VAT group: what it means in UAE tax.

What vat group means

Also called: Tax group, VAT grouping.

A VAT group, called a Tax Group in the law, is a single VAT registration shared by two or more legal persons that are closely connected. Once registered, the group is treated as one taxable person acting through a representative member. The group files one return, and supplies between members may be disregarded for VAT.

To qualify, each member must have a place of establishment or fixed establishment in the UAE, the members must be related parties, and one or more of them must control the others. For grouping, the Executive Regulation treats two legal persons as related where one or more persons together hold 50% or more of the voting interests or market value interests in each, or control each by other means. Only legal persons can join; an individual trading on his own account cannot.

Grouping suits SMEs with a trading company and a sister services or logistics company that charge each other regularly, because it removes internal invoicing for VAT and reduces the number of returns. The trade-off is shared risk: every member remains jointly and severally liable for the group's VAT.

How it works

• The representative member applies on behalf of the group. The FTA should decide within 20 business days of receiving the application.
• If approved, grouping normally takes effect from the first day of the tax period after the one in which the application was received, or from another date the FTA sets.
• All output tax and input tax of the members is treated as that of the representative member, and imports by a member are treated as imports by the representative member.
• The FTA can refuse a group where it would enable evasion or significantly reduce revenue, and it can register related parties as a group itself where they have not applied.
• Members can be added or removed on request, and the FTA can also make changes or deregister the group in the cases the Executive Regulation sets.

Worked example

One owner holds all the shares in a Dubai trading company and a Dubai logistics company. The logistics company charges the trading company AED 300,000 a year for deliveries. Both register as a VAT group.

Trading company sales to outside customers	AED 2,000,000
Logistics company sales to outside customers	AED 1,500,000
Delivery charges between the two companies	AED 300,000
Output tax at 5% on outside sales	AED 175,000
Output tax on the internal delivery charges	AED 0

The group accounts for VAT only on sales to outside customers, in one return, and the internal charges drop out.

Common mistakes

• Assuming any business owned by the same person can join: members must be legal persons with a place of establishment or fixed establishment in the UAE.
• Forgetting that every member is jointly and severally liable for the whole group's VAT, including debts from a member that is later sold.
• Not telling the FTA when a company is bought, sold or restructured, so the group registration no longer matches the real control position.

The law

• Federal Decree-Law No. 8 of 2017 on Value Added Tax, Article 14 (Tax Group)
• Cabinet Decision No. 52 of 2017 (VAT Executive Regulation), Article 9 (Related Parties), Article 10 (Registration as a Tax Group), Article 11 (Amendments to a Tax Group) and Article 12 (Effect of registration as a Tax Group)

Frequently asked questions

Does a VAT group also create a Corporate Tax group?

No. A VAT group is a VAT registration only. Corporate Tax grouping has separate conditions and a separate application, covered on the corporate tax group page.

How quickly does grouping take effect?

The FTA should decide within 20 business days. An approved group usually starts on the first day of the tax period after the application was received, unless the FTA sets another date.

Related terms

Related party · Corporate Tax group · Tax registration number · VAT tax period. See every term in the UAE tax glossary.

Need help with VAT returns? See our VAT returns service.