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What is Group Relief?

Group relief is a relief from Corporation Tax. Businesses are able to create tax groups under the UAE corporate tax framework, which will go into force in June 2023.

The basic idea of group relief is to tax the economic unit - i.e a company, that gives rise to profits over a corresponding period. Similar to how an individual with various sources of income can be taxed, the income of a business’s various revenue streams can be grouped together and taxed. Companies create tax groups to restrict or fence responsibilities, which optimizes the expense of their total tax compliance. This offset would be subject to the group loss utilisation rules.

For example, a company with profits of AED 1,000 wholly owns a subsidiary which has losses of AED 100. In economic terms, there is one profit-making unit (the group) and it has profits of AED 900. Group relief is designed to ensure that the group pays tax on AED 900. 

Scope of Group Relief 

Group relief allows the transfer of losses between companies and aTax Group is treated as a single taxable person represented by the Parent Company. The companies are still treated as separate legal entities for tax, and the framework operates on that basis. 

The company which claims the losses of its internal companies is called a ‘Claimant Company’. The companies that ‘surrender’ their losses to the Claimant Company are called ‘Surrendering Companies’.

Criteria for Group Relief 

Businesses that are liable to UAE corporate tax must determine if they are properly qualified to form a tax group.  A business must meet specific conditions set out by the UAE Ministry of Finance (MoF) in order to establish a corporate tax group.

  • The tax group’s members should all follow the same fiscal year.
  • The parent organisation must own at least 95% of the voting rights and share capital of its subsidiaries.
  • Especially when all of the group members are UAE residents, companies can create a tax group.
  • Neither the Parent Company nor the Subsidiary is an Exempt Person or a Qualifying Free Zone Person
  • If a subsidiary is indirectly held by the parent firm and other subsidiaries possess at least 95% of its shares, the subsidiary could join a tax group or if it is a UAE branch of the parent firm or one of its subsidiaries.

Requirements for Group Relief 

  • At least 75% of UAE group enterprises are held collectively.
  • No loss transfers from businesses that are immune or gain access to the 0% Free Zone CT system are permitted.

The overall tax loss offset may not exceed 75% of the applicable period’s taxable income of the entity obtaining the transferred losses. Balance tax losses can be carried forward indefinitely, provided certain conditions are met.

UAE tax groups would be able to file a single return for the entire group.

Key contact

Rayhan Aleem, Founder and Managing Partner, Alpha Pro Partners
Rayhan Aleem
Managing Partner of Alpha Pro Partners

Corporate Tax for Small Business

From the 1st of June 2023, the corporate tax rate will be 9% of net profits made by businesses in the UAE.

In order to support small businesses and start-ups, the corporate tax rate will be 0% of profits is up to the threshold of AED 375,000.

Small Business Compliance Checklist

The new UAE Corporate Tax regime will require businesses to have comprehensive accounting and bookkeeping in place.

Our consultants and partners will work with you to support your compliance requirements using our comprehensive checklist.

Corporation Tax Introduction

Corporate Tax (CT) is a direct tax levied on the net income or profit of corporations and other businesses.

Do I need to Comply with Transfer Pricing Rules?

Transfer pricing refers to the prices of goods and services that are exchanged between companies under common control.

Do I need to Pay Foreign Tax and Double Taxation?

Under the upcoming UAE Corporate Tax regime, foreign companies will be subject to the corporate tax rate of 9% on annual taxable income exceeding AED 375,000.

Corporate Tax application on Freezone companies

On 09 December 2022, the Ministry of Finance released Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This law included the treatment of businesses on freezones as well as the mainland.

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Key Highlights on UAE Corporation Tax 

  • UAE Corporation tax rate one of the lowest within the GCC region and along major economies
  • Tax applicable on profits above AED 375,000 and not below that
  • Standard Corporate Tax Rate is 9%
  • CT effective from 1 July 2023 from financial year 2023 ending on 30 June 2024
  • The financial year for businesses starting 1 January 2023 and ending 31 December 2023 will become subject to the tax beginning from 1 January 2024
  • Tax incentives offered to freezone businesses complying with all regulatory requirements will remain
  • Capital gains and dividends received by the companies in UAE from their qualifying shareholdings are also exempt from paying CT.
We care about your business

We Care

You have put your blood, sweat and tears into your business and you deserve a partner who understands. Our promise is that we will treat your business like our own.

Xero experts

We are Xero Platinum Partners and are experts in using Xero. Xero is continuously making improvements and enhancements to its software and we believe it's the best accounting software available for your operational and accounting needs.

Xero Accounting Software Experts
Supporting your business with accounting, bookkeeping, and software implementation tasks

Supporting your Growth

In 2021, we supported our clients to grow their revenues by 98%. We work with 100’s of diversified clients and advise them on sustainable growth strategies.

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