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Tax group: formation and conditions

Applies
FY2024 onwards
Reviewed
Rule
UAE-CT-GROUP-2024.1
By

What are the conditions to form a UAE tax group?

A resident parent owning 95% of resident subsidiaries' capital, votes and profits, none exempt or a QFZP, all on one year end and one standard.

Per Federal Decree-Law No. 47 of 2022, Article 40, Tax Group

A Resident Person, as Parent Company, can apply to the Authority to form a Tax Group with one or more Resident Subsidiaries where all are juridical persons not treated as resident elsewhere under a tax treaty, the Parent Company owns at least the published minimum of the Subsidiary's share capital, holds at least that minimum of its voting rights and is entitled to at least that minimum of its profits and net assets — each directly or indirectly — neither is an Exempt Person, neither is a Qualifying Free Zone Person, both have the same Financial Year, and both use the same accounting standards, continuously throughout the Tax Period. Subsidiaries of a Government Entity holding that interest may group without it, on the conditions of FTA Decision No. 12 of 2023. A Tax Group is treated as a single Taxable Person represented by the Parent Company; the Parent Company and each Subsidiary are jointly and severally liable for the group's Corporate Tax.

Eligibility to apply, not formation. Article 40(3) requires the Parent Company and each Subsidiary to apply, and Article 41 dates the formation from the Tax Period specified in the application or determined by the Authority. What comes with membership is not optional: single-Taxable-Person treatment, the Parent Company carrying the obligations, and joint and several liability for the group's Corporate Tax.

The conditions, the alternative route, and what membership brings

40(1) — every one of these must be met

  • (a) The Resident Persons are juridical persons — and, under MD 301 of 2024 Article 3, neither is treated as resident in another country under a tax treaty in force in the State
  • (b) The Parent Company owns at least the published minimum of the Subsidiary's share capital, directly or indirectly through one or more Subsidiaries
  • (c) The Parent Company holds at least that minimum of the voting rights in the Subsidiary, directly or indirectly
  • (d) The Parent Company is entitled to at least that minimum of the Subsidiary's profits and net assets, directly or indirectly
  • (e) Neither the Parent Company nor the Subsidiary is an Exempt Person
  • (f) Neither is a Qualifying Free Zone Person
  • (g) The Parent Company and the Subsidiary have the same Financial Year
  • (h) Both prepare their financial statements using the same accounting standards

Three ownership tests, not one

Share capital, voting rights, and entitlement to profits and net assets are measured separately. They are commonly met together and commonly assumed to be one test — but tracking shares, a shareholders' agreement or a preference class can satisfy one and fail another.

40(2) — the Government Entity route

Subsidiaries in which a Government Entity directly or indirectly owns at least the published interest, as measured in (b), (c) and (d), can form a Tax Group without it. FTA Decision No. 12 of 2023 sets the conditions: the Subsidiaries meet every Article 40(1) condition; the Government Entity is not a member; a Subsidiary that is itself an Exempt Person is not a member; and the Government Entity appoints one Subsidiary as the group's representative, which makes the application. The Exempt Person condition is therefore NOT relaxed for the members themselves.

40(3)–(4) — a Tax Group is formed by application

  • The application is made to the Authority by the Parent Company and each Subsidiary seeking to become members
  • A Tax Group so formed is treated as a single Taxable Person, represented by the Parent Company
  • Article 41 dates the formation, or a Subsidiary joining, from the Tax Period specified in the application or any other period the Authority determines

Ministerial Decision No. 301 of 2024 — timing and continuity

  • The Article 40(1) conditions must be met continuously throughout the Tax Period (Article 2(1)); 'share capital' is the nominal issued and paid-up capital (Article 2(2))
  • The application to form or join must be submitted before the end of the Tax Period in which formation or joining is requested (Article 5(1)); a newly established Subsidiary may join from incorporation (Article 5(5))
  • A member that stops meeting the conditions leaves from the beginning of that Tax Period (Article 41(3)), and the group must notify the Authority within 20 business days (Article 12)
  • MD 301 of 2024 applies to Tax Periods commencing on or after 1 January 2025; MD 125 of 2023 applies before

40(5)–(8) — what membership brings

  • The Parent Company complies with the payment, registration and return obligations on behalf of the Tax Group
  • The Parent Company and each Subsidiary are jointly and severally liable for the Corporate Tax Payable by the group for the periods in which they are members
  • That joint and several liability can be limited to one or more members for a Tax Period following approval by the Authority
  • Each remains responsible for complying with the withholding provisions of Article 45 in its own right

40(9)–(13) — joining, leaving and ceasing

  • A Subsidiary joins an existing group on application by the Parent Company and that Subsidiary
  • It leaves on the Authority's approval of an application, or where it no longer meets the Clause 1 conditions
  • The group ceases on the Authority's approval of an application by the Parent Company, or where the Parent Company no longer meets the conditions
  • The Parent Company can apply to be replaced without the group discontinuing, where the new Parent Company meets the conditions or is the universal legal successor of the former one
  • The Authority may at its discretion dissolve a Tax Group or change its Parent Company on the information available to it

Article 42 — how the group's Taxable Income is computed

  • The Parent Company consolidates the members' results, eliminating transactions between members (including valuation adjustments and provisions — MD 301 of 2024, Article 6)
  • A joining Subsidiary's pre-Grouping Tax Losses may be used only against the group income attributable to it, subject to Articles 37 and 39
  • Losses stay with the group when a Subsidiary leaves, except its unutilised pre-Grouping losses
  • An intra-group transfer is clawed back if the transferor or transferee leaves within two years (Article 42(9))
  • The group prepares consolidated financial statements; audited special purpose statements are required as FTA Decision No. 7 of 2025 specifies

Order of testing

  1. 1

    Inputs requiring your determination

    Any input a person must decide and has not decided stops the computation. An undecided input is never read as a no.

  2. 2

    Each condition of Article 40(1), in the article's order

    The first condition not met is reported and no further condition is tested. The three ownership measures are tested separately, and a failure on one says so — meeting another does not help.

  3. 3

    Article 40(2) — Government Entity ownership

    Where a Government Entity holds at least the published interest, the Exempt Person condition — and only that condition — is read subject to Clause 2, whose own conditions the Authority prescribes and this rule does not encode.

  4. 4

    Every condition of Article 40(1)

    Where all are met, the Persons are eligible to apply. The result says what applying brings, including joint and several liability.

Examples

Illustrative scenarios — ours, not the authority’s — each computed live by this rule. Change any fact and the outcome is the rule’s, not a hand-written answer.

A wholly owned resident subsidiary

A UAE holding company owning 100% of the share capital, voting rights and profit entitlement of a UAE subsidiary, same year end, same standards, neither exempt nor in a free zone.

Computed

Every condition of Article 40(1) is met as computed, so the Parent Company and the Subsidiary are eligible to apply. A Tax Group is formed by application, not by meeting the conditions: Article 40(3) requires the Parent Company and each Subsidiary to apply to the Authority, and Article 41 dates the formation from the Tax Period specified in that application or determined by the Authority. Ministerial Decision No. 301 of 2024 requires the application before the end of the Tax Period in which formation is requested, and the conditions to be met continuously throughout each Tax Period; a member that stops meeting them leaves from the beginning of that period (Article 41(3)), and the group must notify the Authority within 20 business days. A Tax Group is treated as a single Taxable Person represented by the Parent Company (Article 40(4)). The Parent Company complies with the payment, registration and return obligations on behalf of the group (Article 40(5)); the Parent Company and each Subsidiary are jointly and severally liable for the group's Corporate Tax for the periods in which they are members, which the Authority may limit on approval (Article 40(6) and (7)); and each remains responsible for the withholding obligations under Article 45 in its own right (Article 40(8)). Based on the facts you supplied.

Decided by the every condition of article 40(1)

Enough share capital, not enough voting rights

A subsidiary in which the parent holds 97% of the share capital and profit entitlement but, under a shareholders' agreement, only 80% of the voting rights.

Computed

The Persons are not eligible to apply to form a Tax Group as computed: Article 40(1)(c) requires that the Parent Company holds at least the published minimum of the voting rights in the Subsidiary, directly or indirectly, and that condition is not met on the facts you supplied. Article 40(1) requires all of its conditions, so no further condition is reported. The interest held is 80% against a published minimum of 95% for FY2026. Article 40(1) measures share capital, voting rights and entitlement to profits and net assets separately, so meeting one does not meet another.

Decided by the condition 40(1)(c)

Enough capital and votes, a preference class taking the profits

The parent holds 100% of the ordinary share capital and votes, but a preference class leaves it entitled to only 70% of profits and net assets.

Computed

The Persons are not eligible to apply to form a Tax Group as computed: Article 40(1)(d) requires that the Parent Company is entitled to at least the published minimum of the Subsidiary's profits and net assets, directly or indirectly, and that condition is not met on the facts you supplied. Article 40(1) requires all of its conditions, so no further condition is reported. The interest held is 70% against a published minimum of 95% for FY2026. Article 40(1) measures share capital, voting rights and entitlement to profits and net assets separately, so meeting one does not meet another.

Decided by the condition 40(1)(d)

Subsidiaries of a Government Entity

Two taxable companies wholly owned by a Government Entity group without it, one appointed as representative. The Government Entity stays outside the group, and neither Subsidiary is itself exempt.

Computed

Every condition of Article 40(1) is met as computed for Subsidiaries of a Government Entity under Article 40(2). FTA Decision No. 12 of 2023 also requires that the Government Entity is not a member, that no member is itself an Exempt Person (tested above), and that the Government Entity appoints one Subsidiary as the group's representative, which makes the application, so the Parent Company and the Subsidiary are eligible to apply. A Tax Group is formed by application, not by meeting the conditions: Article 40(3) requires the Parent Company and each Subsidiary to apply to the Authority, and Article 41 dates the formation from the Tax Period specified in that application or determined by the Authority. Ministerial Decision No. 301 of 2024 requires the application before the end of the Tax Period in which formation is requested, and the conditions to be met continuously throughout each Tax Period; a member that stops meeting them leaves from the beginning of that period (Article 41(3)), and the group must notify the Authority within 20 business days. A Tax Group is treated as a single Taxable Person represented by the Parent Company (Article 40(4)). The Parent Company complies with the payment, registration and return obligations on behalf of the group (Article 40(5)); the Parent Company and each Subsidiary are jointly and severally liable for the group's Corporate Tax for the periods in which they are members, which the Authority may limit on approval (Article 40(6) and (7)); and each remains responsible for the withholding obligations under Article 45 in its own right (Article 40(8)). Based on the facts you supplied.

Decided by the article 40(2) — government entity ownership

A free-zone subsidiary

A wholly owned subsidiary that is a Qualifying Free Zone Person, which condition (f) excludes outright.

Computed

The Persons are not eligible to apply to form a Tax Group as computed: Article 40(1)(f) requires that neither the Parent Company nor the Subsidiary is a Qualifying Free Zone Person, and that condition is not met on the facts you supplied. Article 40(1) requires all of its conditions, so no further condition is reported.

Decided by the condition 40(1)(f)

Try it

Supply the facts and this rule computes the outcome in your browser, live. Leave a determination undecided and it blocks the result — it is never read as a no.

Not computed yet

9 inputs still need your determination:

  • The Persons are juridical persons that are Resident Persons, and neither is treated as resident in another country under a tax treaty in force in the State (MD 301 of 2024, Article 3)?
  • The Parent Company owns at least the published minimum of the Subsidiary's share capital, directly or indirectly. What is the percentage?
  • The Parent Company holds at least the published minimum of the voting rights in the Subsidiary, directly or indirectly. What is the percentage?
  • The Parent Company is entitled to at least the published minimum of the Subsidiary's profits and net assets, directly or indirectly. What is the percentage?
  • Neither the Parent Company nor the Subsidiary is an Exempt Person?
  • Neither the Parent Company nor the Subsidiary is a Qualifying Free Zone Person?
  • The Parent Company and the Subsidiary have the same Financial Year?
  • Both prepare their financial statements using the same accounting standards?
  • Is the group formed by Subsidiaries of a Government Entity that owns at least the published interest in each, under Article 40(2) — with the Government Entity outside the group and one Subsidiary appointed to represent it? For such a group, answer the other conditions for the Subsidiaries themselves.

Computed in your browser from the figures you supply. Nothing is sent anywhere, and the result is a computation against a rule — reference, not tax advice.

Thresholds

uae.tax_group_min_ownership
95% · reviewed 2026-09-28 · source

Threshold values are published separately from the rule and carried with a citation. Where none has been published for the period being computed, the rule reports that rather than applying a default.

Sources

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Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader