The UAE Federal Tax Authority has recently issued a corporate tax guide on tax groups to provide guidance to taxable persons on the matter, including, inter alia, the formation of a tax group. Some keys aspects relating to formation of a tax group are set out below:

• Conditions relating to share capital ownership, voting rights and entitlement to profits and net assets are met if the parent company holds such rights directly and/or through one or more subsidiaries¹. As such, indirect ownership is only considered if it is through one of more subsidiaries of the parent company.

• For a tax group to be formed, the parent company and the subsidiary must continuously meet all the specified conditions throughout the relevant tax period during which the tax group rules are applied.

• There is no limit on the number of members of a tax group. However, a juridical person can only be a member of one tax group at any given time. It is not possible for a parent company to form multiple tax groups with different subsidiaries.

• There is no requirement for any connection or relation between the business activities of the members of the tax group.

• Determination of share capital ownership condition is based on legal ownership of the shares and not on their effective or beneficial ownership.

• Where the legal title to the shares in a subsidiary is transferred to another person while retaining the voting rights and entitlement to other benefits from such shares, then such voting rights will count for the purposes of the voting rights condition, even though the shares will not be counted for the purposes of the share capital ownership condition.

• Although the profits and net assets condition will often be met if the share capital ownership condition is met, the profits and net assets rights need to be assessed independently and can produce different results if contractual arrangements limit the rights to profits and net assets, or if the rights to profits and net assets do not fully align with nominal share capital ownership.

1 The parent company must own at least 95% of the ownership interest in the subsidiary(ies).