Value Added Tax (VAT) Grouping in the UAE

What is a VAT Tax Group?

The governments of many countries allow VAT tax groups. It is also known as group registration. Under this mechanism, more than one company can get VAT registration as a VAT tax group under single common control. The VAT returns and VAT payments are carried out by the member who acts as a representative of this VAT group. However, all the members of the group are jointly liable for the payments and returns. The group members can make any transaction or supply within the group. There is no need for VAT accounting for these particular supplies.

What is Group VAT Registration?

The VAT mechanism allows more than one company to get VAT registration as a group. A group of more than one company will have a single VAT number under this provision. Limited liability partnership firms can also opt for group registrations.

The VAT tax group is jointly known as ‘bodies corporate’. The group is treated more or less as a single taxable person. The group VAT registration number is issued in the name of the representative member. However, the group uses a single consolidated accounting system and all the members are severally liable in the case of VAT debt and defaults.

The representative member is liable to submit a single consolidated VAT payment, return, and VAT returns on behalf of his VAT tax group.

Benefits of VAT Group

There are many advantages of the group registration but the main objective is to simplify the procedures and save the cost of multiple VAT registrations. We have cited here the main benefits of the VAT tax group registration.

1. Each VAT group can submit a consolidated VAT return as a group. This significantly reduces the administrative cost. The payments and refunds of the value-added tax can also be netted off.

2. Any supply of the services and the goods by one member of the group to another member is not considered for VAT. The VAT accounting and taxes are not implied to such ‘within group’ dealings.

3. Any VAT if taxable on the imports of the goods by any member can be paid by the representative member.

4. Yet another benefit is that is simple to remove and add a company from the VAT group at any time. It is also easy to change the representative of the group or to terminate the group at any time.

VAT tax group registrations are preferred individual costs are reduced. The administrative cost incurred over returns, payments, and registrations is divided and hence reduced.

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