Are you a juridical taxable person looking to take advantage of qualifying group relief (QGR) under the UAE corporate tax law? Mahar Afzal, a managing partner at Kress Cooper Management Consultants, breaks down the eligibility criteria and requirements for QGR in a detailed analysis. The QGR allows for the transfer of assets and liabilities between members of the same qualifying group without recognizing any gains or losses, as long as certain conditions are met.
To qualify for QGR, both the transferrer and transferee must be resident juridical taxable persons in the UAE, including entities incorporated in the UAE, entities controlled and managed from the UAE, and non-resident persons with a permanent establishment in the UAE. Natural persons with business revenue exceeding Dh1 million or non-residents deriving UAE sourced income are also considered taxable persons, although non-residents without a PE are ineligible for QGR.
Common ownership of at least 75% is a key requirement for QGR eligibility, meaning that the transferor must own 75% equity in the transferee, or vice versa, or a third party must own 75% in both entities. Financial years must end at the same time, and similar accounting policies must be followed. Upon meeting these conditions, assets and liabilities can be transferred at book value without any gain or loss, provided they are held in the capital account and the QGR has been opted for.
Various transactions, such as sales, exchanges, and option exercises, can be classified as transfers under QGR. However, transfers due to liquidation or mergers resulting in the cessation of an entity do not qualify. Consideration in kind in the form of another asset or liability held on the capital account constitutes an exchange and must be treated as separate transactions for QGR assessment. Additionally, losses of the transferrer cannot be transferred to the transferee within the same qualifying group.
In the post-transfer phase, the relief becomes void if either party exits the qualifying group within two years or if the related asset or liability is transferred out of the group. In a clawback situation, gains or losses are calculated based on market value assumptions, with the transferor recording this in the same tax period as the clawback triggering. If the transferrer ceases to exist, the gain or loss will be recorded by the transferee. For further information or clarifications, contact Mahar Afzal at mahar@kresscooper.com.
