The Ministry of finance has clarified the following rules regarding related tax grouping for corporate tax purposes.
Ownership requirements
The conditions specified under the law shall be met continuously throughout the relevant tax period. Besides, the definition of share capital shall include the nominal issued and paid-up share capital, or membership or partnership capital of each subsidiary, as applicable.
Residency
The parent company, as well as the subsidiary or subsidiaries, must be resident persons that are not considered residents for tax purposes in another jurisdiction under a relevant international agreement in force in the UAE. Where a member of a tax group becomes a resident for tax purposes in another country or foreign territory, the relevant member shall be treated as leaving the tax group from the beginning of the tax period in which it became a resident for tax purposes in such another country or foreign territory.
Transactions prior to forming or joining a tax group
Transactions between members of a tax group shall not be eliminated insofar as a member has recognized a deductible loss in a tax period in respect of those transactions prior to joining or forming the tax group until such deductible loss is reversed in full. If the transaction is not eliminated, the tax group shall include any income in relation to that transaction in determining the taxable income of the tax group for the tax period in which that income arises up to the amount of the deductible loss that was previously deducted prior to joining or forming the tax group.
Date of formation or joining of a tax group
The application to form a tax group or to join an existing tax group must be submitted to the authority before the end of the tax period within which the formation or joining of a tax group is requested.
Assets, liabilities, financial positions of members of a tax group
Transactions between the Parent Company and each Subsidiary that is a member of the Tax Group shall include:
- transactions between two or more subsidiaries that are members of the same tax group; and
- valuation adjustments and provisions in relation to transactions between two or more members of the same tax group.
Relief for pre-grouping tax losses
The amount of pre-Grouping Tax Losses of a Subsidiary that can be used to offset the Taxable Income of the Tax Group in a Tax Period shall be the lesser of the following two amounts:
- the taxable income of the tax group that is attributable to that subsidiary; or
- the tax loss that can be used to reduce the taxable income of the tax group in the relevant tax period under clause (2) of article (37) of the corporate tax law.
Ministerial Decision No. 125 of 2023 on tax group for corporate tax purposes was published on the official website on 22 May 2023.