring relief and other adjustments relating to deductions.
The decision also set out adjustments to the accounting income for determining the taxable income of a Partner in an Unincorporated Partnership.
Further, it also clarifies that a taxable person that prepares Financial Statements on an Accrual Basis of Accounting may elect to recognise gains and losses on a realisation basis for certain assets and liabilities, the decision to make an election, or not to make an election, shall be made by the Taxable Person during the first Tax Period and shall be deemed irrevocable, except under exceptional circumstances and pursuant to approval by the Authority.
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