VAT Grouping: Benefits & Limitations

In the United Arab Emirates, two or more than two businesses can form a tax group for Value Added Tax Purposes and they can elect a single registered business to be their representative. The representative business is the one that submits the request to the Federal Tax Authority for the approval of the tax group. The FTA takes up to 20 days to approve the request and a tax group is formed. VAT grouping comes with certain benefits as well as limitations. We will consider both in this article so read ahead for useful information.

Tax Gian are expert tax agents in UAE that provide comprehensive VAT taxation services including VAT tax advisory, VAT registration, VAT filing, VAT deregistration and more. For any type of assistance regarding VAT, contact our expert tax agents at JTC.

VAT Grouping in UAE

• VAT grouping happens when two or more than two businesses in UAE form a tax group and appoint one business as their representative.

• A VAT group files only one VAT return and the representative business files the VAT.

• The VAT group files a VAT return based on the aggregate supplies of the group.

• FTA has the authority to approve VAT grouping and there can be costs to register a VAT group.

• All members of the VAT group need to maintain accurate information and records of supplies.

• There are two types of VAT grouping i.e., mandatory grouping and voluntary grouping. The former is for businesses with fifty per cent common shareholding and the latter is optional for businesses with less than fifty per cent common shareholding.

Benefits of VAT Grouping in UAE

• It gives you increased time to focus on main business functions increasing your efficiency.

• Your audit methods get better than before.

• Your bookkeeping and accounting become simplified and better than before.

• When filing VAT returns, the chances of making errors are reduced.

• VAT management and overall financial management are improved.

• Your VAT liability is reduced.

• It improves cash flow management by requiring only one VAT filing and refund on behalf of the whole group.

• Transactions between the group members are exempt from VAT.

• Administrative load is reduced by decreasing documentation and paperwork requirements.

• Only one member of the group is required to register for VAT making compliance easier.

• The refund process is faster for the VAT group.

• The risk of penalties due to noncompliance issues is reduced.

• You will also save a lot of costs.

• Record keeping is consolidated for the VAT group making it easy for members.

• VAT documentation is reduced.

• Invoicing is simple, only one invoice is used for group transactions.

• It increases competitiveness by simplifying compliance requirements.

• Your relationship with consumers and suppliers is improved.

• Your overall business reputation and credibility are increased.

Limitations of VAT Grouping in UAE

• One business can only make one VAT group at a time.

• Businesses that are UAE residents can form a VAT group only.

• Revoking group registration is harder than ever.

• Group members are still required to comply with each and every requirement.

• Modifying group structure and getting it approved is just like impossible.

• Businesses that form a VAT group must be related.

• VAT refunds are limited.

• Separate return filing is not possible for group members.

• VAT obligations are shared among members of the group.

• Errors affect all group members equally even if it’s not your fault.

• Management and control of the VAT group is a challenging task.

• Single return filing sounds simple but it’s not.

• It depends on the FTA if it will approve the VAT grouping.

• FTA sometimes imposes VAT grouping on related businesses even if they don’t want to make a group.

• Group registration is required to be renewed every year.

• Any change in the group has to be reported to the FTA.

• FTA involvement is very high.

• An error made by the VAT group is an error made by you, so you will also have to file a penalty.

• Damage to the reputation of the group is damage to your business.

Why Choose Tax Gian?

Tax Gian provides a wide range of VAT services including VAT grouping, VAT amendment, VAT registration, VAT deregistration, VAT compliance, VAT health check and more. We have field experts who will provide you with tailor-made solutions in accordance with your business type. Make VAT tax groups with the help of our expert VAT agents and get quick approvals from FTA with our effective strategies.