What are Tax Groups under the UAE Corporate Tax? 

For business holders, the UAE’s corporate tax system’s inclusion of tax groups is important. Primarily, tax groups are eligible for the tax advantages and relaxations that are often offered to the specified group. Corporations get an upper hand in better tax planning and lower compliance expenses by establishing a corporation tax group in the UAE. The requirements and merits akin to tax groups are fully elucidated in the UAE corporate tax Public Consultation Document. 

Who is eligible to form a tax group under Corporate Tax in the UAE?

If the parent business has a minimum of 95% of the voting rights and shares capital of the subsidiaries, the group of firms that are residents of the UAE can create a tax group. To assess and determine whether you are qualified to establish a tax group, it is essential to consult corporate tax experts in the UAE. To establish a tax group in the UAE, the following prerequisites must be attained:

1. None of the parent firm’s or subsidiaries’ employees should be free/exempt.
2. No parent business or subsidiary should benefit from the 0% UAE corporate tax rate by being located in a free zone.
3. The same financial year must be used by all tax group members.

Still more, under the following circumstances, a subsidiary may be included in the corporation tax group for the UAE:

• If other subsidiaries control at least 95% of its shares and the parent firm owns it indirectly; or If the parent business or one of its subsidiaries has a permanent establishment in the UAE.

How will tax groups be regarded as per the Corporate Tax Law?

Under the framework of corporate tax in the UAE, the tax group will be classified as a sole taxable person. This indicates that the fundamental exemption threshold will be imposed once, regardless of the firms involved, but that the definitive law will provide additional clarity. The management and expenditure of corporation tax should be handled by the parent firm on behalf of the group. One can also get assistance from expert corporate tax advisory services with the collection and management of corporation tax. Further, the parent firm must combine the financial records of each subsidiary for the applicable taxation duration to calculate the group’s taxable revenue, omitting any transactions between the parent corporation and each subsidiary group partner.

Tax Group liability 

The period of your membership in the Tax Group defines the liability criteria that indicate every subsidiary and parent firm is jointly accountable for group corporate tax until their membership is ended. The mutual and numerous liabilities may be restricted to one or more specific tax group members. To reduce this liability, one has to obtain the Federal Tax Authority’s consent. You can seek the Federal Tax Authority’s acceptance for limiting liability with the aid of corporate tax consultants in the UAE.

Note on 2026 Amendments:
While the primary corporate tax law (Decree-Law No. 47 of 2022) remains in effect, related amendments under Federal Decree-Law No. 17 of 2025 (Tax Procedures Law) and Federal Decree-Law No. 16 of 2025 (VAT Law) introduce procedural changes effective January 1, 2026. Taxable persons should be aware of:

• A unified five-year limitation period for claiming excess recoverable input tax, refunds, or using credit balances to offset liabilities.
• Clarified order of settlement for corporate tax liabilities: first using withholding tax credits, then foreign tax credits, followed by other Cabinet-approved incentives.
• Provision for claiming refunds of unutilised tax credits arising from specific incentives or reliefs, subject to conditions set by the Cabinet.
  Corporate tax advisors in the UAE can help ensure that your Tax Group filings and intra-group relief claims comply with these updated 2026 procedural rules.

Tax Group relaxation for corporations

By the suggested corporate tax framework, businesses will be able to avoid or postpone paying corporate tax on transfers of properties or liabilities among group members. With the use of this clause, businesses can restructure without incurring extra costs in taxes. To remove taxable profits or losses, the corporate tax in UAE will also permit some corporate reorganization activities, such as mergers, to be carried out on a tax-neutral basis.

Losses Transferred Under Corporate Income Tax UAE

There will be communities of businesses that either don’t have the necessary 95% mutual holding or don’t want to create a tax group. These businesses will be permitted, with some restrictions, to transfer tax losses from one firm group to another firm group. These circumstances are as follows:

• At least seventy-five percent of the United Arab Emirates group enterprises must be possessed collectively.
• The businesses shouldn’t fall into the exempt section or be liable to a corporate tax rate of zero percent in a Free zone.
• The cumulative tax toll offset shall not be greater than seventy-five percent of the firm acquiring the transferred losses’ taxable dividend during the applicable period.

Corporate tax counselors in the UAE may help corporations who want to create a corporate tax group determine whether they meet the requirements, such as ownership and tax resident status. Businesses can seek expert advice from the top tax experts in UAE if they run into any problems determining criteria for eligibility or aligning tax years.

Corporate Tax Consultants 

Since it is quite a laborious process to form a tax group under the UAE Corporate Tax Regime, it is immensely essential to seek the help of trusted corporate tax advisors in the UAE to ensure a smooth and efficient process of forming a tax group under the UAE Corporate Tax Regime. Corporate Tax advisors in UAE provide top-notch Corporate Tax Services in Dubai, UAE. So, do not hesitate to contact us today and we shall be happy to assist you.  

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How Can Taxable Persons Form a Tax Group? 

To form a tax group, both the parent company and its subsidiaries must be resident juridical persons, have the same Financial Year, and prepare their financial statements using the same accounting standards.

The parent company must:

• own at least 95% of the share capital of the subsidiary.
• hold at least 95% of the voting rights in the subsidiary.
• be entitled to at least 95% of the subsidiary’s profits and net assets.

How is the Taxable Income of a Tax Group Calculated?

To determine the Taxable Income of a Tax Group, the parent company must prepare consolidated financial statements covering each subsidiary that is a member of the Tax Group for the relevant Tax Period. Transactions between the parent company and each group member and transactions between the group members, must be eliminated for the purposes of calculating the Taxable Income of the Tax Group.   

Are Unincorporated Partnerships Subject to UAE Corporate Tax?

An Unincorporated Partnership shall not be considered a Taxable Person in its own right, and Persons conducting a Business as an Unincorporated Partnership shall be treated as individual Taxable Persons under the UAE corporate tax. 

However, a Foreign Partnership shall be treated as an Unincorporated Partnership if the following conditions are met: 

1.  The Foreign Partnership is not subject to tax under the laws of the foreign jurisdiction. 
2. Each partner is individually subject to tax on their distributive share of income when the income is received or accrued.

Are transfers within the same groups exempted?

No gain or loss needs to be taken into account in determining the Taxable Income in relation to the transfer of one or more assets or liabilities between two Taxable Persons that are members of the same Qualifying Group

Two Taxable Persons shall be treated as members of the same Qualifying Group if:

1. The Taxable Persons are juridical persons that are Resident Persons, or Nonresident Persons that have a Permanent Establishment in the State. 
2. Either person holds at least 75% direct or indirect ownership in the other, or a third person holds at least 75% ownership in both. 
3. None of the persons is 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. Both Taxable Persons prepare their financial statements using the same accounting standards.
7. If the asset or liability leaves the Qualifying Group within two (2) years, the relief is reversed (clawback rule) and the original transfer becomes taxable.

Exempt Persons under the UAE Corporate Tax

Are payments to connected persons exempted

A payment or benefit provided by a Taxable Person to a Connected Person shall be deductible only to the extent that:

• the payment corresponds to Market Value, and
• it is incurred wholly and exclusively for the purposes of the Taxable Person’s business

Seek expert consultation from UAE top tax consultants.

Essentially, it is advisable for taxable persons to consult UAE tax consultants to determine their tax liability and to stay compliant to the Federal Tax Authority’s regulations, as non-compliance may result in significant administrative penalties. Thus, contact us today and we shall be glad to assist you.

Frequently Ask Question
1: Can a Free Zone company join a UAE Tax Group?

No. A Qualifying Free Zone Person cannot be a member of a Tax Group under UAE Corporate Tax Law.

2: Can non-resident companies form a Tax Group?

Only resident juridical persons can form a Tax Group. Non-residents may only qualify for Qualifying Group relief if they have a Permanent Establishment in the UAE.

3: Is Tax Group formation mandatory?

No. Forming a Tax Group is optional and subject to approval by the Federal Tax Authority.

4: What happens if ownership falls below 95%?

If the ownership threshold is breached, the Tax Group may be dissolved, and separate tax filings may be required.

5: Is intra-group relief permanent?

No. Relief is conditional and subject to the 2-year clawback rule.

Source:

“Federal Decree Law no. 47 of 2022”, https://mof.gov.ae/wp-content/uploads/2022/12/Federal-Decree-Law-No.-47-of-2022-EN.pdf

“Amendments starting January 2026”, https://mof.gov.ae/en/news/ministry-of-finance-to-implement-vat-law-amendments-starting-january-2026/