Requires consistent debt-or-equity classification between issuer and holder and uses the issuer's classification where they differ.
What should you do now?Reconcile every intra-group instrument's classification between issuer and holder before computing tax.
What does the official Article provide?
The official source is Arabic. This English commentary is explanatory and is not presented as an official translation.
Requires consistent debt-or-equity classification between issuer and holder and uses the issuer's classification where they differ.
This is a verified summary rather than a verbatim reproduction. Consult the official Arabic text, the Law and later decisions before making a final determination.
What does the Article mean in plain language?
An intra-group instrument issued to another Constituent Entity must be classified consistently as debt or equity for both parties' Constituent Entity Income or Loss. If classifications differ, both use the issuer's classification for this computation. This does not automatically rewrite the contract or published accounts. Reconcile the instrument's returns at both issuer and holder on the same basis.
Financial reporting, tax, transfer-pricing and consolidation teams.
Reconcile every intra-group instrument's classification between issuer and holder before computing tax.
Treating the return as interest for one party and an equity distribution for the other without adjustment.
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Is this Article enough on its own?
Usually not. Read it with the connected Law Article, definitions, any effective election and current NBR guidance, especially for an amount or deadline.
Does NBR guidance replace the Regulations?
No. Guidance explains application and supports procedures and examples, but current legislation and decisions prevail in case of inconsistency.