The Group companies and U.A.E corporate tax

 Group companies in the UAE can elect to form a tax group for UAE corporate tax purposes, provided they meet the following conditions:

 The parent company must be a UAE tax resident.

The parent company must directly or indirectly hold at least 95% of the share capital, voting rights, and entitlement to profits and net assets of each subsidiary in the group.

All companies in the group must have the same financial year and prepare their financial statements using the same accounting standards.

Neither the parent company nor any of the subsidiaries in the group may be an exempt person or a Qualifying Free Zone Person.

If a group of companies meets these conditions, they can elect to form a tax group by filing a joint election form with the Federal Tax Authority. Once the election is approved, the group will be treated as a single taxable person for UAE corporate tax purposes. This means that the group will be required to prepare consolidated financial statements and pay tax on its overall profits.

 There are several potential benefits to forming a tax group in the UAE. For example, tax groups can:

•  Eliminate intra-group transactions from their taxable profits.
• Consolidate losses from one company in the group with the profits of another company in the group.
• Carry forward losses from one year to offset profits in future years.
• Elect to tax cross-border dividends received from other tax group members at a lower rate.

However, there are also some potential disadvantages to forming a tax group. For example, tax groups are subject to more complex tax rules and administrative requirements. Additionally, if a company leaves the tax group, it may be subject to an exit tax.

 Overall, whether or not to form a tax group is a complex decision that should be made on a case-by-case basis. Businesses should carefully consider the potential benefits and disadvantages before making a decision.

 Here are some examples of how group companies can use tax groups to reduce their overall tax liability in the UAE:

 Example 1: A group of companies that operates a retail business has one company that is responsible for sourcing and importing goods, and another company that is responsible for distributing and selling the goods. By forming a tax group, the two companies can eliminate the intra-group profit margin from their taxable profits. This can result in a significant reduction in the group's overall tax liability.

Example 2: A group of companies that operates a real estate development business has one company that owns the land, another company that constructs the buildings, and a third company that sells the completed units. By forming a tax group, the three companies can consolidate their profits and losses. This means that if one company in the group makes a loss, it can be offset against the profits of the other companies in the group. This can help to stabilize the group's overall tax liability.

Example 3: A group of companies that operates a manufacturing business has one company that is located in the UAE and another company that is located in a foreign country. The UAE company exports goods to foreign companies. By forming a tax group, the two companies can elect to tax cross-border dividends received from each other at a lower rate. This can help to reduce the group's overall tax liability on its international activities.

It is important to note that the UAE corporate tax regime is still new, and there is some uncertainty about how certain aspects of the law will be interpreted and applied. As a result, businesses should consult with a qualified tax advisor before making any decisions about whether or not to form a tax group.