Author name: aswathy@caticx.com

The Federal Tax Authority (FTA) has produced the most recent Business Restructuring Relief Guide for business tax purposes (Guide) as part of its ongoing efforts to help business taxpayers comprehend and navigate the intricacies of the UAE’s corporate tax framework. Please note, however, that FTA Guidelines are not legally obligatory, in contrast to tax regulations. The process by which a firm or group of companies reorganizes its business operations is known as business restructuring, and it is a key factor in maximizing both financial and organizational efficiency. General information about the business restructuring relief granted by Article 27 of the UAE Corporate Tax Law is intended to be provided by this guide. Regarding Business Restructuring Relief, the Guide gives readers a summary of the following: • transactions that fall under the purview of the relief;• eligibility requirements;• consequences of choosing to opt for the relief;• conditions under which the relief will be rescinded and the repercussions of doing so; • requirements for compliance; and interactions with other provisions of the UAE Corporate Tax Law. Business Restructuring Relief: What Is It? It is the easing or removal of the corporate tax impact on specific business transactions that are a part of a company’s reorganization or restructuring. Mergers and demergers are examples of business restructuring transactions that frequently result in a taxable gain or loss, even when the original owners of the business or taxable person continue to own a portion of the restructured business or the ultimate ownership of the business remains unchanged. Certain kinds of restructuring transactions can occur in a tax-neutral way thanks to the Business Restructuring Relief under Article 27 of the Corporate Tax Law. Transactions involving restructuring that are carried out for legitimate business or other non-fiscal purposes are supported. Transactions that fall under the relief’s purview: Article 27(1)(a) and Article 27(1)(b) of the Corporate Tax Law specify the two types of transactions to which Business Restructuring Relief applies. In the first category, a business or a separate portion of a business is transferred from one taxable person to another. In the second category, an entire business is transferred from one or more taxable persons to another, and the transferor subsequently goes out of business. Requirements to qualify for the relief: All of the following requirements must be fulfilled for Business Restructuring Relief to be applicable: The following are the repercussions of choosing Business Restructuring Relief: The same accounting standards are used by the transferor and the transferee to prepare their financial statements (the “Accounting Standards condition”), and The “valid business reasons condition” states that the transfer is being made for legitimate commercial or other non-fiscal purposes that are consistent with economic realities. Since tax relief is a profitable factor when reorganizing a firm, section 5 of the Guide outlines the ramifications of choosing business structuring relief so that taxpayers can make an informed choice. Asset and liability transfers at net book value If a business is transferred without any gain or loss, the transferred assets or liabilities will be valued at their net book value on the transfer date. Therefore, when the assets and liabilities are transferred, the transferor will not experience any taxable gain or loss. The amount of the shares or ownership stake obtained In this situation, the shares or other ownership interests received by the transferor or its shareholder(s) who directly or indirectly own at least 50% of the transferor’s assets will be treated as having a value that is no greater than the net book value of the transferred assets and any assumed liabilities, less the value of any other consideration received for corporate tax purposes. Transfer of Tax Losses:  According to this clause, unused tax losses that the transferor incurred during the tax periods prior to the restructuring transaction may be carried forward and are regarded as the transferee’s tax losses, so long as the transferee keeps up the same or a comparable business or business activity that the transferor did prior to the restructuring transaction. Repercussions for failing to choose Business Restructuring Relief or failing to complete requirements: Not all business transfers between two taxable persons are covered by Article 27(1). The transfer would be outside the purview of Article 27 of the Corporate Tax Law if the requirements for a no-gain or no-loss transfer are not fulfilled or if the transferor has not chosen to use Article 27 of the Corporate Tax Law The clawback of business restructuring relief states that it will not be applicable if the transferor or transferee sells or disposes of all or a portion of their shares to a non-qualifying group or if a subsequent business restructuring under Article 27 of the Corporate Tax Law takes place within two years of the transfer date. Additionally, this guide explains the compliance requirements for businesses choosing to use business restructuring relief, and Section 8 discusses how business restructuring relief interacts with other aspects of corporate tax law. Final Thoughts: These are just a handful of the key clauses in our FTA guide, which offers a thorough explanation of the relief provisions so that companies may confidently plan their expansions to  comply with the new tax regime. To maximize their tax situations during restructuring activities and take advantage of tax benefits, businesses can thoroughly examine the provisions of this Business Restructuring Relief handbook. Disclaimer This publication is intended solely for informational reasons and does not offer any legal advice. Any business, legal, or other decisions should not be made based on the content or information in this publication. Therefore, you are solely responsible for any reliance you place on such material. At MAATS Auditors and Accountants, we provide expert corporate tax accounting services in Dubai to help businesses stay compliant and tax efficient. Our team of qualified corporate tax consultants in Dubai and experienced corporate tax accountants in Dubai deliver tailored solutions covering tax planning, reporting, and advisory. With our trusted Corporate Tax Consultancy in the UAE, we ensure that companies across industries meet all statutory requirements while optimizing financial performance. By choosing our reliable Corporate Tax Service in the UAE, businesses gain a strategic partner dedicated to compliance, growth, and long-term sustainability.

Generally, identification, recruitment, or employment of personnel, and recruitment of such personnel would constitute the supply of manpower services, unless there are special conditions. Under manpower services, payment or consideration is the entire amount given to the employer or supplier of the services, being the provider of the manpower services, “customer.” Included in this instance are all the charges being made by the supplier to the customer and those being made by the customer to the staff directly as compensations, benefits, or salaries. In the case of visa facilitation services, the consideration just refers to any charge that can be made with regard to the issuance of visas to employees of another person, for example, in the provision of facility for visa services.In some cases, employment visas are issued to a person, i.e., a company, but the employees are managed and controlled by another company. Manpower services The most common practices in the identification/recruitment/appointment of candidates and provision of such employees to any business seem to be a taxable supply of services in question under VAT legislation. In those scenarios, the Supplier has, as a rule, all such employment responsibilities, including but not limited to, payment of salary and providing other emoluments of employment. Regarding supervision and control, the Supplier may have a general right to monitor the employee’s execution of his/her work in the Customer and to some extent instruct where any employee is placed. Supervision and control also involve determining the extent of duties assigned to any employee and the hours of work he or she works, as well as staff guidance and instruction. Assume an illustration where a firm, the Supplier, seconds employees to a customer company. The supplier has to ensure that the employees fulfill their individual roles with the customer and that the work is performed well. The supplier must bear some prevailing employment terms. Value of supply—manpower services Manpower services supply, in this case, refers to all such amounts being paid (or payable) by the customer to the supplier, either paid in the form of a recharge to the customer or paid to the employees in the form of wages or salaries. So far as the value-added tax is concerned, the value for tax purposes will comprise the remuneration of the employees, wages, salary, and benefits, along with all the other recharge amounts spent to offer the services. Example – Manpower Services Company A retains the employees’ employment visas, for whom the employees work for Company B. Company A supplies these employees to Company B, and thus Company A is stated to provide manpower services regardless of whether the salary and benefits of the employees are paid by Company A or Company B. The payment for the provision of manpower services is the overall expenditure of Company B, inclusive of the remuneration pay and allowances of Company B workers who, irrespective of the source and amount of payment received, are paid to Company A for the labor provided. Visa Facilitation Services The arrangement would not be seen as a supply of manpower services but as a supply of visa facilitation services if all the other conditions are met. • The customer and the employment visa holder (“facilitator”) belong to the same corporate group but not the same tax group. • The facilitator does not sell manpower supply as part of his business operations. • The facilitator is not responsible for any of the obligations related to the employee. • The facilitator sponsors such employees to work solely and only for and under the control and supervision of the customer. Corporate group requirement The facilitator and customer need to satisfy this requirement from a commercial/accounting perspective and are thus in the same corporate group. The term “corporate group” does not relate to the concept of a tax group under VAT or corporate tax, but rather to companies that have a common corporate structure and common ownership of the companies as provided in Article 9(2) of the Executive Regulation. The requirement would not be fulfilled, and the supply would be a supply of manpower services if the customer and the facilitator do not belong to the same corporate group. The customer and the facilitator would not be considered as making a supply if they were within the same VAT group. The activity in this case would not be exempt from VAT. Insufficient availability of labour services The character of service the facilitator offers as part of its business shall be considered. The activities outlined in the facilitator’s commercial or trade license, its registration with VAT, or any of its internal reports are not the only activities that are “business activities.” The requirement would not be fulfilled, and the provision of manpower services by the facilitator to the customer would not be considered visa facilitation services. Such a requirement would not be satisfied, and the supply would be a provision of manpower services if the facilitator and the customer are not part of the same corporate group. The customer and the facilitator would not be supplying if they belonged to the same VAT group. In such cases, the activity would not be VAT covered. Employment, management, and supervision by the client Since the facilitator has no role but to act as a sponsor of the employment visas, the workers are subject to the customer’s management and control and must work solely for the customer. This condition would be fulfilled where workers are hired solely by the client and are managed by them. Note that this requirement would not be fulfilled, and the supply would be treated as a provision of manpower services if an employee undertook their work for the customer in conjunction with other firms within the corporate group. Value of Supply: There is no cost Apart from where one of the sympathetic exclusions is at issue, the supply shall be regarded as a presumed supply where the facilitator renders its customer visa facilitation services gratuitously. Unless the facilitator had reclaimed any input taxes incurred

The issue of how cryptocurrency mining is treated tax-wise has grown in importance as cryptocurrencies gain popularity. When it comes to proof of work, anyone can mine cryptocurrency for their own account or for someone else’s account by giving them access to data farms or spare processing power. In the context of this public explanation, cryptocurrency is a type of virtual asset. Bitcoin, Ethereum (Classic), and other currencies based on proof of work are examples of cryptocurrencies. The VAT treatment of cryptocurrency mining using the proof-of-work method is made clearer by this public clarification. Mining cryptocurrency for personal use by an individual It is not a taxable supply and is not subject to VAT. Cryptocurrency mining on someone else’s behalf, or providing processing power, is regarded as a taxable service. Since a person mining for his own account would not be incurring these costs to generate a taxable supply, input tax on those expenses would not be recoverable. Input tax paid by a registrant Mining on someone else’s behalf, however, may be recouped to the degree that the input tax was paid to create a taxable supply. Cryptocurrency mining is the process by which specialized computers, sometimes referred to as mining rigs, verify blockchain transactions for a particular cryptocurrency in exchange for a potential reward for their computing contribution. A person has the option of mining bitcoin for himself or hiring someone else to do it for him. The first individual to figure out the cryptographic equation wins a reward for their effort if the attempt to validate the cryptocurrency’s blockchain transaction is successful. This incentive is typically given out by the network in the form of a proportionate share of cryptocurrency in exchange for the user’s proportionate contribution of computational power. The cryptocurrency’s network distributes the reward for mining efforts rather than receiving it directly from users. Mining cryptocurrency for personal use Unless an exception or zero-rating applies, taxable supplies of goods and services made by a taxable person in the UAE are typically liable to 5% VAT. Only the first individual to solve the cryptographic equation correctly will be rewarded for this contribution, which entails authenticating blockchain transactions. If someone solves the cryptographic equation, they are not assured of receiving a reward because the award depends on both solving the equation first and solving it successfully. Provided mining services A taxable supply of services is created when someone mines cryptocurrency for another person in exchange for a fee. This is because there is a specific recipient for the activity, and the person mining on that person’s behalf gets paid by his client. Because the activity has a specific receiver and the individual conducting the mining on behalf of another receives payment from his client, the mining operations are considered a taxable supply of services. The regular rate will apply if a taxable person provides the service to a client in the United Arab Emirates. Mining services obtained When a non-resident individual provides mining services to a UAE company, the supply is liable to VAT. The recipient of these services must use the reverse charge mechanism to account for the tax if they are registered for VAT in the United Arab Emirates. On the other hand, the non-resident supplier must register for VAT in the UAE and charge VAT on the services rendered if the client is a firm that resides in the UAE and is not a taxable person. Input tax recovery As part of his mining operations, a person mining cryptocurrency may be subject to input taxes, such as VAT on gear purchases, commercial real estate space rentals, utility costs, and maintenance services. The individual must consider his eligibility to recoup the input tax paid if he is a registrant. The expenses incurred would not be used to create taxable supplies if someone was mining for their own use. Therefore, the input tax incurred cannot be recovered because the individual mining for his own account is not making a taxable supply; however, if the pertinent supporting documentation, such as tax invoices, is kept, the individual may be eligible to recover the input tax to the extent that it was incurred for the purpose of making taxable supplies. Lawmaking Citations: In this clarification, Cabinet Decision No. 52 of 2017 on the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as “Executive Regulation,” while Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as “Decree-Law.” At MAATS Auditors and Accountants, we are trusted accountants and consultants in Dubai, delivering reliable financial solutions tailored to your business needs. As a leading accounting service consultant in Dubai, we specialize in providing comprehensive support that ensures compliance and financial accuracy. Our team of expert accounting consultants in Dubai offers personalized strategies to help businesses grow with confidence. We also provide professional accounting supervision services in the UAE, ensuring transparency and efficiency in managing your financial records. Whether you require accounting supervision services in Dubai or ongoing accounting services in Dubai, our firm is committed to excellence. With years of expertise in delivering quality accounting services in the UAE, we help businesses streamline processes, maintain accuracy, and achieve sustainable success.