Everything You Wanted to Know about VAT Tax Group in the UAE

The businesses in the UAE, who are taxable, use the group registration procedure for VAT to avoid the costs of multiple registrations and to simplify the procedures. The UAE allows multiple companies to form a group of single common control to register for the VAT.  Two or more companies will get a single VAT number under the group registration, which makes the process more effective. However, only a single representative member from the group is allowed to file the VAT returns and payments on behalf of the group.

Under the Tax group registration provision, the members are being considered as a single taxable entity. However, the members are jointly and severally liable for all VAT debts and other such obligations of the group for the timespan during which they were members.  If a company leaves a tax group, it would still be liable for the period of membership. The application for forming a tax group must be made by a member who is poised to become the representative of the group. For registering a Tax group for VAT purposes, the services of a reputed VAT consultancy service in Dubai, UAE.

Who are Eligible to Form a VAT Tax Group

To be eligible for VAT Group registration the following criteria have to be fulfilled

1. Each constituent member of the VAT group must be a company
2. Individuals are not eligible for VAT Group registration and can’t create a VAT group
3. Each constituent member must be related parties, which means they must share economic or financial ties.
4. Each constituent member of the VAT group must be resident in the UAE
5. The member should not already be a part of another Tax group

How to Form a Tax Group in the UAE?

The Federal Tax Authority allows only a representative member of a prospective Tax group to create a Tax group. The representative member needs to submit a VAT registration application at the time of applying to form a Tax Group. The FTA then will issue a Tax Registration Number (TRN). A member is only allowed to hold one TRN for VAT purposes at the time of application. It is to ensure that Tax group members are not registered separately or as part of another Tax group. The representative member should make sure that duplicate applications are not presented to the FTA.

It is also important that a single company or two companies can have control over the entire Tax Group. However, the FTA has listed certain criteria if the group control is in the hands of 2 companies. In the case of two companies that are in a formal partnership agreement, either of the following conditions is required to be met,

1. a voting interest in those companies of at least 50% when added together
2. a market value interest in each of those companies of at least 50% when added together
3. control by any other means

VAT consultancy services in the UAE recommend that all the information submitted to the FTA for the Tax Group registration must be accurate. Inaccuracies in the application may lead to further delays or even rejection of the application. Outsourcing the process to the top VAT consultants in Dubai, UAE may help the companies avoid penalties arising from such events.

Information Required for Forming a Tax Group

The registration for forming the VAT group can be made online through the FTA website. The application needs to be submitted by the representative member who controls the group. The following information is required to be submitted while applying for group registration.

a) For Each Member of the Group

1. Trade License
2. Certificate of Incorporation (If Applicable)
3. Articles of Association/ Partnership Agreements
4. Authorized signatory documents
5. Financial statements or other documentation to support financial transaction values

b) For the Tax Group

1. Group structure/ documents indicating group control
2. Documents to show members are related parties (group structure/group financial statements)
3. Financial statements
4. Power of Attorney/ Board Minutes in favour of group controller

c) For the Group Controller

• Trade License
• Passport & Emirates ID
• Authorized signatory documents

Benefits of VAT Grouping in the UAE

Registering for a VAT group presents immense benefits for the companies. The process is simplified and the costs that may be incurred on multiple levels can be reduced as the group is considered as a single entity for VAT purposes. The following are the other major benefits,

1. Each member will be considered as a single entity under the Tax Group and can file for VAT return as a group. Being able to submit a consolidated VAT return will slash the administrative costs in a big way.
2. By forming a VAT group, the VAT accounting processes could be simplified. The VAT returns can be compiled and presented at the group level.
3. Any supply of the services and the goods between the constituent members of the group are considered out of the scope of VAT.
4. A representative member can pay any VAT levied on the imports of goods made by any other member
5. There is a provision to amend the members of the group or change the controller. This means any member can be terminated or a new member can be added at any time. It is also possible to change the representative of the group.

Why Choose Jitendra Chartered Accountants?

Registering for a Tax Group for VAT purpose is beneficial for the companies but it should be done meticulously to avoid delays, rejection and penalties. Hiring the services of the best VAT consultancy firms in Dubai, UAE is the ultimate solution to efficiently execute the Tax Grouping procedure. Jitendra Chartered Accountants (JCA) is a respected VAT consultancy firm with a large client base across the UAE. JCA’s tax consultants ensure that the companies’ VAT returns are filed and submitted within the timeframe set by the FTA. The clients put immense faith in JCA’s VAT services as the VAT submissions are made in compliance with FTA regulations. And the approved Tax Agent of JCA is helping the clients on different VAT related matters. JCA is committed to ensuring the companies can build their credibility by avoiding any sort of VAT-related penalties.