Summary on Qualifying Group Relief Conditions Under UAE Corporate Tax
The UAE launched the Corporate Tax (CT) regime in June 2023, changing how companies in the UAE plan and report taxes. Many people think this brings extra challenges, but the regime also gives companies a chance to save tax. Qualifying group relief is one of these helpful opportunities.
Mubarak Al Ketbi (MAK) Auditing explains the main rules you need to know about group relief and how your company can benefit from this option.
What Is a Qualifying Group?
A qualifying group is a special group made for business and tax purposes. In this group, companies can transfer assets and liabilities to each other without paying tax right away.
- The company giving the asset is called the transferor.
- The company getting the asset is called the transferee.
- The transferor must elect to use group relief for every transfer.
- Both companies must be part of the same qualifying group.
- The asset or liability must be in the transferor’s capital account.
If you transfer the asset or liability again within two years, or if the transferor or transferee leaves the group, the FTA can claw back the relief and you may need to pay tax.
Qualifying Group Relief: Main Conditions
There are a few simple but important conditions for this relief:
1. Juridical Persons Only
- Both the transferor and transferee must be juridical persons—this means companies with their own legal identity, like LLCs.
- Individuals or unincorporated partnerships can’t use this relief.
- However, a person who is a partner in an unincorporated partnership can sometimes still qualify.
2. Taxable Persons
- The transferor and transferee must be taxable persons.
- For residents: They must be set up, recognized, or managed in the UAE, or be foreign companies controlled from the UAE.
- For non-residents: They must have a permanent establishment in the UAE.
- Non-resident companies with UAE income but no permanent base don’t qualify.
3. Ownership Interest (Minimum 75%)
- There must be at least a 75% direct, indirect, or common ownership between the transferor and transferee.
- This means one company owns at least 75% of the other, or a third party owns at least 75% of both.
- The person with control should also get the economic benefit.
- This rule still works if an exempt person or a qualifying free zone person holds the shares in between.
4. Not Exempt or QFZP
- Neither company can be an exempt person or a qualifying free zone person (QFZP).
- Free zone companies that aren’t QFZPs can join a qualifying group.
5. Same Financial Year and Accounting Standards
- Every member of the group must end their financial year on the same date.
- Both transferor and transferee must use the same accounting standards for their financial statements.
- If the dates don’t match, a company can ask the FTA to change its financial year, but only if certain rules are followed.
Key Points to Remember
- Group relief only covers capital account transfers.
- Both companies must be in the same group and meet the 75% rule.
- Neither company can be an exempt person or QFZP.
- Keep financial years and accounting standards the same.
Always check rules before doing transfers
What Can Help? – Mubarak Al Ketbi (MAK) Auditing
If you want to use group relief, you should get expert help to meet every rule. Mubarak Al Ketbi (MAK) Auditing can:
- Check if your company can join or create a qualifying group,
- Help file elections with the FTA,
- Make sure you follow accounting and ownership rules,
- Advise you on transfers and compliance,
- Keep your company “ahead of the game” with every tax opportunity.
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
