What criteria must be followed to form a tax group?
The following eligibility criteria must be followed for the FTA to grant permission to form a tax group:
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Business criteria Every individual member of a tax group must be running a regular business that can be located in any place and is independent of its employees.
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Legal person criteria Every individual member of a tax group must be a legal person who has a legal identity of their own and can enter into contracts under their own name.
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Establishment criteria Every individual member must be a resident of the UAE. This can be accomplished by having either a primary business establishment or a fixed establishment in the UAE. According to the FTA, a primary business establishment is the place where important management decisions that influence a business are taken. A fixed establishment is another place where necessary human and technical resources are provided to run a business.
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Related parties and control criteria Every individual member must be related to the others, meaning that they share economic, financial, and organisational ties. Economic ties mean that there is mutual interest amongst the members in the proceeds of the business, financial ties mean that one member’s business benefits another member’s business, and organisational ties mean that the businesses are located in the same property.
Within a tax group, one member must have control over the rest. Control can exist during the following situations:
- When one or more legal person in a formal partnership has at least one of the following:
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At least 50% voting interest in all the companies owned by the legal persons of the partnership, when put together.
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At least 50% market value interest in all the companies owned by the legal persons of the partnership, when put together.
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Control by some other way.
- When two or more legal persons of a partnership are associated with another legal person, who is from the same partnership.