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Tax Group Formation Under the UAE Corporate Tax Regime

Under the UAE’s comprehensive corporate tax regime, businesses can manage their taxes in a streamlined manner. By forming a corporate tax group, companies or entities can share profits, losses, and assets within the same corporation as well as operate under stand-alone concepts with their own distinct operations. To make use of this scheme effectively and efficiently, it is vital to understand the implementation of the UAE’s corporate tax system. Thus, corporations are advised to seek the expert services of Tax Consultants Dubai to seamlessly implement tax standards and stay compliant.     

Tax Group Formation Under the UAE Corporate Tax Regime

The UAE Corporate Tax Regime offers businesses a variety of options for forming a tax group. A tax group is a legal arrangement that allows two or more companies to join together and share certain costs, especially in regard to corporate taxes and filing requirements. The UAE Corporate Tax Regime also allows businesses to form a consolidated tax group, which offers additional benefits upon filing taxes and availing other deductions. 

How to Form a Tax Group Under Corporate Tax UAE?

When forming a tax group, the first step is to select two or more companies that are eligible for participation in the group. All members of the group must be incorporated in the UAE, and they must be owned or controlled by persons or other companies based in the UAE. The group must also have common ownership of at least 50%, or be part of a broader corporate structure. 

Once the companies have been chosen, they will need to file tax consolidation forms with both their local authorities and the Federal Tax Authority (FTA). This outlines how all profits and losses are shared among group members. Essentially, the group should also appoint one company as the “head” of the group that is responsible for filing taxes on behalf of all its members.

The Federal Tax Authority also requires tax groups to submit an annual report outlining any changes made to their composition during the year. In addition, a statement detailing any differences between the members’ individual tax liabilities and the group’s consolidated tax liability must also be filed.

Read more: UAE corporate tax relief for small business

Conditions to be met for the formation of a tax group

A UAE resident group of companies can designate to form a tax group and be treated as an individual taxable person if the following conditions are met:

  • All companies must be registered in the same jurisdiction within the UAE. 
  • The companies should have a common shareholder, either directly or indirectly. 
  • The shareholders should control more than 50% of the voting rights of each company within the group by holding at least 5% of their capital. 
  •  At least one of the companies in the group has to be appointed as a representative member who is responsible for filing any taxes due on behalf of all members within that group. 
  • All transactions between entities in different jurisdictions and those which are conducted with other types of legal persons outside of this group must also be declared and taxed accordingly.   

Read more: How to Register for Corporate Tax in UAE?

The Effects of Tax Group Formation

Tax group formation allows companies to allocate certain expenses, losses, and profits amongst two or more entities within the group, thus improving the overall tax efficiency of their operations in the UAE. By forming a tax group, businesses have access to a reduced corporate income tax rate of 10% as well as an exemption from double taxation. 

In addition, by forming a tax group, businesses also benefit from increased flexibility upon making transfers between different entities within the same group. For example, intangible assets such as trademarks and copyrights can be transferred at market value without incurring any additional tax implications. This flexibility can be significantly beneficial for companies seeking to expand their operations in the UAE or optimize their existing corporate structures. 

Seek the expert services of top tax consultants in the UAE

It is advisable for businesses to seek the services of top tax consultants in the UAE.  UAE tax consultants assist corporations to seamlessly form tax groups in compliance with the Federal Tax Authority regulations and standards. Thus, contact us today and we shall be happy to assist you.

Mostafa is a qualified Corporate Tax Consultant with over 5 years of experience gained in diverse intricate tax matters, he has high expertise in conducting tax negotiations and investigations with the Federal Tax Authority and other external Tax Bodies. He has vast experience in reviewing and drafting tax documents. Mostafa has also advised on a plethora of tax matters, he draws much attention to tax filing procedures and to offering professional investigations to underlining tax complexities. Read more