TAX GROUPS VAT GUIDE

TAX GROUPS VAT GUIDE

A tax group VAT guide called as VATGGR101 was issued to provide guidance for the businesses who are either interested in forming a tax group, adding or removing members from an existing tax group or for the purpose of disbanding a tax group. It discusses in detail the implications of grouping for the purpose of VAT, the eligibility for forming a tax group, the additional criteria for government entities and the methods through which a tax group can be formed and amended.

ELIGIBILITY TO FORM A TAX GROUP

In order to apply for forming a tax group, two or more legal persons must fulfill the following conditions :

  • Each member is required to carry business in any place regularly and independently.
  • Each member must have a legal personality and should be capable of entering into contracts in its own name.
  • Each member must be a resident in the UAE either by way of having its primary or fixed business establishment.
  • Each person must share economic, financial and organizational ties to a sufficient extent and should have the authority to control the members.    

CRITERIA TO BE FOLLOWED BY GOVERNMENT ENTITIES FOR FORMING A TAX GROUP

In order to form a tax group, the government entities are required to adhere to some additional criteria which are as follows :

  • Designated government bodies can form a join a tax group with other designated government  bodies only and not with other government bodies
  • Government bodies which are not designated and have been registered in their own right can form or join a tax group with other legal entities subject to the usual rules of tax grouping.  

FORMING OF A TAX GROUP

In order to establish whether the group is required to or is eligible to register for VAT purposes, it should be necessary to establish whether the VAT registration requirements have been satisfied or not. VAT registration requirements would be satisfied where :

  • Either one prospective member satisfies the relevant registration requirements or
  • If the total value of supplies that have been made or the expenses that have been incurred by the prospective members satisfy the relevant registration requirements or not   

An application to form a tax group will be assessed within 20 business days of the receipt of the application and would come into effect after necessary checks either on :

The first day of the tax period following the tax period in which the application is received or on any other date specified by the authority.

AMENDING A TAX GROUP

  1. ADDING MEMBERS TO A TAX GROUP

New members can be added to a tax group by giving an application to the FTA. subject to the necessary checks, the date of registration of the new member would be effective either on :

The first day of the tax period following the tax period in which the application is received or on any other date specified by the authority.

    2. REMOVING MEMBERS FROM A TAX GROUP

A member can be removed from a tax group by giving an application to the FTA. The representative member is required to inform the FTA within 20 business days if the member ceases to be eligible. Subject to the necessary checks, the date of removal of the new member would be effective either on :

The first day of the tax period following the tax period in which the application is received or on any other date specified by the authority.

    3. CHANGING THE REPRESENTATIVE MEMBER OF A TAX GROUP

The existing representative member of the tax group is required to submit an application to the FTA for appointing a new representative member. Subject to the necessary checks, the date on which the new representative would be treated as such would be :

The first day of the tax period following the tax period in which the application is received or on any other date specified by the authority.

   4. DISBANDING A TAX GROUP

A representative member can disband a tax group at any time by submitting an application to the FTA. Subject to the necessary checks, the date on which a tax group would be disbanded would be :

The first day of the tax period following the tax period in which the application is received or on any other date specified by the authority.

GROUNDS FOR REFUSAL OF APPLICATION

Any application to form, amend or disband a tax group may be refused as a matter of public policy if a significant risk arises to the public revenue as a result of such formation, amendment or disbandment.

An application to add or form members to a tax group can be refused by the FTA on the following grounds :

  • When the applicants fail to meet the criteria for grouping or
  • When the FTA considers that there is a serious risk of tax evasion as a result of that change or
  • When there is a significant reduction in the overall tax would arise as a result of the change
  • When there is a significant increase in the administrative burden on the FTA as a result of the change

An application to remove members from a tax group or disband a tax group would be refused by the FTA on the following grounds :

  • When the FTA considers that there is a serious risk of tax evasion as a result of that approval
  • When any person that remains a related party when he is removed from the tax group would appear to be registrable
  • When there is a significant reduction in the overall tax would arise as a result such approval
  • When there is a significant increase in the administrative burden on the FTA, as a  result, such approval

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