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CORPORATE TAX GROUPING

The UAE Corporate Tax Regime, effective from June 2023, permits companies to form tax groups subject to certain conditions.

Forming a tax group simplifies the calculation and reporting of taxable income by allowing the parent company to file a single tax return based on the aggrege taxable profit or loss of the group.

Before forming a tax group, companies need to evaluate by looking at the pros and cons of forming a tax group and then take a decision. While spreading out of losses can be optimized being part of a tax group, the UAE Corporate Tax Law also contains another provision for transfer of tax losses between ‘resident juridical persons’ who have a common- or cross- holding of at least 75 per cent,” where one need not be part of the group and still enjoy tax loss set off benefits. Hence the decision on seeking tax group status should be on a case-to-case basis.

Conditions for forming a tax group:

A Resident Company (Parent Company), can make an application to the Authority to form a Tax Group with one or more Resident companies, where all of the following conditions are met:

  • Only resident companies can be part of a corporate tax group.
  • Only juridical Persons can be part of a corporate tax group.
  • 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.
  • 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.
  • 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.
  • Neither the Parent Company nor the Subsidiary is an Exempt Person.
  • Neither the Parent Company nor the Subsidiary is a Qualifying Free Zone Person.
  • The Parent Company and the Subsidiary have the same Financial Year.
  • Both the Parent Company and the Subsidiary prepare their financial statements using the same accounting standards.

While determining the Taxable Income of a Tax Group, the Parent Company shall consolidate the financial results, assets and liabilities of each Subsidiary for the relevant Tax Period, eliminating transactions between the Parent Company and each Subsidiary that is a member of the Tax Group.

At M&M Auditing, we have a dedicated team of professionals providing Corporate Tax Services to businesses.