UAE Corporate Tax - Formation of TAX Group
A parent company can make an application to the FTA form a tax group with one or more subsidiary companies.
Both parent and subsidiary must be resident juridical persons to form a Tax group.
Tax Group is treated as single taxable person for the purpose of this decree law, represented by the parent company.
The Parent Company and each Subsidiary shall be jointly and severally liable for Corporate Tax Payable by the Tax Group for those Tax Periods when they are members of the Tax Group.
Conditions to form a tax Group:
- a) The Resident Persons are juridical persons.
- b) The Parent Company owns at least 95% (ninety-five percent) of the share capital of the Subsidiary, either directly or indirectly through one or more Subsidiaries.
- c) The Parent Company holds at least 95% (ninety-five percent) of the voting rights in the Subsidiary, either directly or indirectly through one or more Subsidiaries.
- d) The Parent Company is entitled to at least 95% (ninety-five percent) of the Subsidiary's profits and net assets, either directly or indirectly through one or more Subsidiaries.
- e) Neither the Parent Company nor the Subsidiary is an Exempt Person.
- f) Neither the Parent Company nor the Subsidiary is a Qualifying Free Zone Person.
- g) The Parent Company and the Subsidiary have the same Financial Year.
- h) Both the Parent Company and the Subsidiary prepare their financial statements using the same accounting standards.
If the relevant conditions are met, a joint application can be made to the FTA by the Parent Company and each Subsidiary seeking to form or become a member of a Tax Group. A member of a Tax Group may refer to either a Parent Company or a Subsidiary included in the relevant Tax Group.
Benefits to form a tax Group
- Ability for the Parent Company to file a single Tax Return on behalf of all members of the Tax Group.
- Forming a Tax Group also allows for the income and losses of the members of the Tax Group to be offset against each other.
- Generally, the transfer of assets and liabilities and other transactions and arrangements between members of the Tax Group are to be disregarded when determining the Taxable Income of the Tax Group.
Resident taxable juridical persons
In addition, juridical persons can be members of a Tax Group only if they are regarded both as a Resident Person under the Corporate Tax Law as well as a tax resident of the UAE for the purposes of an applicable Double Taxation Agreement.
In other words, a juridical person cannot be a member of a Tax Group if they are considered tax resident in a foreign jurisdiction under a Double Taxation Agreement in force in the UAE.
