Tax Groups - Cost & Risk Management of VAT Compliance and Reporting
Under the UAE Executive Regulations, registering as a Tax Group can provide significant benefits to businesses reducing the complexities and compliance costs for VAT reporting.
Although the term ‘Group’ implies this provision applies to solely large companies, the UAE economy hosts many businesses that are connected as ‘related parties’ where either one person controls the others, or two or more persons form a partnership and control the others. Therefore, Grouping can serve companies of various sizes and recognizes there are many companies operating in the UAE economy that are ‘related parties’.
The key benefit of Grouping being supplies made between members of a VAT group are disregarded from VAT (i.e. no VAT is due on the supplies) and treated as Out of Scope for VAT. The companies registered as under the same VAT Group will file a Consolidated VAT return with the same reporting period and filing can share a single VAT reporting period and submission deadline.
This is a major benefit if there are several parties where if ungrouped, they would be obliged to report and file VAT returns under Company registrations individually, manage and pay VAT for each company as per its filing deadlines and charge VAT on intra-group supplies, leading to an amplified impact on cashflow and management overheads.
In our paper 'Operating as a Tax Group' , we share the challenges and approaches to improve operating as a Tax Group to minimize cost and risks.