Case Study – Group of Companies Filing

Introduction

The UAE Corporate Tax regime, effective from 1 June 2023, allows groups of companies to file under a group structure subject to specific conditions. Group filing enables tax consolidation, loss relief, and simplified compliance. However, it also requires careful structuring, eligibility checks, and compliance with Federal Tax Authority (FTA) rules.

It presents a case study illustrating how a group of companies in the UAE may approach corporate tax filing, highlighting calculations, adjustments, and benefits.

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Understanding Group Filing in the UAE

Eligibility Conditions for Group Filing:

• Parent company must own at least 95% of shareholding, voting rights, and profits of subsidiaries.

• All group members must be UAE resident entities (or have a UAE branch).

• None of the companies should be an exempt person (e.g., government entity) or a Qualifying Free Zone Person (QFZP) that has opted for 0% regime.

• Same financial year and accounting standards must be applied across the group.

When approved, the group files one consolidated corporate tax return with the FTA.

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Case Study: XYZ Group of Companies

Group Structure:

• XYZ Holdings LLC (Parent Company – 100% owner)

• XYZ Trading LLC (Subsidiary – wholesale business)

• XYZ Manufacturing LLC (Subsidiary – factory operations)

• XYZ Services LLC (Subsidiary – back-office support)

Financial Year: 1 Jan 2024 – 31 Dec 2024

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Step 1: Individual Profits Before Group Filing

• XYZ Trading LLC – Net Profit: AED 2,000,000

• XYZ Manufacturing LLC – Net Profit: AED 1,200,000

• XYZ Services LLC – Net Loss: AED (600,000)

Total Group Net Profit (before adjustments) = AED 2,600,000

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Step 2: Tax Adjustments

Non-Deductible Expenses (added back):

• Trading LLC: AED 50,000 (fines and non-approved donations)

• Manufacturing LLC: AED 30,000 (50% entertainment expenses)

Exempt Income (deducted):

• Trading LLC: AED 200,000 (dividends from a UAE subsidiary)

Adjusted Group Profit = AED 2,480,000

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Step 3: Loss Relief within Group

• Services LLC has a tax loss of AED (600,000).

• This can be offset against taxable income of other group companies.

Adjusted Taxable Income after Loss Relief = AED 1,880,000

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Step 4: Applying Corporate Tax Rates

• 0% on first AED 375,000 = AED 0

• 9% on remaining AED 1,505,000 = AED 135,450

Final Group Corporate Tax Payable = AED 135,450

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Benefits of Group Filing

1. Loss Utilization

o Services LLC’s tax loss is fully utilized, reducing overall taxable income.

2. Simplified Compliance

o One tax return for the group instead of multiple filings.

3. Better Cash Flow Management

o Tax payments are optimized at the group level.

4. Alignment with International Practices

o Encourages consolidated financial reporting and transparency.

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Key Considerations & Challenges

• Transfer Pricing (TP): Even within the group, related-party transactions must comply with the arm’s length principle.

• Documentation: Local File, Master File, and consolidation workings must be maintained.

• Exclusions: Free Zone entities benefiting from 0% tax cannot be included in the group.

• FTA Approval: Group formation requires formal application and approval from the FTA.

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Conclusion

Group filing under UAE Corporate Tax can provide significant tax savings and compliance efficiencies, especially for diversified groups with both profitable and loss-making entities. As shown in the case of XYZ Group, consolidating results reduced overall taxable income and minimized tax payable.

However, businesses must carefully review eligibility, maintain strong documentation, and ensure Transfer Pricing compliance to maximize the benefits of group taxation.

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✍️ Prepared by Sheikh Anwar Accounting and Auditing LLC – Registered Auditor with the Ministry of Economy (Auditor Entry No. 5817, Company Entry No. LC4695-01). We specialize in Corporate Tax, Transfer Pricing, VAT, and AML Compliance, assisting UAE businesses with group structuring, tax computations, and FTA filings.

📧 Contact us: info@sa-auditors.com

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