With the recent application of VAT in UAE, tax groups seem to be a very advantageous option for all businessmen and entrepreneur. It would provide a group of companies the benefit of being considered as a single entity. This would affect the way taxes are applied to the company and will also have a massive impact on the economy.
This blog will provide a deep understanding of what a tax group is and how can we deregister or amend a tax group.
What is a Tax Group?
A tax group is a collection of two or more entities which are clubbed together and are registered as a single taxable entity for taxation in UAE. This makes them equivalent to a single company. This may sound like a lucrative option for everyone, but not everyone can form a tax group. There are certain pre-requisites which a company should match so that they are considered as a tax group.
According to the Federal Decree - Law Number 8 of 2017, more commonly known as the VAT Law, a Tax Group can be defined as “Two or more persons registered with the authority for Tax purposes as a single taxable person by the provisions of this Decree-Law.”
Forming a tax group can be very beneficial for companies, but there may be certain situations in which you need to De-Register or Amend a tax group. Let’s see those situations.
Why De-Register or Amend a Tax Group?
There may be situations where a tax croup can be de-registered on the request of the parties of the tax group. This would lead the Federal Tax Authority, UAE to consider them as separate entities instead of a single group. The reasons because of which a tax group may require to de-register are:
- The concerned parties are not meeting the necessary requirements and benchmarks for being a tax group
- The member entities have no connection with each other with regards to their financial and regulatory matters.
- If the FTA has any reason to believe that the tax group is no longer eligible to hold that status.
- FTA has evidence that a tax group is linked to tax frauds and other illegal activities related to taxes which may hamper the image of the country worldwide.
Similarly, a tax group may not require to de-register all the member entities but may need specific changes with time such as removal of a party from the tax group or addition of a new party in the tax group. In such a case, amending the tax group seems a more logical solution.
- If the entity is unable to meet the required benchmarks, it will render the parties’ ineligible to qualify as a part of the tax group and hence will be needed to be removed.
- If there is a group of entities doing similar kind of business activities, in such a case, if the parties meet all the requirements of the group they will be eligible to be a part of a tax group.
Steps to De-Register or Amend a Tax Group
A tax group can be very easily de-registered or amended. It is only required that you follow the following steps.
- If it is found out that a member of the tax group no longer qualifies to be a part of it, the representative of that particular tax group must inform the FTA of such situation within 20 business days.
- The FTA, on making the required decision, will send a notification to the representative of the group. This notification will also contain the decision as to de-register the group or make an amendment to it. The decision will come into effect within 10 business days of making the decision.
- The FTA will issue a new Tax Registration Number (TRN) for the group in case the group is amended. The entity leaving the group will have his old TRN activated and will have to use that particular TRN.
The representative of a tax group needs to follow only these three steps to amend or de-register a tax group in UAE.
Forming of a tax group is highly helpful for a company, but these decisions require the help of professionals, or the parties could be in a mess. A proper understanding of the rules and regulations of the entities in a tax group are of paramount importance. Therefore, it is suggested that you should take the help of a firm which will take care of all the red tape and will leave you in peace to focus on the development of the company
If you are looking for such a firm, JAXA auditors will be able to assist you in forming, de-registering or amending a tax group. It also provides various other services that will help in the growth of the business such as VAT services, Accounting services, Cash Flow and Forecasting Services. For details on the services, please contact us – we will be happy to assist you.