UAE Corporate Tax Relief for Business Restructuring

Discover UAE Corporate Tax Relief strategies to restructure or transfer assets tax-free. Learn how to stay compliant—read the full guide now!

Restructuring and expanding a business can spark concerns about corporate taxes, especially in the UAE’s evolving regulatory landscape. Fortunately, the UAE Corporate Tax Law offers key relief provisions for business transfers and reorganizations. This guide breaks down how to leverage them effectively and stay tax-compliant while reshaping your business.

Tax-Free Transfers Within a Qualifying Group

Restructuring often involves moving assets between subsidiaries. Under normal circumstances, such transfers could trigger taxable gains. However, the UAE Corporate Tax Law provides relief for transfers within a Qualifying Group, enabling smoother internal shifts without tax consequences.

✅ What Defines a Qualifying Group?

To qualify, companies must meet these conditions:

• Ownership: One company must own at least 75% of the other, or both must be 75% owned by a common third entity.
• Residency: Entities must be UAE residents or non-residents with a UAE permanent establishment.
• Accounting Consistency: The fiscal year-end and accounting standards must align across entities.

🔄 How It Works

Eligible intra-group asset transfers are recorded at net book value, meaning no gain or loss is recognized at the time of transfer. However, if the asset is later sold outside the group within two years, the initial transaction is re-evaluated at market value, and tax may be due.

Business Restructuring Reliefs

For larger changes—like mergers, spin-offs, or division transfers—the law introduces Business Restructuring Relief to encourage growth and innovation without immediate tax barriers.

🧩 When Does It Apply?

This relief is available when a taxable person transfers an entire business or an independent division to another taxable entity in exchange for shares or ownership interests. For example, if Company A merges with Company B and shareholders receive equity in return, the transaction may be tax-exempt.

📋 Qualifying Conditions

To utilize restructuring relief, the following must be met:

• Legal Compliance: The restructuring must follow UAE legal standards.
• Residency Requirement: Both parties must be UAE Resident Persons or have a UAE permanent establishment.
• Non-Exempt Status: Neither entity can be an Exempt Person or Qualifying Free Zone Person.
• Same Fiscal Year: Both companies must align fiscal year-end and accounting methods.
• Genuine Purpose: The deal must reflect legitimate commercial reasons—not merely tax avoidance.

Just like group transfers, these transactions are valued at net book value. Plus, the acquiring company can carry forward unused tax losses from the transferor, a substantial benefit in long-term tax planning.

⚠️ Note: If shares or transferred business assets are sold to outsiders within two years, the tax relief may be revoked through market-value reassessment.

Final Thoughts

For UAE-based businesses undergoing structural changes, these tax reliefs are strategic tools to reduce corporate tax liabilities. However, compliance hinges on meeting detailed conditions, making professional advice essential.

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