VAT Tax Group UAE: Benefits, Eligibility and Registration Guide

VAT group registration in the UAE allows two or more related businesses to register as a single taxable person with the Federal Tax Authority. A tax group simplifies VAT compliance by filing one group VAT return and treating intra-group transactions as out of scope. To qualify, all members must have a place of establishment in the UAE, be related parties, and demonstrate control relationships. This VAT group guide explains how group VAT registration works in the UAE, outlining eligibility criteria, tax group application conditions, and the benefits of registering as a single taxable person.

What is VAT Tax Group in UAE?

A VAT tax group in the UAE allows two or more companies under common control to be treated as one taxable entity for VAT purposes. Once the Federal Tax Authority (FTA) approves the group registration, a single Tax Registration Number (TRN) is issued. Instead of each business filing separate VAT returns, the group submits one consolidated return.

An important feature of this setup is that transactions between members of the same group are not subject to VAT, reducing compliance hassles and easing cash flow management. However, it’s worth noting that all members share equal responsibility, every company in the group is jointly liable for VAT dues and any penalties that arise during the time they are part of the group.

Eligibility Criteria to Form a VAT Tax Group Registration

The Federal Tax Authority has outlined particular conditions that need to be fulfilled. These conditions are intended to ensure that only eligible businesses are granted registration as a single taxable entity. The eligibility criteria are:

1. Business Criteria: Each member must be actively engaged in business activities on a regular and independent basis. Entities that are not carrying out a business cannot form or join a tax group.

2. Legal Person Criteria: Only legal persons, such as companies or government entities, can be members of a tax group. A legal person is recognised under UAE law as having its own legal personality and the capacity to enter contracts. Natural persons (individuals) are not eligible.

3. Establishment Criteria: Every member must have a business establishment or fixed establishment in the UAE. This could be the primary place where management decisions are made or a fixed business presence with sufficient human and technical resources. Subsidiaries and branches of foreign-owned companies may qualify if they meet these establishment requirements.

4. Related Parties and Control Criteria: Members must be related through economic, financial, or organisational ties. Control is established when one or more members have at least 50% voting rights, ownership interest, or the ability to control business operations by other means. Shared premises, financial interdependence, or joint business interests are common indicators of such relationships.

5. Government Entities: Designated Government Bodies may only form or join a tax group with other Designated Government Bodies. They cannot form a tax group with non-designated entities. Government Bodies that are not designated, but are registrable in their own right, may group with other legal entities under the standard VAT grouping rules.

Advantages and Disadvantages of VAT Group in UAE

The decision to form a VAT tax group in the UAE comes with both benefits and challenges. The table below outlines the main advantages and disadvantages of VAT group registration, helping businesses evaluate whether this option suits their tax and compliance needs.

VAT Tax Group Registration Guide

Forming a VAT Tax Group in the UAE can simplify compliance, but the process requires careful documentation and approval from the Federal Tax Authority (FTA). Here’s a step-by-step guide with an illustration to make it clear.

VAT Group Registration Illustration

Consider this scenario:

• Mr. Abdul is a Director in Rose Trading Ltd and also a Partner in A-One Trading Ltd.
• Mr. Rizwan is a Director of A-One Trading Ltd and simultaneously a Partner in Rose Trading Ltd.

Since both individuals hold cross-ownership and control, they qualify as related parties. This makes them eligible to apply for VAT Group Registration in UAE, provided all conditions are satisfied.

VAT Group Registration Application to FTA

To register a VAT group, a separate application must be submitted to the FTA. The process works as follows:

1. Appoint a Representative Member: One company must be nominated as the Representative Member of the VAT group. Other companies will be registered as group members.
2. Administrative Responsibilities: The Representative Member is responsible for VAT return filing, submitting amendment applications, and managing group updates (addition/removal of members). VAT payment, however, remains the joint liability of all members.
3. Application via FTA Portal: The application should be submitted through the Representative Member’s FTA account.
4. Supporting Documents (to be submitted along with application): No-objection letter from all member companies authorizing the Representative Member. Group structure showing common ownership/control. Group turnover declaration.
5. VAT Number Issuance: Once approved, individual VAT numbers are suspended, and a new VAT group number is issued. If the group dissolves, the old VAT numbers are reactivated.
6. FTA Review Timeline: The FTA reviews applications within 20 business days and either approves, rejects, or requests additional information.

Eligibility Criteria for VAT Group Registration in UAE

• At least one member must meet the VAT registration threshold individually, or
• The combined taxable supplies/expenses of the group must meet the threshold.

Situations Where FTA May Reject VAT Group Applications

• If applicants do not meet the eligibility criteria.
• If the FTA suspects the registration is an attempt at tax evasion.
• If any member of the group is not a legal entity.
• If approval would cause a significant reduction in tax revenue.

How to De-register from VAT Tax Group in UAE

A VAT tax group in the UAE must be de-registered if it no longer meets the conditions set out by the Federal Tax Authority (FTA). In such cases, the group’s representative member is responsible for submitting the de-registration request to the FTA.

Circumstances Requiring VAT Group De-registration

A VAT group needs to be de-registered in situations such as:

• Eligibility criteria not met: If the group no longer qualifies to remain registered as a tax group.
• Change in group members: For example, when a group has only two companies and one exits due to liquidation or restructuring.
• Threshold not achieved: If the group fails to meet the voluntary VAT registration threshold of AED 187,500, based on taxable supplies or expenses in the previous 12 months or the upcoming 30 days.

Timeframe for VAT Group De-registration

• Once de-registration becomes mandatory, the application must be filed within 20 business days from the date the conditions are triggered.
• Delays can result in administrative penalties, making timely action critical.

Conclusion

VAT group registration in the UAE offers businesses the advantage of simplified compliance, but it also comes with strict conditions and responsibilities. When the criteria are no longer met, VAT group de-registration becomes mandatory, and the representative member must act promptly to avoid penalties. Whether applying for registration or de-registration, businesses should carefully evaluate eligibility, benefits, and risks to ensure full compliance with UAE VAT law. Proper planning ensures that the VAT tax group remains a tool for efficiency rather than a source of complications.