Corporate Tax - Tax Groups

Frequently Asked Questions

UAE companies have the option to apply for the formation of a Tax Group, which allows them to be treated as a single taxable entity. For this arrangement to be in place, the UAE parent company must possess, either directly or indirectly, a minimum of 95% of the share capital and voting rights of each company within the group.

For example, Company A owns 20% of Company B and 100% of Company C. Meanwhile, Company C owns 80% of the shares of Company B. In this scenario, Company A can form a Tax Group with both Company B and Company C because it indirectly owns 100% of the shares of Company B through Company C.

To form a Tax Group, neither the parent company nor any of its subsidiaries must be categorized as exempt individuals or Free Zone entities that enjoy a 0% corporate tax rate. Additionally, all companies within the group must utilize the same financial year and prepare their financial statements according to the same accounting standards.

UAE subsidiaries of a foreign parent company can form a Tax Group, but it requires an intermediary UAE parent company to hold the UAE subsidiaries. The intermediary UAE parent company will serve as the “parent” of the Tax Group for UAE CT purposes.

No, foreign entities cannot be included in a Tax Group unless they are managed and controlled within the UAE and considered UAE resident entities for UAE CT purposes. Only UAE resident juridical persons have the eligibility to form or be part of a Tax Group.

Yes, the threshold of the 0% CT rate (specific amount to be confirmed in a Cabinet Decision, currently AED 375,000) will apply to the Tax Group as a unified taxpayer, regardless of the number of entities within the Tax Group.

Once a Tax Group is formed, the parent company assumes the responsibility for the administration and payment of CT on behalf of the entire group. During the period of their membership in the Tax Group, both the parent company and each subsidiary share joint and several liabilities for the UAE CT obligations of the Tax Group. However, it is possible to limit this to specifically named members of the Tax Group with approval from the Federal Tax Authority.

Yes, to determine the taxable income of the Tax Group, the parent company must prepare consolidated financial statements that incorporate the financial accounts of each subsidiary for the relevant Tax Period. Additionally, any transactions between the parent company and its subsidiary group members need to be eliminated from the consolidated financial statements.

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