UAE Corporate Tax (‘CT’) Guide for Tax Groups which was published by the FTA recently.
The Guide provides further information on who is eligible to form or be a member of a tax group, when a Tax Group can be formed or ceased, how to determine taxable income of the Tax Group and related compliance requirements.

Brief Background on Tax Group

• Two or more taxable persons can be treated as a single Taxable Person by forming a Tax Group. On satisfying the relevant conditions, a joint application can be made to the FTA by the Parent Company and each Subsidiary seeking to form or become a member of a Tax Group.
• Once a Tax Group is formed, the juridical Resident Persons that are part of the Tax Group are treated as a single Taxable Person and, therefore, Taxable Income needs to be calculated on a consolidated basis for the entire Tax Group. As a result, only one Tax Return for the Tax Group needs to be submitted to the FTA.
• The benefits of forming a Tax Group includes the ability for the Parent Company to file a single Tax Return on behalf of all members of the Tax Group.
• Forming a Tax Group also allows for the income and losses of the members of the Tax Group to be offset against each other.
• Also, generally the transfer of assets and liabilities and other transactions and arrangements between members of the Tax Group are to be disregarded when determining the Taxable Income of the Tax Group.

Key Takeaways from the Tax Group Guide

• With respect to foreign entities, an eligible entity either has to be considered a resident only in the UAE under a Double Taxation Agreement or if there’s no such agreement in effect, it can be part of a UAE CT Group only if it is not considered a tax resident in any other jurisdiction than the UAE.
• The 95% ownership test requirement takes into consideration the following rights viz, legal title ownership, entitlement to distributable profits, entitlement to net assets on winding up and the ownership units must carry shareholding voting rights.
• UAE branches of a Non-Resident Person cannot be part of a Tax Group as a branch is not a separate juridical person.
• Where irrevocable tax elections are made by the Tax Group, such elections continue to apply to members of the Tax Group even after they leave the Tax Group, meaning long-term planning and consideration is required before making any of the elections. Such elections include Qualifying Group elections, realisation basis elections, transitional rules elections and foreign permanent establishment elections. In capital transactions affecting Tax Groups, it will be relevant to review the election status of concerned entities