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Forming a Tax Group UAE: Simplifying Corporate Tax UAE
Forming a Tax Group UAE is an essential tax planning strategy for companies in the United Arab Emirates (UAE). Corporate Tax UAE regulations allow companies to form a Tax Group, treating them as a single taxable entity. This approach streamlines tax compliance and optimizes financial strategies for businesses operating in this dynamic region.
Eligibility for Forming a Tax Group UAE
Understanding Eligibility for Forming a Tax Group UAE
To form a tax group in the UAE, the parent company must directly or indirectly hold at least 95% of the share capital and voting rights of each subsidiary involved. Here’s an example:
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Company A owns 20% of Company B and 100% of Company C.
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Company C owns 80% of the shares of Company B.
In this scenario, Company A indirectly owns 100% of the shares of Company B (via Company C), making it eligible to form a Tax Group UAE with both Company B and Company C.
Requirements for Forming a Tax Group UAE
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Neither the parent company nor the subsidiaries can be exempt persons or Free Zone entities enjoying the 0% corporate tax rate.
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All companies in the Tax Group UAE must share the same financial year and accounting standards.
Corporate Tax UAE: Considerations for Foreign Entities
Corporate Tax UAE for Foreign-Owned UAE Subsidiaries
UAE subsidiaries owned by a foreign parent company can form a Tax Group UAE. An intermediary UAE parent company must hold these subsidiaries and act as the “parent” for tax purposes. The foreign parent company’s ultimate ownership doesn’t prevent forming a Tax Group UAE as long as the subsidiaries are managed and controlled in the UAE and qualify as UAE resident entities.
Exclusions from Corporate Tax UAE for Tax Group Formation
Foreign entities cannot directly be part of a Tax Group UAE. Only UAE resident juridical persons qualify.
Tax Treatment and Administration for a Tax Group UAE
Tax Group UAE: Centralized Tax Administration
Once a Tax Group UAE is formed, it is treated as a single taxable entity. The parent company handles corporate tax administration and payments on behalf of the group. The 0% tax threshold of AED 375,000 applies to the group as a whole, regardless of the number of entities included.
Liabilities and Responsibilities Under Corporate Tax UAE
During Tax Group UAE membership, the parent company and subsidiaries are jointly and severally liable for corporate tax obligations. With Federal Tax Authority approval, liability can be limited to specific group members.
Consolidation Requirements for Tax Group UAE
To determine taxable income, the parent company consolidates financial accounts of all subsidiaries for the tax period. This process eliminates intra-group transactions.
Benefits of Forming a Tax Group UAE
Streamlining Corporate Tax UAE Compliance
Forming a Tax Group UAE simplifies tax compliance, reduces administrative burdens, and optimizes tax strategies.
Optimizing Corporate Tax UAE Financial Planning
This approach maximizes financial efficiency and ensures compliance with UAE tax laws.
Registered Tax Agency and Agents
Tax Agency Registration Name: PARKER RUSSELL OBAID AUDITING
Tax Agency Registration Number: 30000269
Tax Agent Registration Name: Mansour Abdulwahab Mohamed Ahmed
Tax Agent Registration Number: 20037867
To speak with our corporate tax experts, email us at infodubai@pr-uae.com or sales@pr-uae.com.