Forming a Tax Group as per UAE VAT Law

Two or more persons carrying on a business are able to apply for a single tax group registration, and therefore be treated as a single taxable person by the FTA. In order to be a tax group:

  1. each member of the Group must be a legal person (that is, not a natural person);
  2. each member must have a place of establishment or a fixed establishment in the UAE;
  3. the members must be related parties; and
  4. one or more persons conducting business in a partnership must control the others.

As seen from the above conditions, each member must be related to the other to a sufficient extent. In this context, “related” is taken to mean they share economic, financial and organisational ties (either in law, shareholding or voting rights). One person must be able to control the members. For further information regarding tax group eligibility criteria, please refer to the Tax Groups VAT Guide (VATG101).

The effect of a tax group registration is that the members of the tax group are treated as a single taxable person for VAT purposes. This means that:

  1. supplies made between members of the tax group will be disregarded for VAT purposes and therefore no VAT is chargeable on intra-group transactions;
  2. only one VAT Tax Registration Number is issued for use by the group;
  3. the tax group submits only one tax return which summarises all supplies and purchases made by group members over the tax period concerned; and
  4. one member of the tax group will be appointed as its ‘representative member’. All of the VAT obligations of the tax group, and all supplies made and received by it, are carried out in the name of the representative

Please note that the members of a tax group are jointly and severally liable for any and all VAT debts and other such obligations of the group for the period during which they were members. That means that even when a business has left a tax group, they remain liable for VAT and penalties for the period of membership.