17 July 2026 · Clawback
The 2-Year Clawback Trap
Article 27 relief is conditional for two years from the transfer. If, within that window, the shares in the transferor or the transferee are sold to a person outside the qualifying group, or the transferred business (or independent part) is transferred on again outside the group, the relief is clawed back — the gain that was deferred at the time of the original transfer becomes taxable in the tax period the triggering event occurs, not restated back to the original transfer date. Planning the two-year holding period, and pricing the clawback risk into any deal that might involve an earlier exit, is essential before you elect the relief. The clawback tests the two-year window from the original transfer date, not from the date the election was made on the return, so track the transfer date itself.
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What undoes the relief
Onward sales inside two years bite, because the relief was only ever a deferral conditioned on the restructured group staying together. The clawback catches both a direct sale of the transferred business and an indirect sale through the shares of the transferor or transferee — so a shareholder exit can trigger it even if the operating business itself never moves again.
- Selling transferor/transferee shares outside the group.
- Transferring the business on again outside the group.
- Within two years of the original transfer.
- Deferred gain becomes taxable.
- The trigger can be a share sale even without a further asset transfer.
- The clawback applies regardless of whether the onward sale itself had a valid commercial reason.
Protect the relief
Structure and hold for two years. The safest position is a genuine intention to keep the restructured group together for the full clawback window — if a sale is already on the horizon when you elect the relief, the clawback risk needs to be priced into the deal from day one, not discovered when the sale happens.
- Plan a genuine two-year holding period.
- Avoid triggering onward disposals.
- Monitor group ownership after the transfer.
- Factor the clawback into deal timing.
- Flag any planned exit to your tax advisor before electing the relief.
- Track the two-year anniversary date for every relieved transfer.
What the clawback costs in practice
Take a business transferred at its AED 3.2 million tax written-down value against a AED 7.5 million market value, deferring a AED 4.3 million gain under Article 27. If the owner sells the transferee's shares to an outside buyer fourteen months later, the clawback undoes the relief and the deferred AED 4.3 million gain becomes taxable in the period of that sale — up to AED 387,000 of corporate tax at 9%, on top of whatever tax applies to the share sale itself. Wait until after the two-year window closes, and the same sale leaves the original relief intact.
- The clawback tax is calculated on the original deferred gain, not the current market value.
- It falls due in the period of the triggering event, not restated to the transfer date.
- A sale completed even a few months early can trigger the full clawback.
- Selling after the two-year window closes leaves the relief untouched.
Clawback triggers that catch groups off guard
The clawback is not limited to an obvious full sale of the business. Partial exits, investor buy-ins, and internal group reshuffles that move shares outside the qualifying group can all trip the same two-year rule, often without anyone connecting them back to a restructuring completed well before the deal was contemplated.
- An investor buying into the transferee within the two-year window.
- A partial share sale that still moves ownership outside the group.
- A second reorganisation that unwinds the first before two years are up.
- Assuming the clock resets after a partial, rather than full, disposal.
- A restructuring inside a wider group sale process, where the two-year clock is easy to lose track of.
Related guides
Frequently Asked Questions
For protecting the relief through the full two-year window after the transfer.
How long is the clawback period?
Two years from the date of the original transfer. Any qualifying onward sale within that window — of the shares or of the business itself — claws back the relief; a sale completed after the two years closes leaves the relief intact.
What triggers the clawback?
Selling the shares of the transferor or the transferee, or selling the transferred business or independent part on again, to a person outside the qualifying group, within two years of the original transfer. It can be triggered by a share sale alone, without any further movement of the underlying business.
What happens if it is clawed back?
The previously deferred gain becomes taxable in the tax period the triggering event occurs — not restated back to the original transfer date. In practice, this means the tax that the election originally avoided comes back into charge, on top of any tax due on the triggering sale itself.
Does a partial share sale trigger the clawback?
It can. Any sale that moves shares in the transferor or transferee outside the qualifying group within the two-year window is capable of triggering the clawback, even if it is only a partial disposal rather than a full exit.
Can I plan around the clawback if a sale is already likely?
Yes — this should be modelled before you elect the relief, not after. If an exit within two years is realistically on the table, price the potential clawback tax into the deal, or consider whether a taxed transfer now, with a stepped-up base for the transferee, is cheaper overall than electing relief and risking the clawback.
Does the clawback apply to Article 26 Qualifying Group Relief too?
Yes, Article 26 carries a broadly similar two-year clawback if the group ownership link is broken within that window, so the same holding-period discipline applies whichever relief you use.
Does the clawback apply if the sale is to another qualifying group member?
No — the clawback is triggered by a sale to a person outside the qualifying group. A transfer or share sale that stays within the same qualifying group within the two-year window does not, on its own, trigger the clawback, though it may have other tax consequences worth checking separately.
Can Exiloz manage the clawback risk?
Yes. We plan the holding period around your group's realistic exit timeline, monitor for triggering events during the two-year window, and model the clawback cost against alternative structures before you elect the relief.
Avoid the clawback
Exiloz plans your holding period and monitors the two-year window so the deferred gain stays deferred.