What is Tax Grouping and how does it work?
WHAT IS TAX GROUPING AND HOW DOES IT WORK?
What is Tax Grouping in the UAE Corporate Tax system? Learn eligibility, benefits, filing process, and key rules. TAXESMAN explains simply.
What Is Tax Grouping and How Does It Work?
What is Tax Grouping and how does it work?
Tax Grouping lets eligible UAE companies elect to be treated as one taxable person for Corporate Tax, with the parent company filing one return for the group.
This matters if you run multiple entities in Dubai, Abu Dhabi, Sharjah, or across the UAE and want simpler compliance, clearer group reporting, and better management of profits and losses across the group.
In this guide, you will learn what Tax Grouping is, who can form a Tax Group, how the filing works, and common mistakes to avoid. Need help assessing whether your structure qualifies? Contact TAXESMAN today.
What Is Tax Grouping Under UAE Corporate Tax?
Tax Grouping (also called a Corporate Tax Group or Tax Group) is an option where a Parent Company and its Subsidiaries can form a Tax Group so they are treated as one taxable person for UAE Corporate Tax purposes.
In practice, this usually means:
- One Corporate Tax return for the group (filed by the parent)
- Group level taxable income calculation
- Specific rules for transactions between group members
If you want to know whether Tax Grouping makes sense for your group, contact TAXESMAN today.
Who Can Form a Tax Group?
This is the key question behind “What is Tax Grouping and how does it work?”
In simple terms, a Tax Group is generally possible when:
- The Parent Company and Subsidiaries are UAE tax resident juridical persons
- The Parent meets strict 95% ownership requirements (share capital, voting rights, and entitlement to profits and net assets)
- The group members share the same financial year
- Certain statuses can restrict eligibility (for example, specific exempt categories or qualifying free zone status)
The FTA Tax Groups guide explains the detail around the voting rights test and how different share classes can be assessed for the 95% voting rights condition.
If you have a holding company structure, mixed share classes, or intermediate subsidiaries, TAXESMAN can confirm eligibility properly.
How Does Tax Grouping Work in Day-to-Day Compliance?
Once formed, Tax Grouping changes how you file and who is responsible.
Who files and pays Corporate Tax for a Tax Group?
The Parent Company is typically responsible for:
- Filing the Corporate Tax return for the Tax Group
- Paying Corporate Tax due for the whole group
If you want TAXESMAN to manage the group filing process end to end.
How are transactions between group companies treated?
Tax Group rules include specific treatment for transactions between members, including eliminations and adjustments when computing the group taxable income.
This matters if you have:
- Intercompany management fees
- Intragroup sales of goods
- Intragroup services
- Asset transfers between group entities
If you have many intercompany transactions, TAXESMAN can help you keep your records clean and group-ready.
What Are the Benefits of Tax Grouping?
Businesses usually explore Tax Grouping for three main reasons:
1) Simpler filing
Instead of multiple filings, you can have a single group return and one point of responsibility through the parent company.
2) Better use of losses across the group
The UAE Corporate Tax framework includes rules for tax losses and relief, and the Tax Group regime includes specific treatment for pre-grouping losses and how losses are used within the group in later periods.
If one entity makes a loss and another makes a profit, this can matter a lot for cash flow and compliance planning. TAXESMAN can review your structure and explain what is practical in your case.
3) More consistent group reporting
Tax Grouping encourages consistent accounting, aligned financial year-end, and clearer group level reporting, which helps many SMEs and growing groups stay organised.
If your group reporting is messy today, TAXESMAN can help you standardise it.
How Do You Apply for Tax Grouping?
Tax Grouping is not automatic. You generally need to apply.
Ministerial Decision No. 301 of 2024 covers operational details, including timing and process points like submitting an application before the end of the relevant tax period when formation or joining is requested.
If you want to avoid errors in the application process, TAXESMAN can prepare the required steps and review your eligibility before submission.
Dubai, Abu Dhabi, Sharjah Examples of Tax Grouping
Example 1: Dubai holding company with 2 subsidiaries
A Dubai holding company owns 100% of two UAE subsidiaries (same year-end).
- They may be able to form a Tax Group if all conditions are met
- The parent files one Corporate Tax return for the group
Example 2: Abu Dhabi parent with a free zone subsidiary
A UAE resident parent owns a free zone company that may be a qualifying free zone person.
- Eligibility for Tax Grouping can be restricted depending on status and conditions
Example 3: Sharjah group with different year-ends
A Sharjah group has two companies with different financial year ends.
- A Tax Group generally requires the same financial year
TAXESMAN can help you plan the cleanest way to align year-ends and reduce compliance friction.
Common Mistakes With Tax Grouping
If you are searching “What is Tax Grouping and how does it work?”, avoid these common problems:
- Assuming a group can form without meeting the strict 95% tests (including voting rights and profit entitlement)
- Forgetting the same financial year requirement
- Applying too late (timing matters under the ministerial decision)
- Not keeping proper support for eliminations and intragroup transactions
If you want to do this safely, TAXESMAN can review your structure before you elect Tax Grouping.
What Is Tax Grouping and How Does It Work?
To recap, what is Tax Grouping and how does it work?
Tax Grouping allows eligible UAE companies in a parent-subsidiary structure to be treated as one taxable person for Corporate Tax, with the parent generally filing one return and applying group rules for income, losses, and intragroup transactions.
If you are managing multiple UAE entities and want to reduce complexity while staying compliant, let TAXESMAN assess whether Tax Grouping is right for you and handle the process end to end.
FAQs: What Is Tax Grouping and How Does It Work?
What is Tax Grouping in UAE Corporate Tax?
It is an election where eligible parent and subsidiary companies are treated as one taxable person for Corporate Tax.
What is the 95% condition for Tax Grouping?
The parent generally must meet 95% tests across ownership, voting rights, and entitlement to profits and net assets, with detailed interpretation in FTA guidance.
Who files the Corporate Tax return for a Tax Group?
The parent company typically files and pays for the group.
Do all group companies need the same financial year?
Generally yes, the tax group requires the same financial year.
Is Tax Grouping the same as VAT grouping?
No. VAT grouping is a separate concept under VAT law, with its own guidance and rules.