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The new Corporate Tax Law in UAE will be effective for financial years starting or after June 1, 2023.
The Corporate Tax Regime has been designed to incorporate best practices globally and minimize the compliance burden for UAE businesses.
As an investor or business owner, you might have used different setups or structures to carry out your operations in UAE.
You might have set up one or more of the following:
The type of structure raises various issues in terms of taxation and compliance.
All such concerns and questions are addressed in the UAE CT regime. Let us find out.
A UAE resident group of companies can elect to form a tax group and be treated as a single taxable person.
A tax group can be formed if the following conditions are fulfilled:
To form a tax group, the parent company and all the subsidiaries must submit a joint application to the FTA.
Each member of the tax group will be jointly and severally liable for the group’s CT.
However, the FTA might approve one or more named members to be the representative member and responsible for the tax compliance for the tax group.
As you can see from the above, the 95% common equity among group companies is quite high. Many businesses may not be able to form the Group. In such cases, which are quite common, are there any alternatives?
In addition, there are many other challenges the group companies under common ownership face.
Some of them are:
Is there a way to handle such challenges? How?
Fortunately, the answer is yes.
Reorganizing and restructuring businesses is common. And necessary for efficient operations. For good economics. For sustainable use of national resources.
UAE CT regime provides the following relief to group companies for organizing and restructuring their businesses.
A loss-making company in a group can transfer its losses to a profit-making company in the group.
The following are the requirements for receiving these benefits:
Companies within a Group of companies can transfer their assets and liabilities to their other group companies
The following are the requirements for the transfer of assets and liabilities:
The conditions should be met continuously for a period of three years from the transfer. Otherwise,
Any transaction that a company or its group companies undertakes to restructure its business operations is referred to as a restructuring transaction. Here are some examples of restructuring transactions:
if such assets or liabilities are transferred to a third party within three years of the restructuring,
After you've completed an analysis of your financial statements,
You should reconsider your company's ownership structure. Restructure it if necessary.
This is important for a variety of reasons. For the formation of tax groups. The transfer of assets and obligations, and the optimal management of cash flows. For many commercial activities, it is now possible to own 100% of the company in UAE. You could think about it.
The CT law would provide tax benefits for restructuring. With conditions.
Have a say in how the UAE Corporate Tax laws should be - submit your comments and learn more about the new CT Law.
All the answers on Tax loss carry forward under the new Corporate Tax Law.
Calculating your tax liability under the Corporate Tax Law
Are companies in UAE Free Zones subject to Corporate taxes?
The Corporate Tax Law is a Federal Law that will apply to all businesses and commercial activities(legal entities)in the UAE. Find out more.