All you need to know about Amending a Tax Group
04

Jun 2020

The United Arab Emirates understood that the country could not depend upon the revenue from a single source. Thus the Value Added Tax (VAT) was implemented all over the country from 1st January 2018. The new tax will not only help the economy of the country to obtain an original source of revenue but will also reduce the burden of taxation by having a single tax on various objects.

The VAT will also benefit the businessmen and entrepreneur as Value Added Tax (VAT) will allow a group of companies to be considered as a single unit. This treatment will have a significant effect on the taxation of the companies, which will, in turn, have a massive impact on the economy.

Tax Group – What is it?

A tax group is cumulative of two or more businesses which are considered as a single entity for taxation purposes. The Federal Decree-Law Number 8 of 2017 defines a tax group as "Two or more persons registered with the Federal Taxation Authority for tax purposes as a single taxable entity.”

Being a part of the tax group can help a company a lot as it will not only simplify the accounting procedures and will also require to prepare reports which will be compliant to other processes, but even with these benefits, some situations may arise in which you may need to amend or de-register a tax group

What do you mean by Amending a Tax Group?

The meaning of amendment in the English dictionary is a minor change or addition which is designed to improve a text, a piece of legislation, etc. Amending a tax group means changing the specifications of a tax group. This usually comprises of the following:

  • Addition of new business to a pre-existing Tax Group
  • Removal of a member company from the existing Tax Group
  • Change in the details of the Tax Group

This amendment can be applied only by the representative member of a registered Tax Group. The modifications can be done only after the application has been approved by the Federal Tax Authority.

Why Amend a Tax Group?

During the course of business, certain situations may arise in which the companies which are a part of a tax group may need to amend the tax group. While providing a reason for making a change or modifying a tax group, all the companies which are part of the tax group must be in consensus. The reasons for amending a tax group is usually provided below:

  1. If a tax group consists of companies which are conducting similar business activities and if these companies meet all the requirements, the tax group can be amended.
  2. If the companies which are a part of the tax groups do not fulfil the requirement of the Federal Tax Authority, these companies or businesses will be considered as ineligible. They will be removed from the tax group.

Who can be Added or Removed from the Tax Group?

A representative member of the Tax Group can add a new member to the tax group. Still, before adding a new member, the representative member is required to ensure that specific requirements are fulfilled by the prospective member of the Tax Group:

  1. The prospective member should be regarded as a legal person
  2. The prospective member is considered as a resident in the UAE
  3. The member in consideration should not be a member of different Tax Group

The process of removing a member from the tax group is straightforward. The process is given below:

  1. When you are viewing the tax group amendment form, a list containing the details of the tax group along with the name of all the members, will be visible to you.
  2. Select the name of the member in the tax group to remove.
  3. After selecting click on the OK button to confirm.

To be a member of a Tax Group can prove to be a significant decision for a company. Still, if such arrangements are not taken after many considerations, it can hamper the company. This is why a proper understanding of the rules and regulations are of paramount importance.

If you are looking for help in the formation, amendment deregistration of a Tax Group, then you must look into the services provided by JAXA Chartered Accountants. For more details on the services offered by us, Contact us. We will be happy to help.