Three UAE-resident companies each have a fixed establishment in the UAE. Company X holds a 60% voting interest in Company Y and a 55% voting interest in Company Z, and no other party controls any of the three. All three companies want to register together as a single VAT Tax Group. Under Article 14 of Federal Decree-Law No. 8 of 2017, is this permitted?
- Yes, because each company has a UAE establishment, the companies are related parties through Company X's controlling interest in the other two, and Company X, as the controlling party, satisfies the requirement that one of the persons control the others
- No, because VAT Tax Group registration requires 100% common ownership between every member, unlike the lower threshold used for a Corporate Tax Group under Article 40
- No, because a VAT Tax Group can only ever consist of exactly two members, a controlling company and a single subsidiary
- Yes, but only if all three companies also elect to form a Corporate Tax Group under Article 40 at the same time, since UAE VAT Law treats the two group regimes as mutually conditional
Why A? And why not the others?
Correct answer: A. Yes, because each company has a UAE establishment, the companies are related parties through Company X's controlling interest in the other two, and Company X, as the controlling party, satisfies the requirement that one of the persons control the others
Article 14 permits two or more persons conducting business to register as a VAT Tax Group where each has a place of establishment or fixed establishment in the UAE, they are related parties, and one or more of them control the others; here all three companies have a UAE fixed establishment, Company X's majority voting interests make it a related party to both Company Y and Company Z, and Company X's control over both satisfies the control condition, so registration as a single VAT Tax Group is permitted. The option requiring 100% common ownership is wrong because Article 14's control test does not demand full ownership, only related-party status plus control by one or more members, which majority voting interests such as 60% and 55% can satisfy. The option limiting a VAT Tax Group to exactly two members is wrong because Article 14 allows any number of related, commonly controlled persons with a UAE establishment to register together. The option requiring a simultaneous Corporate Tax Group election is wrong because VAT grouping under Article 14 and Corporate Tax grouping under Article 40 of the Corporate Tax Law are separate regimes with independent conditions, and electing one is not conditional on electing the other.
Source: UAE Federal Decree-Law No. 8 of 2017, Article 14 (Tax Group)