UAE Mergers and Acquisitions Tax and Restructuring

1. Corporate income tax

• Tax due diligence: When conducting mergers and acquisitions, it is necessary to pay attention to whether the target company plans to join the corporate tax group and evaluate the impact of the joining rules on subsequent tax planning and compliance. It is also necessary to check the compliance of the target company to enjoy the 0% tax rate in the free zone to ensure that the strict conditions of Article 18 of the Corporate Tax Law are met. At the same time, it is necessary to evaluate whether the target company's related-party transactions comply with the OECD guidelines. If they do not comply, the pricing or agreement arrangements need to be adjusted.
• •Tax structure optimization: Take advantage of the participation tax exemption policy to evaluate the tax exemption conditions for dividends and capital gains of the target company, especially when there is a multi-level investment structure. Leveraged mergers and acquisitions must balance tax efficiency and compliance and reasonably plan the proportion of internal and external financing.
• •The impact of the global minimum tax system: From 2025, the effective tax rate in each jurisdiction of Argentina for groups with a global annual turnover of more than 750 million euros shall not be less than 15%. In mergers and acquisitions, it is necessary to pay attention to whether the target company triggers this rule and the tax impact of closed transactions, such as the treatment of installment payments and deferred income.
• Value-added tax:
• •Transactions such as asset transfers in mergers and acquisitions may involve value-added tax, with a standard tax rate of 5%. However, if it is the transfer of certain goods and services such as qualified export goods, international transportation, etc., it may enjoy zero tax rate or tax exemption.

2. UAE Mergers and Acquisitions and Restructuring

• Forms of mergers and acquisitions
• •Merger: An absorption merger is when one company absorbs other companies, and the absorbed company is dissolved; a new merger is when two or more companies merge to establish a new company, and the original company is dissolved.
• •Acquisition: Equity acquisition is to purchase the equity of the target company to gain control; asset acquisition is to purchase part or all of the assets of the target company.
• •Split: A derivative split is when a company divides part of its assets and business to establish a new company, and the original company continues to exist; a new split is when a company assigns all its assets and business to two or more new companies, and the original company is dissolved.
• •Other forms: including equity swaps, that is, both parties exchange their own equity for the other party's equity; and debt restructuring, that is, adjusting the debt structure of the target company, etc.

3.Merger and acquisition restructuring process

• Determine the goals and motivations: clarify the purpose of M&A and restructuring, such as expanding market share, acquiring technology or resources, etc., and evaluate the impact on the company's strategy.
• • Find and screen targets: conduct market research, find target companies through intermediaries and other channels, and screen from business, financial, legal and other aspects.
• • Due diligence: conduct a comprehensive review of the target company, covering legal, financial, business and operating conditions, including contracts, debts, intellectual property rights, etc.
• • Negotiate and reach an agreement: negotiate on the terms of M&A and restructuring, including price, payment method, delivery conditions, etc., and sign the agreement after reaching an agreement.
• • Financing and payment: Financing is carried out according to the transaction amount and its own financial situation. The payment methods include cash, stocks, bonds or a combination.
• • Obtain approval: It is necessary to obtain government antitrust and other review and approval, and obtain approval from shareholders of both companies.
• • Integration and optimization: After the completion of the merger and acquisition, the target company will be integrated and optimized in terms of strategy, business, personnel, finance, etc.
• • Post-evaluation and risk management: Evaluate the effect of M&A and restructuring, establish a risk warning mechanism, and respond to integration, market, financial and other risks.