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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. It does not go as far as treating a group of companies as if they were a single company for tax purposes. 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.
  • A free zone business that enjoys the 0% corporate tax rate or an exempt person can be a part of a tax group.
  • 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
Managing Partner of Alpha Pro Partners

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Corporation Tax Introduction

All businesses and individuals conducting business activities under a commercial license in the UAE will be subject to Corporation Tax.

Do I need to Comply with Transfer Pricing?

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

Key Corporate Tax Considerations for Small Business

On the 1st of June 2023, the corporate tax rate will be 9% of the net profit made by businesses in the AUE. In order to support small businesses and start-ups, the corporate tax rate will be ‘0’ % if the net profit is up to 3,75,000 AED.

Small Business Compliance Checklist

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

Go back to Corporation Tax Home

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

What we offer

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.

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