Clawback in Business Restructuring Relief UAE CT

Clawback Explained: Business Restructuring Relief in UAE CT

UAE has set new rules for corporate tax to help businesses grow. The new CT regime started a big change in how companies pay tax and follow the law. Every company must know about the rules if they want to stay compliant. UAE makes tax easier by giving some reliefs, exemptions, and deductions. One of the main reliefs is business restructuring relief. But, companies need to follow the rules or the relief can be taken back. This is called a clawback.

Mubarak Al Ketbi (MAK) Auditing explains what a clawback is and how it works under UAE CT law. This article helps you see which actions can make the FTA claw back the relief, and what steps your company must take.

What Does Clawback Mean in Business Restructuring Relief?

A clawback happens when your company got relief during a business change but then broke the rules. If you make certain moves within 2 years after the transfer, you must pay the tax you saved. The government checks if you followed every rule. If not, your business will lose the relief and must pay extra tax.

Key Situations That Trigger a Clawback

A clawback can happen in a few ways. You need to know these to stay safe:

• If your company sells, transfers, or gives away shares in the business within 2 years, and the buyer is not in the same qualifying group, the relief will be clawed back.
• If there’s a transfer or sale of shares in the company that got the assets, and the buyer is not a member of the same group, the relief will be lost.
• If you sell, transfer, or dispose of the whole business or an important part, the relief will be lost.
• If any transaction happens that changes ownership outside the group, the clawback applies.

After the clawback, the FTA counts the transfer as happening at full market value. The tax gain or loss goes into your company’s taxable income.

Examples of Clawback Triggers

Let’s look at some clear cases:

• If you sell shares in the new business to someone not in your group.
• If a transfer happens because the company closes or winds up.
• If shares or interests get sold during any other big restructuring, and the buyer is not in the same group.

You must keep an eye on every transfer for 2 years after the relief is given.

What’s the Rule for Business Transfers After Restructuring?

If your business, or a big part of it, gets sold or transferred within 2 years, the relief is clawed back. This applies to:

• Any transfer inside a tax group,
• Any transfer within a qualifying group under Article 27(1) of CT law,
• Transfers that happen during winding up or liquidation,
• Other big changes that use restructuring relief.

The FTA will check if your transfers break any clawback rules.

How Can Your Business Avoid a Clawback?

To avoid a clawback, your business should:

• Keep shares and main ownership within the qualifying group for at least 2 years,
• Don’t sell or transfer big parts of the business during that period,
• Follow every CT law step,
• Keep good records of all group members and business structure.

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

Mubarak Al Ketbi (MAK) Auditing helps you stay on the right track. Our team checks if you meet the rules, so your relief isn’t clawed back. We explain every tax step and train your team to spot risks. We’ll show you how to avoid mistakes and keep your tax savings. When you work with us, you’ll “leave no stone unturned” to protect your business.

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