Qualifying Groups Under UAE Corporate Tax & Eligibility for Tax Groups
The UAE brought in a federal corporate tax on June 1, 2023. This law matches world standards. It’s important for companies to know about tax groups and qualifying groups under this law. The rules help businesses save tax and follow the right path.
What Are Qualifying Groups in UAE Corporate Tax?
A qualifying group lets two or more firms join up for some tax benefits. For a group to form, one person must own at least 75% of each company, either directly or through other firms. You do not need to get FTA approval for a qualifying group, which makes it easier for many businesses.
Here’s what makes a Qualifying Group:
- Each company must be a UAE resident or have a UAE permanent establishment.
- At least 75% of shares and voting rights must be owned by another company in the group.
- Each member must use the same accounting standards and follow the same financial year.
- None of the companies can be exempt from corporate tax or be a qualifying free zone person.
Qualifying groups give you benefits like:
- Move tax losses between members.
- Transfer assets at book value, with no tax on gains or losses.
- Each company files its own tax return.
But there is no full consolidation. Every firm in the group must file taxes based on its own profits.
What Is a Tax Group & Why Does It Matter?
A tax group is different from a qualifying group. In a tax group, all the companies join as one single taxpayer. The main company must own at least 95% of voting rights and shares of each group member.
Important rules for a tax group:
- The main company must keep the 95% ownership at the start and end of every tax year.
- Voting rights can be held directly or through other companies.
- Companies owned by just individuals can’t form a tax group, even if they work in the same field.
Not eligible to form a qualifying group:
- Real estate investment trusts (REITs)
- Qualifying free zone persons
- Exempt persons
Some companies may also miss out because of:
- Involvement in illegal activities
- Financial troubles
- Breaking past tax laws
Tax Group Approval by the FTA
Companies need FTA approval before forming a tax group. The FTA will check if the group has a real business purpose. The FTA may not allow groups made just for tax savings.
Steps to apply:
- Fill the FTA application form.
- Show member details and ownership charts.
- Prove you have a good business reason to form the group.
If approved, the tax group is treated as one taxpayer. The group can combine profits and losses and file just one tax return. This makes things simple and can lower your group’s tax bill.
Benefits of Forming Qualifying Groups or Tax Groups
Forming a group under UAE CT law can help your business:
- Reduce your total tax bill
- Make tax filings simpler
- Use losses from one firm to offset profits in another firm
- Improve your group’s financial reports
Here’s what you gain:
- Easier transfers of assets between firms in the group
- Shared tax planning for the whole group
- Less paperwork and fewer filings
But you need to follow all rules. If your group doesn’t meet the requirements, the FTA may break it up.
Key Points for UAE Companies
To use group rules under UAE CT law, make sure:
- You follow every FTA guideline.
- You know which group type fits your business.
- You check eligibility every year.
Don’t forget:
- Tax groups need FTA approval.
- Qualifying groups don’t need approval, but rules still apply.
- Use the same accounting rules for all group companies.
- If you transfer assets within the group, use book value—no gain or loss is taxed until you sell to a third party.
How Mubarak Al Ketbi (MAK) Auditing Can Help Your Group
Mubarak Al Ketbi (MAK) Auditing has experts who understand every part of UAE corporate tax. We help you set up qualifying groups or tax groups the right way. We can check your eligibility, prepare your paperwork, and make sure you get all tax benefits. Our custom solutions keep your company on the right path. Remember, when it comes to taxes, “the early bird catches the worm”—so act fast for peace of mind!
- For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp: +971 50 276 2132
