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Establishing a Corporate Tax Group in the UAE: Key Considerations

Flexibility in Formation: Determining Group Composition

When establishing a corporate tax group (tax group) in the UAE, certain essential conditions must be met. This process involves a joint application submitted to the Federal Tax Authority (FTA), detailing the proposed initial tax period. The application must be completed before the conclusion of the current tax period for which group formation is sought. The FTA has the authority to designate an alternative starting tax period if needed.

Parent Company’s Responsibilities: Ongoing Corporate Tax Compliance

Upon formation of the tax group, the parent company assumes responsibility for ensuring ongoing corporate tax compliance for the entire group. This includes managing new subsidiary applications, preparing consolidated financial statements, timely filing of tax returns, settling corporate tax liabilities, pursuing tax refunds, overseeing group registration and deregistration, and maintaining comprehensive documentation.

Changes in Tax Group Dynamics: Life Cycle Considerations

Throughout the life cycle of the tax group, changes such as member additions or departures and parent company replacements may occur. The effectiveness of these changes is determined by the start of the specified tax period in the application submitted to the FTA or as otherwise decided by the FTA.

Tax Payment Dynamics: Joint Liability and Compliance

Regarding tax payments, the tax group, treated as a single taxable entity, is liable to settle due taxes within nine months from the conclusion of the relevant tax period. Failure to pay the stipulated amount makes each group member jointly and severally liable for the outstanding tax and related penalties to the FTA.

Tax Deregistration: Evaluating Business Cessation in the Group Context

When a member’s business activities conclude, a tax deregistration application is required. In the context of a tax group, the assessment of business cessation is conducted at the group level. Deregistration is necessary only if the entire tax group concludes its business activities.

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