Page 14 - ICAI UAE TAX UPDATE_APRIL 2024

3.1.4 FTA Guide - Business Restructuring Relief

On April 17, 2024, the Federal Tax Authority (FTA) For Business Restructuring Relief to apply, all of the
released a Corporate Tax Guide focusing on “Business following conditions need to be met:
Restructuring Relief” (Relief) to offer general insights
into the Relief provisions outlined in Article 27 of the • the transfer is undertaken in accordance with, and
Federal Decree-Law No. 47 of 2022 on the Taxation of meets all the conditions imposed by, the applicable
Corporations and Businesses (CT Law). legislation of the UAE (the “legally compliant condition”)
While the guide is not legally binding, the guide aims to • the Transferor and the Transferee are Resident Persons,
aid in comprehending the Relief provisions within the or Non-Resident Persons that have a Permanent
CT Law. Following are the key aspects discussed in the Establishment in the UAE (the “Taxable Persons
Corporate Tax Guide issued by the FTA. condition”)

• Compliance requirements and a brief note on • neither the Transferor nor the Transferee is an Exempt
Interaction of Business Restructuring Relief with other Person (the “Exempt Person condition”)
parts of CT Law.
• neither the Transferor nor the Transferee is a Qualifying
• Consideration for the transfer as per BRR is also Free Zone Person (the “Qualifying Free Zone Person
elaborately discussed in the guide. condition”)
• The guide also states the consequences of not electing • the Financial Year of Transferor and Transferee ends on
BRR. the same date (the “Financial Year condition”)

• Detailed explanation on clawback provisions along • the Transferor and Transferee prepare their Financial
with elaborative examples is given in the guide. Statements using the same Accounting Standards (the
“Accounting Standards condition”)
1. What is a Business Restructuring relief?
• the transfer is undertaken for valid commercial or other
The Corporate Tax Law offers relief for restructuring non-fiscal reasons which reflect economic reality (the
transactions, allowing smooth business reorganizations “valid commercial reasons condition”).
without tax penalties, supporting legitimate commercial
activities. 3.Consequences of electing for Business Restructuring
Relief:
Business Restructuring Relief applies to two types of
transactions: Where a Business or an independent part of a Business
is transferred on a no gain or loss basis under Article
(i) transferring a whole business or an independent part* 27(1) of the Corporate Tax Law, the assets or liabilities
of it from one taxpayer to another (Article 27(1)(a)), and transferred will be treated as transferred at their net
book value at the date when the transfer takes place.
(ii) transferring a whole business from one or more Accordingly, for the Transferor, there will be no taxable
taxpayers to another, resulting in the cessation of the gain or loss on transferring the assets and liabilities.*
transferor (Article 27(1)(b)).
*Net Book Value = Cost of the Asset / Liability -
*An independent part of a business operates of Asset/Liability Accumulated Depreciation /
autonomously from other components, with transferred Amortisation or any other value
assets and liabilities functioning separately. Transfer adjustments.
occurs on a going concern basis, adhering to accounting
standards. Operational support, whether from Related Adjustments to be made by the Transferee:
Parties or third parties, doesn’t negate its independence.
Generally, the assets and liabilities of the business are
2. Conditions to qualify for Business Restructuring acquired at market value, and the transferee’s financial
Relief: statements reflect this value. Consequently, any changes

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UA E TAX UP DATE NEWSLET TER ISSUE 01 - April 2024