A guide to Corporate Tax Groups in the UAE

Corporate taxation in the UAE has transformed the business landscape, and one of the most beneficial frameworks introduced under the new tax regime is the corporate tax group concept. This arrangement allows eligible companies to be treated as a single taxable entity, making tax filing and compliance more efficient.

In a guide to corporate tax groups in the UAE, we explore how forming a UAE corporate tax group can optimise tax responsibilities, reduce administrative burden, and support smoother financial management for businesses operating across multiple entities.

What is a Corporate Tax Group?

A Corporate Tax Group refers to a structure where two or more eligible companies are treated as a single taxable entity for corporate tax purposes. Instead of filing separate tax returns, the group submits one consolidated tax return, simplifying compliance and potentially reducing the overall tax burden.

In the UAE corporate tax group framework, companies must share common ownership (at least 95% direct or indirect shareholding), follow the same financial year, and be resident of legal entities. When formed, a corporate tax group in the UAE allows businesses to offset profits and losses among group members, centralise tax management, and improve financial efficiency.

Creating a corporate tax group is especially beneficial for organisations with multiple subsidiaries or diverse business operations seeking streamlined reporting and tax advantages under UAE Corporate Tax Law.

Who Can Form a Tax Group in the UAE?

To form a Tax Group in the UAE, the following conditions and eligibility criteria must be met:

1. Legal Persons Only

• The parent company and subsidiaries must be juridical persons (e.g., LLCs, PJSCs, free zone companies, etc.)
• Natural persons (individuals) cannot form or be part of a tax group.

2. UAE Tax Residents

• All entities must be tax residents in the UAE.
• Foreign companies can qualify only if they have a permanent establishment in UAE.

3. Parent–Subsidiary Relationship

The parent company must own at least 95% of the subsidiary’s share of capital, voting rights, and profits.

• Same Financial Year: All group members must follow the same financial year for accounting and tax reporting.
• Unified Accounting Standards: All companies must use the same accounting standards (such as IFRS).

4. Corporate Tax Registration

Each entity must be registered for UAE corporate tax before applying to form a tax group.

These requirements ensure compliance and allow businesses to benefit from streamlined reporting and consolidated tax filings under a corporate tax group

Main Objectives of Forming a Tax Group

The main objectives of forming a tax group in the UAE are as follows:

• Streamline corporate tax management by submitting one consolidated tax return instead of multiple filings.
• Allow group entities to offset internal profits and losses to improve the overall taxable position.
• Simplify the movement or transfer of assets, liabilities, and internal transactions between group companies without creating separate tax consequences.
• Optimise and potentially reduce the total corporate tax payable across the entire group.

Eligibility Criteria for Forming a Corporate Tax Group in the UAE

Businesses can create a corporate tax group only if they fulfil specific regulatory requirements set out under the UAE corporate tax regime. These include:

• Shared Ownership Structure: A single parent entity must control a minimum of 95% of the subsidiary’s shareholding, voting power, and profit entitlements. This control may be exercised directly or through multiple levels of ownership.
• UAE Tax Residency Requirement: Every company within the group must be classified as a UAE tax resident. Foreign or non-resident entities cannot be part of the group structure.
• Aligned Financial Reporting Timeline: All participating companies must operate on the same financial year calendar to maintain unified tax reporting.
• Consistent Accounting Approach: Members must adhere to identical accounting frameworks, typically based on International Financial Reporting Standards (IFRS), to ensure accurate consolidation.
• Entities Not Eligible to Join: Certain businesses are restricted from forming or joining a corporate tax group, such as Free Zone companies claiming the 0% Corporate Tax incentive (unless they voluntarily switch to 9%), regulated financial sector entities, and companies where the ownership threshold falls below 95%.

Key Benefits of Forming a Corporate Tax Group in the UAE

Setting up a corporate tax group in the UAE isn’t just about combining companies under one umbrella; it requires strategic planning, documentation, and regulatory approval.

The UAE Corporate Tax Grouping process is structured to ensure transparency and accurate financial reporting across all participating entities. Here’s a clear roadmap to guide your corporate tax group formation:

Step 1: Confirm Eligibility

Before starting the registration process, verify that all companies meet the legal and financial criteria for a tax group, UAE corporate tax setup:

• Every member must be a UAE tax resident and classified as a resident person under corporate tax law.
• The parent entity should meet the minimum ownership and control requirements over each subsidiary.

Step 2: Compile Required Documentation

Prepare essential records and agreements that demonstrate structure and compliance:

• Valid trade licences for the parent company and all subsidiaries.
• Recent financial statements for each entity.
• An organisational chart outlining ownership percentages.
• A signed agreement confirming all parties’ consent to join the UAE corporate tax group.

Step 3: File the Application with the FTA

The parent company is responsible for applying electronically through the Federal Tax Authority portal. You will also need to indicate the intended first tax period for the group. During the review, the FTA may request additional evidence or clarification.

Step 4: FTA Assessment & Decision

The Federal Tax Authority examines the request to confirm eligibility and regulatory compliance. Formal approval is granted only if all requirements are met throughout the process.

Step 5: Formation & Tax Registration

Once approved, the tax group will officially be recognised from the date determined by the FTA. A unique Tax Registration Number (TRN/TIN) will be issued for the entire group, while each entity retains its individual TRN for internal administrative purposes. From this point, the parent company becomes legally responsible for tax filings, reporting, and payments on behalf of the group.

Although the process is straightforward in theory, practical challenges can arise during audits or documentation reviews. Partnering with a certified corporate tax agent in Dubai, such as Shuraa Tax, can simplify compliance, reduce delays, and ensure accurate group procedures under the UAE corporate tax grouping regulations.

Challenges of Forming a Tax Group in the UAE

While tax grouping delivers many operational and financial advantages, it also comes with specific challenges that companies should evaluate before proceeding:

1. Collective Tax Responsibility: Every entity within the group becomes jointly accountable for the total corporate tax due. If one company fails to meet its obligations, the burden may fall on the others.
2. Financial Reporting Complexity: Creating consolidated accounts requires consistent accounting policies, coordinated financial management, and, often, external professional support, increasing time and costs.
3. Complications During Structural Changes: Restructuring the group, such as adding a subsidiary or removing an existing member, can trigger tax consequences and require approval, documentation, and recalculation of taxable positions.

Criteria for Transferring Tax Losses Within a Group

Tax loss transfers can help balance profitability across group members, but only under specific conditions:

• The company receiving the loss must be at least 75% owned (directly or indirectly) by the same parent company.
• The receiving entity cannot be exempt from corporate tax and must not be based in a 0% Free Zone regime.
• The losses transferred are limited; they cannot exceed 75% of the company receiving the transfer taxable income.

The UAE corporate tax framework enables businesses with shared ownership to form tax groups to simplify compliance, reduce administrative effort, and optimise overall tax outcomes.

With a clear understanding of requirements, procedures, and associated risks, companies can maximise the advantages of tax grouping and manage their corporate tax responsibilities more efficiently in the UAE.

Empowering Businesses Through Strategic Tax Grouping

In summary, forming a corporate tax group under the UAE corporate tax regime is a strategic way for businesses to simplify compliance, optimise tax planning, and streamline financial management.

As explained in A Guide to Corporate Tax Groups in the UAE, UAE Corporate Tax Grouping enables eligible companies to file a single tax return, offset profits and losses, and improve overall tax efficiency. While there are regulatory requirements and challenges to consider, the long-term benefits make corporate tax group formation a valuable option for multi-entity businesses.

For expert support with the tax group, UAE corporate tax setup and compliance, connect with Shuraa Tax today.

📞 Call: +(971) 44081900

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📧 Email: info@shuraatax.com

Frequently Asked Questions

Q1. What does forming a Corporate Tax Group in the UAE mean?

A corporate tax group allows multiple companies under the same ownership structure to be treated as a single taxable entity. Instead of filing several tax returns, the parent company submits one consolidated return for the entire group, simplifying compliance and tax administration.

Q2. How is ownership eligibility assessed when creating a UAE Corporate Tax Group?

To establish a corporate tax group, the parent entity must hold a minimum of 95% of the subsidiary’s equity, voting power, and rights to profits. This level of control ensures unified financial management and tax oversight across the group.

Q3. Is it possible for a member of the company to leave the Corporate Tax Group?

Yes, a subsidiary can be withdrawn or removed if it fails to meet the required conditions, for example, by falling below the ownership threshold or becoming a Qualifying Free Zone Person (QFZP). Any removal takes effect at the start of the following tax period.

Q4. Are there challenges associated with forming a Corporate Tax Group in the UAE?

One of the main limitations is that every member must follow the same financial year and accounting standards. This requirement may complicate internal restructuring and delay operational flexibility when expanding or reorganising the business.

Q5. What are the key benefits of forming a Corporate Tax Group?

Tax grouping enables offsetting profits and losses within the group, reduces overall tax payable, streamlines record-keeping, and avoids double taxation on internal transactions.

Q6. Can Free Zone companies join a Corporate Tax Group?

Free Zone entities may join only if they are not Qualifying Free Zone Persons (QFZPs). QFZP-status businesses cannot be part of a group to retain their 0% tax benefit.

Q7. How does VAT registration differ from Corporate Tax Grouping?

VAT groups and corporate tax groups are independent of each other. Even if companies are part of a VAT group, they must apply separately to form a corporate tax group under UAE corporate tax rules.

Q8. Who is responsible for tax payments within a Corporate Tax Group?

The parent company is legally responsible for submitting the tax return and paying the due corporate tax for the entire group, although internal agreements may allow cost-sharing among members.

Q9. Does forming a Corporate Tax Group require approval?

Yes, businesses must apply to the Federal Tax Authority (FTA). Grouping becomes valid only after formal approval has been granted.

Q10. Can companies with different business activities join the same tax group?

Yes, as long as all eligibility criteria are satisfied, including ownership thresholds, tax residency, and unified financial reporting.