Business Restructuring Relief – Article 27 – Corporate Tax Law

Article 27 – Business Restructuring Relief

1. No gain or loss needs to be taken into account in determining Taxable Income in any of the following circumstances:

1. A Taxable Person transfers its entire Business or an independent part of its Business to another Person who is a Taxable Person or will become a Taxable Person as a result of the transfer in exchange for shares or other ownership interests of the Taxable Person that is the transferee.
2. One or more Taxable Persons transfer their entire Business to another Person who is a Taxable Person or will become a Taxable Person as a result of the transfer in exchange for shares or other ownership interests of the Taxable Person that is the transferee, and the Taxable Person or Taxable Persons that are the transferor cease to exist as a result of the transfer.

2. Clause 1 of this Article applies where all of the following conditions are met:

1. The transfer is undertaken in accordance with, and meets all the conditions imposed by, the applicable legislation of the State.
2. The Taxable Persons are Resident Persons, or Non-Resident Persons that have a Permanent Establishment in the State.
3. None of the Persons are an Exempt Person.
4. None of the Persons are a Qualifying Free Zone Person.
5. The Financial Year of each of the Taxable Persons ends on the same date.
6. The Taxable Persons prepare their financial statements using the same accounting standards.
7. The transfer under Clause 1 of this Article is undertaken for valid commercial or other non-fiscal reasons which reflect economic reality.

3. For the purposes of this Decree-Law, where a Taxable Person applies Clause 1 of this Article, all of the following must be observed:

1. The assets and liabilities transferred shall be treated as being transferred at their net book value at the time of transfer so that neither a gain nor a loss arises.
2. The value of the shares or ownership interests received under paragraph (a) of Clause 1 of this Article shall not exceed the net book value of the assets transferred and liabilities assumed, less the value of any other form of consideration received.
3. The value of the shares or ownership interests received under paragraph (b) of Clause 1 of this Article shall not exceed the book value of the shares or ownership interests surrendered, less the value of any other form of consideration received.
4. Any unutilised Tax Losses incurred by the Taxable Person that is the transferor prior to the Tax Period in which the transfer under Clause 1 of this Article completes may become carried forward Tax Losses of the Taxable Person that is the transferee, subject to conditions to be prescribed by the Minister.

4. The provisions of this Article shall apply, as the context requires, where, in the case of a transfer under Clause 1 of this Article:

1. shares or ownership interests are received by a Person other than the Taxable Person that is the transferor;
2. shares or ownership interests are issued or granted by a Person other than the Taxable Person that is the transferee; or
3. no shares or ownership interests are received by the Taxable Person who is a partner in an Unincorporated Partnership that is treated as a Taxable Person under Clause 9 of Article 16 of this Decree-Law.

5. Where a Taxable Person transfers an independent part of its Business, paragraph (d) of Clause 3 of this Article shall apply only to those unutilised Tax Losses that can be reasonably attributed to the independent part of the Business being transferred.

6. The provision of Clause 1 of this Article shall not apply where, within (2) two years from the date of the transfer, any of the following occurs:

1. The shares or other ownership interests in the Taxable Person that is the transferor or the transferee are sold, transferred or otherwise disposed of, in whole or part, to a Person that is not a member of the Qualifying Group to which the relevant Taxable Persons belong.
2. There is a subsequent transfer or disposal of the Business or the independent part of the Businesses transferred under Clause 1 of this Article.

7. Where Clause 6 of this Article applies, the transfer of the Business or the independent part of the Business shall be treated as having taken place at Market Value at the date of the transfer.