On 3 April 2024, the UAE Federal Tax Authority (FTA) issued the Corporate Tax Guide on Qualifying Group Relief – CTGQGR1. This group relief permits the transfer of assets or liabilities between two taxable persons within the same qualifying group without incurring a gain or loss for corporate tax purposes.
This guide provides general guidance on the Qualifying Group Relief available under Article 26 of the UAE Corporate Tax Law. The guide provides the readers with an overview of the following in respect of Qualifying Group Relief:
- transactions covered within the scope of the relief,
- conditions to be eligible for the relief,
- consequences of electing for the relief,
- circumstances when the relief will be clawed back and the consequences of clawback of the relief,
- compliance requirements, and
- interaction with other provisions of the UAE Corporate Tax Law.
This guide does not address Tax Groups, except where the Tax Group provisions interact with the provisions outlined above.
The guide should be read by any Taxable Person intending to transfer one or more of its assets or liabilities to another Taxable Person who are both member of the same Qualifying Group. It is intended to be read in conjunction with the Corporate Tax Law, the implementing decisions, and other relevant guidance published by the FTA.
Qualifying Group Relief: General aspects
Article 26 of the Corporate Tax Law 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 Corporate Tax purposes. Broadly, this 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.
The relief is only available where 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.
Assets and liabilities eligible for Qualifying Group Relief
Qualifying Group Relief applies only to the transfer of assets or liabilities held on the capital account and recorded on the balance sheet of the Transferor. The transfer of assets or liabilities which are not held on a capital account (for example, inventory transferred as part of regular Business operations) is not within the scope of Qualifying Group Relief and hence, cannot benefit from the no gain or loss tax treatment.
The general Corporate Tax rules, including the requirement to apply the arm’s length standard on transfers between Related Parties, apply in respect of the transfer of assets or liabilities between members of the Qualifying Group where they are not held on capital account on the balance sheet of the Transferor, or where the assets or liabilities transferred are held on capital account but the Transferor has not made an election for Qualifying Group Relief.
