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Significant tax reforms have recently been implemented in the UAE to simplify the tax system, bring it into line with international standards, and increase revenue. Subject to certain exclusions and limitations, the proposed corporate tax (CT) in the UAE will be assessed on taxable profits made by companies, including individuals engaged in business, commercial, or any other economic activity.
Under the UAE corporate tax regime, groups within the UAE could apply for group relief for losses, intra-group transactions, and restructurings. For more information on the projected group reliefs under UAE corporation tax, please keep reading.
Corporate tax group relief is a unique type of relief that allows companies to be taxed as a single unit rather than as multiple individuals. This relief, which is also known as fiscal unity, provides tax advantages and simplifies the administrative process for companies with multiple entities. It helps to reduce the overall corporate tax burden on businesses by allowing them to pool their profits and losses together and then divide up the resulting taxes among each entity.
The idea behind corporate tax group relief is that one company’s activities should not affect another company’s taxation status. In order to qualify for this type of relief, certain criteria must be met including having common ownership or control over all of the companies in the group, filing consolidated accounts and having shared management decisions regarding all members of the group.
Businesses restructure their operations in order to improve operational efficiencies, adapt to economic changes, or achieve other business objectives.
In the absence of targeted tax rules, reorganising or restructuring within a group may result in a tax liability due to the realisation of gains on transferred assets or liabilities. This is considered undesirable because there is no change in the ultimate ownership of the business or assets being transferred.
Recognizing the importance of allowing businesses to reorganise without incurring an unnecessary tax charge, the proposed UAE CT regime will allow for CT exemptions or deferrals when assets or liabilities are transferred between members of a group. Furthermore, under the CT regime, certain corporate reorganisation transactions (e.g., mergers) will be tax-neutral, resulting in no taxable gain or loss.
If held for at least three years after the date of transfer, transfers of assets and liabilities between UAE-based group entities with a common ownership stake of at least 75% are exempt from the CT requirement.
When intra-group relief is requested, the relevant assets and liabilities are acknowledged as having been transferred at their tax net book value, avoiding the loss or gain that the transferor and transferee firms would otherwise have to bear when determining their respective taxable income.
Any gain or loss that would have been recognised upon the first transfer must be calculated and included in the transferor's tax return in the tax period in which the circumstances formally ended if the appropriate criteria for intra-group relief are no longer met.
Any transaction in which a company or its group companies restructures its business operations is referred to as a restructuring transaction. Here are some examples of restructuring agreements:
Corporate tax re-structuring relief is a government-funded program that provides incentives for businesses to restructure their taxes in order to improve their overall financial performance.
It is designed to help companies save money through restructuring, which can include changes such as merging, reorganizing, liquidating assets or changing the way they are taxed. By decreasing the amount of taxes that businesses owe and increasing the amount of profits they make, corporate tax re-structuring relief can provide companies with much needed financial stability.
The goal of corporate tax re-structuring relief is to stimulate economic growth and create jobs by reducing barriers to entry into new markets or industries. It also helps companies reduce their costs of doing business by providing incentives for them to invest in new technologies or research and development projects.
The UAE CT scheme would exempt or postpone taxation where entire businesses or independent sections of businesses are transferred in exchange for shares or other ownership interests to facilitate mergers, spin-offs, and other corporate restructuring activities.
The purchasing firm can use the transferor's current tax basis in the transferred assets and liabilities, while the natural person is not subject to CT for any benefit derived from the transfer.
In order to avoid reporting a gain or loss for determining taxable income, assets and liabilities transferred as part of a qualified reorganisation will be considered transferred at their tax net book value.
Any restructuring benefits will be 'clawed back' if the company is sold to a third party within three years of the restructuring. Any gain or loss from the initial transfer must be calculated and included in the tax return for the tax period of the third-party disposal in this case.
Corporate Tax Consultants in Dubai, UAE are the go-to professionals for businesses looking to maximize profits and minimize tax liabilities. Knowing the ins and outs of corporate taxation can be a daunting task, but with the help of an experienced professional, it is possible to ensure that all necessary taxes are paid on time and that any exemptions or other reliefs are taken advantage of. Corporate Tax Consultants provide comprehensive services ranging from filing returns to creating effective tax strategies that benefit both companies and investors alike. In addition, they can advise on accounting issues related to corporate taxes such as depreciation and amortization.
The demand for Corporate Tax Consultants in Dubai, UAE has been steadily increasing due to a number of reasons including globalization, rising compliance requirements, new regulations, more complex taxation systems and an increase in the number of foreign investments in Dubai.
Reyson Badger with the team of experienced professionals understand the complexities of international business law. We have an extensive knowledge of UAE’s corporate tax system, which enable Reyson Badger to prepare effective plans for our clients. Reyson Badger Corporate tax consultants in Dubai, UAE also provide advice on how to reduce or even eliminate taxes through careful planning and knowledgeable decisions about company structures and operations. By utilizing our expertise, companies can save considerable amounts of money each year while remaining fully compliant with all applicable laws and regulations.