Should related companies form a VAT group? Benefits, risks and the FTA test

According to the FTA's tax group registration service, each member must be a legal person with a place of establishment or fixed establishment in the UAE, and all members must be related parties. Each must make taxable supplies or import concerned goods or services. The application is made through the representative member's EmaraTax account, with trade licences, a group structure showing shareholdings, a declaration of the past 12 months' turnover and a no objection letter from each entity. The FTA aims to process a complete application within 20 business days.

A tax group is treated as a single taxable person. Supplies between members are generally disregarded for VAT, so a management fee from the parent to a subsidiary carries no VAT. The group files one VAT return through the representative member, and members are jointly and severally liable for the group's VAT under the VAT law.

There is a new e-invoicing angle too. Under Ministerial Decision No. 197 of 2026, transactions between members of the same tax group are excluded from e-invoicing for 24 months from 1 January 2027, which may reduce the early e-invoicing workload for groups with heavy intercompany billing.

Grouping tends to pay off in a few situations.

• One member makes exempt supplies, for example residential leasing, and buys services from another member. Without a group, the VAT on those intercompany charges may be partly irrecoverable.
• There are many intercompany invoices each month, and the admin of charging and recovering VAT on them is real.
• The companies share one finance team and one set of processes anyway.

Joint liability is the big one: if one member has a VAT problem, all members can be pursued for it. A group of companies with different minority shareholders may not want that. One return also means one deadline and one set of controls; a sloppy member delays everyone. And if the members already recover all their VAT, grouping saves only administration, not tax.

There is also a threshold point. The FTA notes that a group cannot be formed if the combined taxable supplies and imports of the members do not exceed the mandatory registration threshold. Two small related companies that each sit below AED 375,000 and together still fall short cannot use grouping as a route into the VAT system. Finally, consider future plans: if you expect to sell one company or bring in an investor, unwinding a group adds steps to that transaction.

A family group has a property company letting residential buildings in Sharjah and a facilities management company that maintains them. The FM company charges the property company AED 1.2 million a year plus AED 60,000 VAT. Because residential rent is exempt, the property company cannot recover most of that AED 60,000. In a VAT group, the intercompany maintenance charge is disregarded, so that VAT does not arise. The FM company's own external costs still carry VAT, and the group's recovery on those will reflect the mix of exempt and taxable activity.

Whether the net saving is worth the shared liability and extra administration is a question for the group's tax agent, using the actual figures.

If each company is set up as a separate entity in HelloBooks, you can ask the AI for intercompany charges by direction and the VAT on them for the last 12 months, plus each company's recovery position. That gives your adviser the core inputs for the decision. Once grouped, you can continue to keep separate books per company for management and corporate tax purposes. Our team can configure group reporting packs on request through /book-a-demo.