GTL Summary:

Article 6 addresses the application of Top-up Tax rules during corporate restructurings. It defines how the EUR 750 million threshold applies to group mergers and demergers. The article provides rules for entities joining or leaving an MNE Group, including the treatment of deferred tax attributes and historical carrying values. It also clarifies the treatment of transfers of assets and liabilities, specifically under 'Pillar Two Reorganisations', and outlines the status of Joint Ventures and Multi-Parented MNE Groups, ensuring tax continuity and preventing avoidance during significant structural changes in corporate groups.

Document Type: CD - Cabinet Decision
Law: DMTT (FDL No 60 of 2023)
Decision Number: cabinet-decision-142-article-6
Year: 2024
Country: 🇦🇪 UAE
Official Name: Article 6 - Corporate Restructurings and Holding Structures
Last updated at: 2026-03-23 15:38:06 UTC

Article 6 - Corporate Restructurings and Holding Structures

Article 6.1. Application of Consolidated Revenue Threshold to Group Mergers and Demergers

6.1.1 For the purposes of Article 1.1:

(a) If two or more Groups merge to form a single Group in any of the four Fiscal Years prior to the tested Fiscal Year, then the consolidated revenue threshold of the MNE Group for any Fiscal Year prior to the merger is deemed to be met for that year if the sum of the revenue included in each of their Consolidated Financial Statements for that year is equal to or greater than EUR 750 million.

(b) Where an Entity that is not a member of any Group (acquirer) acquires or merges with an Entity or Group (target) in the tested Fiscal Year and the target or acquirer does not have Consolidated Financial Statements in any of the four Fiscal Years prior to the tested Fiscal Year because it was not a member of any Group in that year, the consolidated revenue threshold of the MNE Group is deemed to be met for that year if the sum of the revenue included in each of their Financial Statements or Consolidated Financial Statements for that year is equal to or greater than EUR 750 million.

(c) Where a single MNE Group within the scope of this Decision demerges into two or more Groups (each a demerged Group), the consolidated revenue threshold is deemed to be met by a demerged Group:

i. with respect to the first tested Fiscal Year ending after the demerger, if the demerged Group has annual revenues of EUR 750 million or more in that year;

ii. with respect to the second to fourth tested Fiscal Years ending after the demerger, if the demerged Group has annual revenues of EUR 750 million or more in at least two of the Fiscal Years following the year of the demerger.

6.1.2 For the purposes of Article 6.1.1 a merger is any arrangement where:

(a) all or substantially all of the Group Entities of two or more separate Groups are brought under common control such that they constitute Group Entities of a combined Group; or

(b) an Entity that is not a member of any Group is brought under common control with another Entity or Group such that they constitute Group Entities of a combined Group.

6.1.3 For the purposes of Article 6.1.1 a demerger is any arrangement where the Group Entities of a single Group are separated into two or more Groups that are no longer consolidated by the same Ultimate Parent Entity.

Article 6.2. Constituent Entities joining and leaving an MNE Group

6.2.1 Except to the extent provided in Article 6.2.2, the following provisions apply where an Entity (the target) becomes or ceases to be a Constituent Entity of an MNE Group as a result of a transfer of direct or indirect Ownership Interests in such Entity during the Fiscal Year (the acquisition year):

(a) where the target joins or leaves a Group or the target becomes the Ultimate Parent Entity of a new Group, the target will be treated as a member of the Group for the purposes of the provisions of this Decision if any portion of its assets, liabilities, income, expenses or cash flows are included on a line-by-line basis in the Consolidated Financial Statements of the Ultimate Parent Entity in the acquisition year;

(b) in the acquisition year, an MNE Group shall take into account only the Financial Accounting Net Income or Loss and Adjusted Covered Taxes of the target that are taken into account in the Consolidated Financial Statements of the Ultimate Parent Entity for purposes of applying this Decision;

(c) in the acquisition year and each succeeding year, the target shall determine its Pillar Two Income or Loss and Adjusted Covered Taxes using its historical carrying value of the assets and liabilities;

(d) the computation of the target’s Eligible Payroll Costs under Article 5.3.3 shall take into account only those costs reflected in the financial statements used to determine the Pillar Two Income or Loss;

(e) the computation of carrying value of the target’s Eligible Tangible Assets for purposes of Article 5.3.4 shall be adjusted proportionally to correspond with the length of the relevant Fiscal Year that the target was a member of the MNE Group;

(f) with the exception of the Pillar Two Loss Deferred Tax Asset, the deferred tax assets and deferred tax liabilities of a Constituent Entity that are transferred between MNE Groups shall be taken into account under this Decision by the acquiring MNE Group in the same manner and to the same extent as if the acquiring MNE Group controlled the Constituent Entity when such assets and liabilities arose; and

(g) deferred tax liabilities of a target that have previously been included in its Total Deferred Tax Adjustment Amount shall be treated as reversed for purposes of applying Article 4.4.4 by the disposing MNE Group and treated as arising in the acquisition year for purposes of applying Article 4.4.4 by the acquiring MNE Group, except that in such cases any subsequent reduction to Covered Taxes under Article 4.4.4 shall have effect in the year in which the amount is recaptured.

6.2.2 For purposes of the implementation of this Decision, the acquisition or disposal of a Controlling Interest in a Constituent Entity will be treated as an acquisition or disposal of the assets and liabilities if the Jurisdiction in which the target Constituent Entity is located, or in the case of a Tax Transparent Entity, the Jurisdiction in which the assets are located, treats the acquisition or disposal of that Controlling Interest in the same or similar manner as an acquisition or disposition of the assets and liabilities and imposes a Covered Tax on the seller based on the difference between their tax basis and the consideration paid in exchange for the Controlling Interest or the fair value of the assets and liabilities.

Article 6.3. Transfer of Assets and Liabilities

6.3.1 Subject to Article 3.2.3, in the case of a disposition or acquisition of assets and liabilities, a disposing Constituent Entity will include the gain or loss on disposition in the computation of its Pillar Two Income or Loss and an acquiring Constituent Entity will determine its Pillar Two Income or Loss using the acquiring Constituent Entity’s carrying value of the acquired assets and liabilities determined under the accounting standard used by the financial statements used for the purposes of determining the Pillar Two Income or Loss.

6.3.2 If the disposition or acquisition of assets and liabilities is part of a Pillar Two Reorganisation Article 6.3.1 shall not apply and:

(a) a disposing Constituent Entity will exclude any gain or loss on the disposition from the computation of its Pillar Two Income or Loss; and

(b) an acquiring Constituent Entity will determine its Pillar Two Income or Loss after the acquisition using the disposing Entity’s carrying values of the acquired assets and liabilities upon disposition.

6.3.3 If a disposition or acquisition of assets and liabilities is part of a Pillar Two Reorganisation in which a disposing Constituent Entity recognises Non- qualifying Gain or Loss, Articles 6.3.1 and 6.3.2 shall not apply and:

(a) the disposing Constituent Entity will include gain or loss on the disposition in its Pillar Two Income or Loss computation to the extent of the Non-qualifying Gain or Loss; and

(b) an acquiring Constituent Entity will determine its Pillar Two Income or Loss after the acquisition using the disposing Entity’s carrying value of the acquired assets and liabilities upon disposition adjusted consistent with local tax rules to account for the Non-qualifying Gain or Loss.

6.3.4 At the election of the Filing Constituent Entity, a Constituent Entity of an MNE Group that is required or permitted to adjust the basis of its assets and the amount of its liabilities to fair value for tax purposes in the UAE in which it is located, shall:

(a) Include in the computation of its Pillar Two Income or Loss an amount of gain or loss in respect of each of its assets and liabilities that is equal to:

i. the difference between the carrying value for financial accounting purposes of the asset or liability immediately before and the fair value of the asset or liability immediately after the date of the event that triggered the tax adjustment (the triggering event);

ii. decreased (or increased) by the Non-Qualifying Gain (or Loss), if any, arising in connection with the triggering event;

(b) use the fair value for financial accounting purposes of the asset or liability immediately after the triggering event to determine Pillar Two Income or Loss in Fiscal Years ending after the triggering event; and

(c) include the net total of the amounts determined in 6.3.4(a) in the Constituent Entity’s Pillar Two Income or Loss in one of the following ways:

i. the net total of the amounts is included in the Fiscal Year in which the triggering event occurs; or

ii. an amount equal to the net total of the amounts divided by five is included in the Fiscal Year in which the triggering event occurs and in each of the immediate four subsequent Fiscal Years, unless the Constituent Entity leaves the MNE Group in a Fiscal Year within this period, in which case the remaining amount will be wholly included in that Fiscal Year.

Article 6.4. Joint Ventures

6.4.1Articles 3 to 7 and Article 8.2 shall apply for the purposes of computing any Top-up Tax of the Joint Venture and its JV Subsidiaries as if they were Constituent Entities of a separate MNE Group and as if the Joint Venture was the Ultimate Parent Entity of that Group.

Article 6.5. Multi-Parented MNE Groups

6.5.1 The following provisions apply to Multi-Parented MNE Groups:

(a) the Entities and Constituent Entities of each Group are treated as members of a single MNE Group for purposes of this Decision (the Multi-Parented MNE Group);

(b) an Entity (other than an Excluded Entity) shall be treated as a Constituent Entity if it is consolidated on a line-by-line basis by the Multi-Parented MNE Group or its Controlling Interests are held by Entities in the Multi-Parented MNE Group;

(c) the Consolidated Financial Statements of the Multi-Parented MNE Group shall be the Consolidated Financial Statements referred to in the definition of Stapled Structure or Dual-listed arrangement (as relevant) prepared under an Acceptable Financial Accounting Standard, which is deemed to be the accounting standard of the Ultimate Parent Entity; and

(d) the Ultimate Parent Entities of the separate Groups that comprise the Multi- Parented MNE Group shall be the Ultimate Parent Entities of the Multi- Parented MNE Group (when applying the provisions of this Decision in respect of a Multi-Parented MNE Group, references to an Ultimate Parent Entity shall apply, as required, as if they were references to multiple Ultimate Parent Entities).

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