The Federal Tax Authority issued a public clarification to provide a guide on tax groups in UAE in relation to VAT. The guide is for businesses in the country that are interested in creating tax groups, removing or adding members to an already existing tax group, and disbanding an entire tax group. In this article, we’ve summarized all there is to know about UAE VAT (tax) groups, including implications for grouping businesses for VAT purposes, eligibility for the formation of a tax group, additional criteria that may have to be addressed for different businesses as per the direction of government entities, as well as the methods in which tax groups may be amended or formed. Let’s start!
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How Can You Create a Tax Group in UAE?
In order to apply for the creation of a tax group for VAT purposes in UAE, businesses must fulfill conditions, which include the following:
- A business that wants to be a member of a tax group must be carrying business in a particular place independently and regularly.
- A tax group member has to possess its own legal personality with the capability in entering into contracts using its own name.
- A tax group member has to be a UAE resident either by having a fixed or primary business establishment.
- A tax group member has to share organization, financial, and economic ties to certain extent to other members and should also have certain amount of control over other tax group members.
What are the Requirements to be Fulfilled by members of a tax group?
In order to successfully create a tax group in UAE, government entities often require the adherence of additional criteria, which include the following:
- A designated government entity may be able to belong to a tax group, but it has to be a tax group that is composed only of other designated bodies of the government.
- A government body that is not designated and has been registered in its own right may form or belong into a tax group that is with other kinds of legal entities and will be subject to regulations for tax grouping in UAE.
In order to figure out whether a group is eligible or required in registering for the purpose of UAE VAT, it’s necessary to establish whether or not the requirements for tax group registration in UAE have been satisfied. The requirements for VAT registration are satisfied if:
- The total value for the group’s supplies or expenses which have been incurred satisfy the requirements for registration;
- If either one member satisfies the registration requirements
An application for a VAT group in UAE will be reviewed by the Federal Tax Authority within twenty business days from the receipt of the tax group application. An application that is approved will come into effect following necessary checks by the FTA officials either on the first day for a tax period following tax period wherein application was received and approved or on a date that is specified by the tax authorities.
Also Read: Interesting Facts About VAT In The UAE
How to Make Changes in a Tax Group in UAE?
- Adding of members to a UAE tax group – a new member may be added onto an existing tax group by providing the FTA the requirements, including the application. The application will be subject to necessary checks. Date of registration of new member for a tax group would be effective on a date that is specified by authorities or on the first day for tax period following period wherein application was acknowledged by the FTA.
- Removal of a member from a UAE tax group – a tax group can remove any of its members, but the FTA must provide its approval. An application has to be submitted and a representative member of the tax group should inform the tax authorities twenty days prior to a member becoming ineligible. Removal of a member is subject for review by the FTA as well.
- Changing a tax group’s representative – an existing tax group representative member will have to submit to the FTA an application for the appointment of a new member that will be its representative.
- Disbanding of a tax group – a tax group can cancel or disband itself at any time or when it is no longer meeting the tax grouping criteria. The group’s representative member has to notify the FTA twenty days prior to a group becoming ineligible.
Note: there are specific information that are required to be furnished to the tax authorities for any application concerning a tax group including the trade licenses of the members, certificate of incorporation, memorandum or articles of association, partnership agreements, and financial statements among others. If you want to know more about tax groups and relevant regulations in UAE, contact us here in VAT Registration UAE.