Qualifying Group Relief (QGR) is a tax provision in the UAE that allows for the transfer of assets and liabilities within a qualifying group without triggering immediate tax liabilities. In order to qualify for QGR, both the transferrer and transferee must be juridical resident persons or permanent establishments of non-resident persons and part of the same qualifying group. The legislation also mandates a minimum of 75% common ownership between the parties involved.
Additionally, the transferrer and transferee must not be qualifying free zone persons or exempt persons at the time of the transfer. If either party becomes a QFZP or exempt person within two years of the transfer date, a clawback provision is triggered. Parties do not need to start their financial years simultaneously, but having the same fiscal year end is crucial for QGR eligibility.
Unlike business restructuring relief, QGR does not have a designated consideration requirement. The value of the consideration, whether cash, assets, or others, is deemed equivalent to the book value of the assets or liabilities being transferred. It is important to note that QGR is only available for assets and liabilities held in the capital account, which are subject to depreciation and amortization.
The clawback provision of QGR is triggered within two years of the transfer if the asset or liability is transferred to a party outside the qualifying group or if the transferrer or transferee leaves the tax group. In such instances, the party responsible for the transfer is accountable for calculating and settling the tax based on the market value assumption of the original transfer. Mahar Afzal, a managing partner at Kress Cooper Management Consultants, provides expert insights into the intricacies of QGR and its implications for businesses in the UAE. For more information or clarification on QGR, you can contact him at mahar@kresscooper.com.
In conclusion, Qualifying Group Relief is a valuable tax provision in the UAE that allows for tax-efficient transfers of assets and liabilities within a qualifying group. To qualify for QGR, certain criteria must be met regarding the residency status, common ownership, and tax status of the parties involved. By understanding the nuances of QGR and working with experienced professionals like Mahar Afzal, businesses can benefit from tax savings and efficient asset transfers. In the rapidly evolving tax landscape of the UAE, staying informed and proactive is key to maximizing tax efficiency and compliance.
