What are Tax Groups and UAE Corporate Tax law?


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What are Tax Groups and UAE Corporate Tax

Navigating the UAE’s complex tax rules and regulations can be daunting for both small business owners and multinational corporations operating within the country. One of the most important aspects of these laws is understanding when and how to form tax groups. We will explain what tax groups are and how they can be formed under corporate tax uae law, as well as how they can benefit a company’s financial future.

What is a Tax Group?

A tax group is a single legal entity formed by two or more corporations that are under common ownership and control to achieve certain tax benefits. Under corporate tax uae law, a tax group can only be formed if all of the following conditions are met:

  1. The members of the group must be corporations that are residents of the UAE.
  2. The members of the group must be wholly owned by the same person or persons.
  3. The members of the group must have the same accounting period.
  4. The members of the group must file a consolidated tax return.

If all of these conditions are met, then the corporations will be considered a tax group for corporate tax purposes.

Overview of Corporate Taxes in UAE

The UAE has a Federal Tax Authority (FTA) which is responsible for administering Value Added Tax (VAT), excise tax, and corporate income tax. The FTA also collects customs duties.

There are two types of taxes in the UAE: direct taxes and indirect taxes. Direct taxes are levied on individuals and companies, while indirect taxes are levied on goods and services.

Corporate income tax is a direct tax levied on the profits of companies operating in the UAE. The corporation tax rate in the UAE is 20%.

Value Added Tax (VAT) is an indirect tax levied on the supply of goods and services in the UAE. The margin of VAT rate in the UAE is 5%. Excise tax is also an indirect tax, and it is levied on specific products such as tobacco, alcohol, and carbonated beverages. The excise tax rate in the UAE is 100%.

Customs duty is a type of import tariff, and it is levied on goods imported into the UAE. The customs duty rate in the UAE depends on the type of goods being imported.

When can a Tax Group be formed under UAE Corporate Tax?

A tax group can be formed under corporate tax uae when two or more companies are under common ownership and control and satisfy the other requirements outlined in the UAE Tax Law. 

Benefits of Formation of Tax Groups Under UAE Corporate Tax

When corporate entities are established in the UAE, there is an option to form a tax group. This can be done by two or more companies that are under common control, as long as they carry out similar activities and share the same economic interests. The purpose of creating a tax group is to enable the member companies to pool their resources and benefit from economies of scale. This can help them to reduce their overall tax liability and improve their competitiveness in the marketplace.

There are several benefits of forming a tax group under corporate tax uae law. 

Firstly, it allows member companies to combine their turnover to calculate their taxable income. This can lead to a reduction in taxes payable, as the taxable income is calculated on a consolidated basis rather than on a per-company basis. 

Secondly, member companies can share expenses such as research and development costs, which can also lead to a reduction in taxes payable. 

Finally, member companies can elect to have their profits taxed at a lower rate than would apply if they were taxed on a standalone basis.

What Are the Eligibility Requirements for the Formation of Tax Groups in the UAE?

To be eligible to form a tax group in the UAE, all of the following requirements must be met:

  • The members of the group must be companies that are incorporated in the UAE.
  • The members of the group must be 95% owned by the same ultimate parent company.
  • The members of the group must have a common financial year-end date.
  • The members of the group must file their tax returns electronically.

Factors That May Affect Approval of Tax Groups

When it comes to tax groups, there are a few key factors that may affect whether or not your group is approved. First, all members of the group must be residents of the UAE. Second, the group must be formed to carry on business activities in the UAE. Finally, all members of the group must have a common interest in carrying on that business activity.

Understanding Corporate Tax UAE Laws

The United Arab Emirates has a territorial tax system, meaning that profits are only taxed in the UAE if they are derived from a UAE source. This means that foreign-source income is not subject to corporate tax in uae. To encourage foreign investment, the UAE offers several tax incentives, including a reduction or exemption from corporate tax.

Tips for Hiring a TAX Consultant to Set Up a Tax Group in UAE

When it comes to setting up a tax group in the United Arab Emirates (UAE), there are a few things that you will need to take into account. One of the most important factors is finding a reputable and experienced TAX consultant who can help you with all the necessary paperwork and procedures. Here are a few tips to keep in mind when hiring a consultant for your tax group: 

  • Make sure that the consultant has experience in setting up tax groups in the UAE. There is a specific process that needs to be followed and it is important that your consultant is familiar with it.
  • Ask for referrals from other business. This will help you find a reputable consultant.
  • Get quotes from several different consultants before making your final decision. 
  • Make sure that you understand all the fees involved before hiring a consultant. Some may charge by the hour while others may charge a flat fee for their services.
  • Ask questions! If you are unsure about anything, make sure to ask your consultant for clarification. It is better to ask too many questions than not enough and end up with unexpected costs or problems down the line.


Tax groups can provide a number of benefits for business in the UAE, from reduced liabilities to simplified tax filing procedures. The legal framework and regulations concerning tax groups are quite comprehensive, requiring careful consideration when forming a group structure. However, with the right guidance and advice, companies can take advantage of this opportunity and reduce their overall corporate taxes. With more knowledge about what tax groups entail, business owners can make more informed decisions on how to minimize their liabilities under UAE corporation tax law.

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