Business Restructuring Relief UAE: CT Consequences

Effects of Business Restructuring Relief under UAE Corporate Tax

UAE has introduced the new CT regime to help businesses work better. Companies now must follow extra rules for taxes. UAE gives special relief for business restructuring. Companies can apply for business restructuring relief if they meet certain conditions. But, every business must know what happens after they choose this relief. Mubarak Al Ketbi (MAK) Auditing explains the effects and steps you must follow.

Main Effects of Choosing Business Restructuring Relief

When a business picks the restructuring relief, it must think about some big results:

1. Transfer of Assets and Liabilities at Net Book Value

If you transfer a business or a big part of it, and you use business restructuring relief, the law says you measure assets and liabilities at net book value. You don’t make a gain or loss for tax purposes.

Example:

• Imagine Company B builds electric car machines.
• Company D repairs those machines.
• Company D buys Company B during a tax year, giving 30% of its shares to Company B.
• Company B’s business has a net book value of AED 2.3 million.
• The market value of Company D’s shares is AED 2.7 million.
• For accounting, Company D uses the higher market value, but for tax, both sides use the AED 2.3 million net book value.
• This way, Company B gets AED 2.3 million in consideration for tax, and Company D pays AED 2.3 million—no extra gain or loss.

2. Value of Shares or Ownership Interests Received

If the transfer happens under restructuring relief, the transferor or its shareholders (with at least half the ownership) must value new shares or interests at the net book value of assets and liabilities, minus other consideration.

The law says:

• Value received must not go over the net book value of what was transferred.
• This helps set the right gain or loss when someone later sells those shares or interests.

3. Transfer of Tax Losses

Business restructuring relief lets a company move its tax losses from before the transfer over to the new company, as long as the new company keeps doing the same business.

The business must:

• Use the transferred assets like before,
• Avoid big changes to the business,
• Only change because of new ways to use assets, products, or services that were already there.

When Businesses Should Watch Out

Choosing business restructuring relief means watching out for these main points:

• You must record all transfers at the right value.
• You can’t count gains or losses on the transfer.
• You must use fair methods to value shares or interests.
• You must move and track tax losses if the business stays the same.

If you miss a step or break a rule, you may face a clawback, which means the government will take back the relief, and you’ll owe more tax.

Steps to Handle UAE CT Business Restructuring Right

Mubarak Al Ketbi (MAK) Auditing says to follow these steps:

• Always keep records for every transfer.
• Make sure you value assets, liabilities, shares, and interests correctly.
• Review tax loss rules before moving business parts.
• Don’t make big business changes too soon after a transfer.
• Ask experts to check your CT work and help you stay safe.

What Can Help? – Mubarak Al Ketbi (MAK) Auditing

When you need to handle business restructuring relief, Mubarak Al Ketbi (MAK) Auditing will guide you at every step. Our team of CT experts will:

• Check your eligibility for relief,
• Help record every transfer the right way,
• Review your share value and losses,
• Give you updates on CT rules,
• Train your staff in business tax.

You can trust us because we always “keep our finger on the pulse” of UAE tax law.

For more information:

• Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
• Contact/WhatsApp: +971 50 276 2132