What are tax groups and when can they be formed under UAE corporate tax?

Corporate tax UAE furnish provisions to form and manage Tax Groups. Thus, it is imperative to seek the expert services of accredited tax consultants in the UAE to seamlessly establish a tax group in the UAE and to stay compliant with tax regulations and standards. 

What are the requirements for UAE tax group formation?

Corporations that are subject to UAE corporate tax ought to determine if they are qualified to form a tax group. For this, entities have to meet the requisites and standards set forth to establish a tax group. For a tax group to be established under the UAE tax group’s purview, the following requirements must be met:

  • The parent company can only create a tax group if every participant of the group holds UAE resident status.
  • At least ninety-five percent (95%) of the voting liberties and share capital of the subsidiary must be held by the parent company.
  • The main firm and/or its subsidiaries shouldn't qualify as exempt individuals or free zone entities that enjoy 0% UAE corporate tax rates.
  • Both parent company and subsidiary should have to follow the same fiscal year for forming a Tax Group.
  • To keep accounting records and sum up financial records(FS), the subsidiary and parent entity have to follow identical accounting criteria.
  • The parent company owns a right to claim 95% of the net revenue of shares of the subsidiary, either in a direct way or indirectly via other subsidiaries.

Read more: Who is Exempt from the UAE Corporate Tax?

How to create a tax group under corporate tax UAE?

Corporations ought to satisfy all the Federal Tax Authority’s (FTA) regulations and standards, the Federal Tax Authority has to receive a notification before a tax group can be created, further the parent firm and each of its affiliates have to endorse the declaration. Subsidiaries wishing to enter an established tax unit ought to adhere to a similar procedure. Nevertheless, all subsidiaries and parent companies will be presented as a single taxable person before the Federal Tax Authority. Still more, the whole responsibility regarding administrative processes and payment-related affairs will be on the end of the parent company.

How is taxable Income for UAE tax groups calculated? 

Corporations are compelled to comply with the FTA's regulations to calculate the tax group's taxable revenue. The parent body has to eradicate all proceedings among the parent firm and every subsidiary nominee of the group member and combine the financial records of every subordinate for the applicable tax duration. To add on, the subordinate individuals' transactions have to be stopped. 

Read more: Why You Should Hire Corporation Tax Accountants in UAE

Tax group’s corporate tax liability

For the period that both parties are part of the tax group, each subordinate and the parent business will be collaboratively accountable for the group’s corporate income tax. With the Federal Tax Authority's permission, the joint and individual obligation may only apply to one or more specific tax group participants. 

Avail the best tax services in the UAE

To seamlessly establish a tax group in the UAE and to stay compliant with the Federal Tax Authority’s regulations and standards, it is imperative to avail the expert services of accredited tax consultants in the UAE. Thus, contact "Corporate Tax UAE" today, a trusted and premier tax agent in the UAE!


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