Corporate Tax Grouping in the UAE: Strategy, Compliance & Practical Insights

Introduction 

With the introduction of the UAE Corporate Tax regime under Federal Decree-Law No. 47 of 2022, businesses have been presented with a transformative opportunity: Corporate Tax Grouping. This mechanism allows a parent company and its eligible subsidiaries to be treated as one single taxable person, enabling a consolidated tax approach. 

Introduced for tax periods beginning on or after 1 June 2023, Corporate Tax Groups (CT Groups) simplify compliance, optimize tax outcomes, and reduce administrative burdens provided businesses meet the strict eligibility criteria and maintain ongoing compliance as required by UAE law. 

This article explores the legal framework, eligibility rules, compliance requirements, recent regulatory changes, and key strategic considerations for forming and managing a CT Group in the UAE. 

Legal Framework & Governing Provisions 

Corporate Tax Grouping is primarily governed by: 

• CT Law: Federal Decree-Law No. 47 of 2022  
  - Article 40 – Formation of a Tax Group 
  - Article 42 – Determination of Taxable Income for Groups 

• Ministerial Decisions  
  - MD 114 (2023) – Aggregated financial statement rules 
  - MD 125 (2023) & MD 301 (2024) – Grouping mechanics 
  - MD 84 (2025) – Mandatory audit for tax groups 
  
  
• FTA Decision No. 7 of 2025 – Framework for Aggregated Financial Statements
   

• Public Clarification CTP007 – Elimination rules, audit requirements, adjustments & clawbacks 

Who Can Form a Corporate Tax Group? 

Under Article 40, a CT Group may be formed when: 

• A UAE-resident parent company owns at least 95% of:   
  - Share capital 
  - Voting rights 
  - Rights to profits and net assets 

• All entities are UAE tax-resident juridical persons.

Special considerations: 

• Foreign companies may be included only if their POEM is in the UAE and they can prove non-tax residency elsewhere. 
  

• Natural persons cannot join a CT Group. 
  

• Exempt Persons and Qualified Free Zone Persons (QFZPs) are not eligible. 
  

Dual residency is a high-risk area; absence of proper documentation can lead to FTA rejection. 

 
Eligibility Conditions (All Nine Must Be Met) 

To form and continue as a CT Group, the following conditions must be satisfied at all times: 

1. All members are juridical persons. 
   

2. All are UAE tax residents. 
   

3. Parent owns ≥95% share capital. 
   

4. Parent owns ≥95% voting rights. 
   

5. Parent holds ≥95% rights to profits and net assets. 
   

6. No member is an Exempt Person. 
   

7. No member is a QFZP. 
   

8. All share the same financial year. 
   

9. All use the same accounting standards (IFRS or IFRS for SMEs). 
   

The FTA may cancel the group if even one condition fails. 

Application Process & Required Documentation 

The parent company initiates the CT Group application through the FTA portal. Key documentation includes: 

• Valid trade licenses 
  

• Shareholding proof confirming ≥95% ownership 
  

• Group structure chart 
  

• Confirmation of financial year 
  

• Accounting standards confirmation 
  

• Board resolution approving the formation 
  

• CT registration certificates 
  

Special cases require: 

• Foreign tax residency certificates (for dual residents) 
  

• POEM proof for foreign-incorporated entities 
  

• Pre- and post-merger documentation for restructuring cases 
  

Applications must be submitted before the end of the intended tax period. 

Responsibilities of the Parent Company & Members 

Parent Company – Representative Taxable Person 

The parent becomes legally responsible for: 

• Filing one unified CT return 
  

• Filing audited aggregated financial statements 
  

• Maintaining group-wide records 
  

• Ensuring continuous eligibility 
  

• Responding to FTA audits 
  

• Paying CT liabilities for the entire group 
  

Joint & Several Liability 

Although the parent is the representative, every member is jointly and severally liable for the group's entire tax liability. 

Subsidiary Responsibilities 

Each member must: 

• Maintain proper records 
  

• Follow same accounting standards 
  

• Align financial years 
  

• Disclose intra-group transactions 
  

• Provide complete data to the parent 
  

Advantages of CT Grouping 

1. Single CT Return Filing 
   

2. Intra-group Eliminations (Article 42) 
   - Income, expenses, unrealised gains eliminated 

3. Loss Pooling 
   - Post-group losses may offset group profits 

4. Transfer Pricing Relief 
   - No TP documentation required for intra-group transactions

5. Lower Administrative Burden 
   

These benefits make grouping a strategic option for large corporate structures. 

Disadvantages & Risks 

1. Joint & Several Liability 
   

2. Mandatory Aggregated Financial Statements – complex and specialized 
   

3. 0% Threshold Applies at Group Level 
   

4. Eligibility Can Be Lost Easily 
   

5. Exempt Persons, QFZPs, Natural Persons cannot join 
   

6. M&A transactions may break 95% tests 
   

Before forming a CT Group, businesses should perform a cost–benefit analysis. 

Compliance, Monitoring & Reporting Requirements 

Ongoing Compliance 

• Continuous monitoring of 95% tests 
  

• Monthly review of ownership changes 
  

• Alignment of accounting standards 
  

• Ensuring no member becomes exempt or a QFZP 
  

• Maintaining inter-company reconciliations 
  

The FTA may reassess eligibility at any time. 

Reporting Requirements 

1. Corporate Tax Return – filed within 9 months of financial year-end 
   

2. Transfer Pricing Disclosure Form 
    Group-level thresholds: 
   - AED 40M (related-party transactions) 
   - AED 4M per category 
   - AED 500k for connected persons 

3. Aggregated Financial Statements 
   - Mandatory for all CT groups 
   - Must follow FTA Decision No. 7 of 2025 

4. CT Deregistration 
   - Possible only if the entire group ceases business

Audit Requirements 

Effective 1 January 2025, all CT Groups must file: 

• Audited aggregated financial statements 
  

• Special-purpose audit based on CTP007 guidance 
  

Standalone audits of individual members are not required unless they fall under separate regulatory obligations. 

Recent Changes (2024–2025) 

Key regulatory updates include: 

• Mandatory audit for all CT Groups 
  

• Special-purpose aggregated FS replacing conventional consolidated FS 
  

• Updated elimination and valuation rules 
  

• Introduction of the 2-year clawback rule  

• Strengthened TP disclosure thresholds  

• TRC no longer available at group level 
  

These updates significantly raise compliance obligations. 

Practical Examples (FTA-based) 

Examples cover: 

• Loan impairment reversals 
  

• Asset transfers with depreciation adjustments 
  

• Member exiting after 2 years (no clawback) 
  

• Member exiting within 2 years (clawback applies) 
  

• Dual-residency entity rejected for insufficient proof 
  

These examples illustrate the FTA’s strict approach to accuracy and documentation. 

Key Takeaways for Businesses 

1. Strict Eligibility - Only UAE-resident juridical persons qualify. 
   

2. 95% Ownership Tests Must Be Maintained at all times.  

3. Only One CT Group Membership Allowed per entity. 
   

4. Loss Offsetting Allowed under specific rules. 
   

5. SBR Threshold Applies to Consolidated Revenue. 
   

6. TRC Issued Only at Member Level. 
   

7. Cessation Applies to Entire Group, not individual members. 
   

Strategic Recommendations for Management 

• Do a cost-benefit assessment before forming a CT group. 
  

• Maintain a Tax Group Dossier including structure, accounting alignment, and residency proofs. 
  

• Reconcile intercompany transactions monthly. 
  

• Strengthen internal tax controls and monitoring dashboards. 
  

• Evaluate restructuring carefully to avoid breaking the 95% tests. 
  

• Seek FTA clarifications in writing for ambiguous cases. 
  

Conclusion 

Corporate Tax Grouping in the UAE represents a sophisticated mechanism designed to simplify compliance, improve tax efficiency, and streamline reporting for complex business groups. However, it requires disciplined governance, accurate documentation, and continuous monitoring to remain compliant. 

Businesses that understand and strategically apply the CT Group framework under UAE law can significantly optimize their tax position while minimizing risk. 

Disclaimer: Content posted is for informational and knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.