Treatment of Mergers and Acquisitions, VAT in GCC

Treatment of Mergers and Acquisitions, VAT in GCC

Since VAT implemented on 1st January 2018 in GCC (UAE, Kuwait, Bahrain, Saudi Arabia, Oman, Qatar). There are many things and to be considered when you’re making bigger, complex business decisions because it may involve VAT (Value Added Tax) implications that you might not know of for example VAT Treatment of Mergers and Acquisitions, VAT in GCC.

Following is the VAT Treatment of Mergers and Acquisitions, VAT in GCC

In case of the Mergers and Acquisitions, the business (VAT registered) has two main options: –

  • Acquire the other business as running business
  • Acquire other business as Business Assets

In case of the acquisition as the running business all the claims and liabilities of the acquired business will be transfer to the Acquirer.

If the business has a history of tax fraud or the tax penalties or late payments, the whole of the TAX history will be transferred to the acquirer but no VAT will be paid on the purchase of the running business by the acquirer.

Corporate Acquisition Deal:

This type of the acquisition is commonly known as the corporate acquisition deal.

On the other hands, if the business is acquired as the BUSINESS ASSETS, the acquirer will only purchase the assets of the business and will also pay VAT on the purchase of the assets.

In this case the previous record of the business will not be transfer to the purchaser.

Before the VAT Treatment of Merger and Acquisition, the business must consult with their VAT Consultants and the tax advisers to get the VAT due diligence.

This way they can make the final decision either to acquire the business as corporate deal or the business assets.

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