What are the Implications of Registration as a Tax Group in UAE?
It is indeed another progressive element to note that, as part of adopting the global best practices, FTA has included the facets of tax group also into the fast-evolving niche of VAT in UAE. Two or more persons conducting businesses may apply for tax registration as a tax group in UAE. Taking into account the various streams of a family business and investment groups in the region, the theme of tax group is a commended point among the business folks here without a doubt.
What is Tax Group?
A tax group is a group of two or more persons registered with the FTA as taxable persons subject to the requirements of the UAE VAT Law. When a group of two or more legal persons get the tax registration status from FTA as a single taxable person it is named as a tax group.
Who can register as Tax Group?
To become eligible to apply as a tax group, all the proposed members of the tax group shall be legal persons carrying out taxable business operations. They should have a primary/fixed business establishment in UAE. Also, the proposed members shall be related parties and their taxable supplies at a consolidated level as a group would exceed the mandatory registration threshold. At any point in time, a person can hold only one Tax Registration Number (TRN). If a person is a member of a registered tax group, that person cannot hold another TRN individually or as part of another tax group.
How to identify ‘Related parties’ as per the regulation with respect to Tax Group?
VAT regulation has listed down instances where legal persons can identify themselves as related parties. Considerations are also given in terms of economic, financial and regulatory aspects to conclude on the persons as related parties.
Also read, How can a Member be Removed from a Tax Group?
The reflect arrangements in the style of partnerships and ventures between a group of persons where one or more persons in the group having a majority of (50% or more) voting interest, market value interest or control of each of those persons in the group.
How to register as a Tax Group?
The persons within the proposed tax group shall first select one of them as the representative member for this purpose. This selected representative member can then apply to register a tax group with the authority using the online tax group form. There are various documents to be attached along with the application form such as Group structure, Trade licenses, Incorporation documents, financial statements, authorized signatory documents of the members of the group and other documents depending upon the legal status and profile of the members.
What are the implications of registering as a Tax Group?
In case of any UAE VAT liability of the tax group, all the people within the group will be liable personally and jointly. In regard to the impact of UAE VAT, any business activity carried out by any of the persons within the tax group will be deemed to be carried out by the representative member of the tax group. These activities include any taxable supply made to parties outside the group, import of goods/services, export of goods/services, charge of output tax and incurring of input tax. Also, the transactions within the tax group between its members are outside the scope of UAE VAT.
What are the benefits of registering as a Tax Group?
The main advantage of this tax group registration is for the filing of VAT return. On behalf of all the persons within the group, only one VAT return is required to be submitted to FTA periodically. This saves time and efforts involved in the preparation of individual VAT return for each of the persons in the group otherwise. For the related party transactions and supplies within the tax group, VAT can be treated as out of scope, which will obviate the burden of VAT accounting in these cases. Also for all other activities on a VAT compliance perspective, the tax group will be considered as one single entity with the group as a whole.
Are there any chances of rejection of application for registration as a Tax Group?
Yes, there are possibilities where the application for registration as a tax group can be rejected by the authority. Following are such cases as listed down in the VAT regulation:
- The persons applying do not meet the requirements for registration as a tax group as defined above
- Any likelihood of tax evasion is noted because of this registration
- If anyone of the persons in the proposed group is not found to be a legal person
- If one of the persons in the proposed group is identified to be a government entity
- If one of the persons in the proposed group is identified to be charity
How CDA assist you with the Tax Group registration and other VAT related services?
CDA can help you:
- To carry out the application to register as tax group in UAE
- To analyze whether you are eligible to apply for the registration
- To guide you to understand what all details you need to ensure in hand to complete the application
- To clarify your queries on the implications of tax group registration in UAE
- To support you on VAT-related operations and filings post to registration as a tax group in UAE
- To consolidate the accounting transactions and process the inter party adjustments within the tax group to ensure compliance with respect to FTA requirements and other statutory regulations in UAE
Hope you have got a clear idea about the implications on registration as a tax group in UAE. Still, you'd have thought, contact CDA to attend a one-hour free consultation to clarify your queries regarding tax group in UAE.