Tax Groups — Concept and Eligibility

What is a Tax Group?

A tax group is two or more legal persons registered as a single taxable person for VAT purposes. The group is treated as one entity — supplies between group members are ignored, and only one VAT return is filed for the entire group.

Eligibility Criteria

1. UAE establishment: All group members must be established in the UAE.
2. Common control: One person must control (directly or indirectly) all other group members.
3. Not exempt: No member can be an exempt person (e.g., a government entity).
4. Legal persons: All members must be legal persons (not natural persons, except sole proprietors meeting conditions).

What is "Control"?

Control means:

• Ownership of more than 50% of the voting rights, OR
• Ownership of more than 50% of the share capital, OR
• The right to appoint the majority of the board of directors

Benefits of Tax Grouping

1. Reduced administration: One VAT return for the entire group.
2. No intra-group VAT: Supplies between group members are ignored — no invoicing, no VAT, no input tax recovery issues.
3. Cash flow optimization: Input tax from one member can offset output tax from another.
4. Simplified accounting: No need to invoice between group companies.

Limitations

• All group members are jointly and severally liable for the group's VAT obligations.
• If one member defaults, the FTA can recover from any other member.
• Group registration is optional — companies can choose to register individually.