In the UAE, when two or more individuals or companies jointly report VAT returns as a single entity, it is considered as a VAT group or ‘bodies corporate’. Under VAT group reporting, the group will have a single tax registration number (TRN). The VAT returns get filed by the elected representative member of the group as per the VAT registration. The group can conduct transactions and adjustments within itself and can jointly report the VAT returns.
One of the examples for VAT group Registration and reporting is intercompany transactions. When an entity has opted for VAT group registration, two or more entities or individuals will share the same TRN number UAE. Hence, while cross charging intercompany debit and credit notes, there has to be no VAT charged. The VAT group submits one Tax return for the given VAT period for all the transactions made by the group.
Eligibility for VAT group registration
Under the VAT Guide number VATGGR101, issued in May 2018, states various criteria for VAT group registration. The criteria as mentioned below
For forming a VAT group, the individual or company must fall under the business definition. A business in the UAE is an economic activity regularly carried out in the UAE or elsewhere ( one or more reporting periods) and is run independently.
Legal Person Criteria
A person cannot form or join a VAT group unless it falls under the legal criteria. The Legal Criteria is defined as a person or a company that is verified and falls under the decree of the local laws of the emirates. The business or individual must be able to enter and exit from contracts legally under its name.
A natural person criteria
A natural person bound with no legal business criteria cannot form a VAT group or join a VAT group.
The VAT group member must be registered in the UAE by running the fixed, established business and having enough human and technical resources. On the other hand, foreign subsidiaries can also qualify for a VAT group if they display the same presence as the branch company in the UAE.
Criteria for Related Parties (Control Criteria)
Each party from the VAT group must be related to one another by sharing economic, financial, and organisational ties. The companies’ voting rights and market value form a minimum of 50% when added together.
Here are the benefits of VAT group registration
- Simplification of VAT and accounting procedures
- Avoiding duplication of entries in VAT returns filing.
- VAT can be reported on a group level instead of each entity separately reporting it
- It is easier to conduct an intergroup transaction by issuing out of scope VAT Debits, credit notes, or even invoices.
- The process of adding and removing companies within the VAT group is easy, and the representative member can be changed at any time.
How to register for VAT Group in UAE?
One elected member forms the representative member, who is responsible for the VAT returns filing. They can use the allocated TRN number for the group, filling returns under the representative member.
Once you identify as a legal person or entity, a resident of UAE and don’t belong to any other VAT group, you are eligible for forming a tax group.
- First, you will need to log on to the FTA e-service portal and start registering.
- After registering details, you will be provided with a TRN number UAE.
- If you are eligible for Excise Tax, you will need to select the Excise Tax option.
- Click on the “Register as Tax group” option and complete the entire form.
- Ensure all the required documents and details are handy while filling out the application to avoid any refusal from the FTA.
- Add each member that intends to be a part of the VAT group registration.
- Submit the form for approval
- The VAT group registration will show the following status.
- Drafted- i.e. yet to be submitted
- Pending- The details are received by the FTA and are under review
- Resubmitted- There are further details required. Once it is uploaded, it has to be resubmitted.
- Approved- The application for the VAT group is approved.
- Rejected- There are several reasons for the rejection of the VAT group application. You will be provided with a valid reason; if you need VAT consultancy services in UAE, click here.
After the VAT registration in the UAE on a group level, the standard VAT laws apply. VAT registration can help how to calculate VAT in UAE for your VAT group. VAT consultants and qualified Chartered Accountants will help your business with accurate VAT reporting—one of the best accounting firms in the UAE, Vat experts can assist you to benefit from VAT refunds and avoid any VAT penalties.