Tax Group

What is a Tax Group?

A Tax Group is a VAT grouping mechanism that allows two or more related legal entities resident in the UAE to be treated as a single taxable person for VAT purposes. This means group members file one consolidated VAT return instead of separate returns, and transactions between group members are disregarded for VAT.

Eligibility Requirements

UAE Resident: All members must be resident in the UAE (have place of establishment or fixed establishment)
Control Requirement: At least 50% common ownership or effective control among all members
VAT Registration: All members must be registered or required to be registered for VAT
FTA Approval: Tax group formation requires FTA approval through application

Benefits of Tax Grouping

Simplified Administration

File one consolidated VAT return for all group members instead of multiple separate returns

Cash Flow Improvement

Offset VAT payable from one member against VAT refundable to another member in the same group

No VAT on Intra-Group Transactions

Supplies between group members are disregarded for VAT, reducing compliance burden

Cost Savings

Reduced compliance costs through consolidated reporting and administration

How Tax Groups Work

When a tax group is formed:

1 One member is designated as the Representative Member responsible for all VAT obligations
2 The representative member files a single VAT return covering all group members' transactions
3 Transactions between group members are disregarded for VAT purposes (no Output Tax or Input Tax)
4 Transactions with external customers are subject to VAT as normal
5 All group members remain jointly and severally liable for VAT obligations

Representative Member

The representative member is responsible for:

Filing the consolidated VAT return on behalf of the group
Maintaining records for all group members
Paying any VAT due or claiming refunds on behalf of the group
Corresponding with the FTA on all VAT matters
Ensuring all group members comply with VAT obligations

Application Process

Submit application through EmaraTax portal
Provide details of all proposed group members and ownership structure
Designate the representative member
FTA reviews and approves or rejects the application
If approved, tax group becomes effective from the start of the next tax period

Adding or Removing Members

Group members can be added or removed by notifying the FTA. The change takes effect from the beginning of the next tax period following FTA approval. If a member no longer meets the eligibility criteria, it must be removed from the group.

Dissolution of Tax Group

A tax group may be dissolved:

Voluntarily: By application to the FTA
Automatically: If members no longer meet eligibility requirements
By FTA: If the FTA determines the tax group should be dissolved

Important Considerations

Joint Liability: All members are jointly and severally liable for the group's VAT obligations
Free Zone Persons: Cannot be part of a tax group with mainland entities
Record Keeping: Each member must maintain their own records even though filing is consolidated
Tax Invoices: Can be issued in the name of any group member