UAE Tax Group Compliance: Audit & Financial Reporting
With the introduction of UAE Corporate Tax (Federal Decree-Law No. 47 of 2022), formation of Tax Groups becomes a powerful tool for multinational entities and large local businesses to manage their compliance more efficiently. Tax group ensures more simplified compliance and potential tax savings for companies under common ownership or control by enabling them to consolidate their profits and losses for tax purposes.
However, tax groups also resulting in specific obligations, mostly the requirement to prepare and maintain aggregate financial statements. In some cases, they will undergo for mandatory audit also. This blog explores what is mean by these requirements, why they important and how businesses can stay compliant
What is a Tax Group in UAE Corporate Tax?
A tax group allows the parent company and one or more of it’s subsidiaries to be treated as a single taxable person under UAE Corporate Tax provisions. Key conditions include:
- The parent company must hold at least 95% ownership (directly or indirectly) in each subsidiary under group.
- All members in group must follow the same financial year and maintain their accounts under the same accounting standards (Mostly IFRS)
- None of the members in group can be an Exempt Person or a Qualifying Free Zone Person (QFZP).
Aggregate Financial Statements Requirement
Once a tax group formed, it is the responsibility for the Parent company to prepare the consolidated financial statements covering all members in group.
Key Features:
1.Single Statement – The entire group is treated as one taxable person ; there is no requirement to file separate tax returns for each member companies
2. Elimination of Intra-Group Transactions – All transactions between member companies (sales, purchase, loans, and provision of services) must be eliminated during the preparation of aggregate accounts.
3.Uniform Accounting – To ensure consistency in reporting, members must use uniform accounting policies and standards ( mostly IFRS)
Example:
If a UAE parent company owns two subsidiaries, One is making profits and other one is making losses, the preparation of aggregate financial statements allow the group to adjust the profits against losses before computing the tax liability
Audit Requirement for Tax Groups
Audit is not applicable on all tax groups, the UAE Corporate Tax Law and Cabinet Decisions specifically mentioned certain thresholds results in an audit obligation
- If the tax group’s consolidated revenue exceeds AED 50 million per year
- Or, if any member of the tax group is a Qualifying Free Zone Person (QFZP) aiming to retain the benefit of 0% corporate tax rate
For the above cases, the aggregate financial statements must be audited by a UAE licensed auditor.
Why?
The aggregate financial statements audited by a UAE licensed auditor gives assurance to Federal Tax Authority (FTA), that the group’s tax position is accurate and is complaint with UAE Corporate tax rules.
Legal Reference
The requirement for aggregate financial statements and audits is from:
- Federal Decree-Law No. 47 of 2022 (Articles 40–42): Mentioning the Establishment of tax groups and filing obligations
- Cabinet Decision No. 116 of 2022: Detail explanation on record-keeping obligations and audit requirements
- FTA Clarification CTP007 (August 2025): Providing practical guidance on aggregate financial statements and audit rules
Risks of Non-Compliance
Failure to meet these obligations can lead to serious consequences, including:
- Administrative Penalties for late or incorrect filings
- Loss of Tax Group status, forcing each member to file separately losing the benefit of single filing
- Increased risk of audit requirement and damage of reputation
- Potential disallowance of losses or intra-group adjustments
Case Example (Fictional)
Hima Horizons Holding formed a tax group with three of it’s subsidiaries operating in trading, logistics, and management consultancy. The consolidated annual revenue of the group is AED 120 million
- They have prepared aggregate financial statements for the group but did not done the audit
- During the compliance check by FTA, it was found that the group exceeded the aggregate revenue threshold of AED 50M and therefore required to submit audited accounts.
- The FTA has imposed penalties for incorrect filing, and this results in group to assign auditors retroactively, thereby incurring significant costs
Lesson: Tax groups must keep an eye on their thresholds carefully to avoid significant penalties
Best Practices for Compliance
1.Assess Eligibility Before Grouping – Ensure that all intended members must meet the Conditions under Corporate tax laws
2.Maintain Consistent Accounting Policies – Follow standardized accounting and reporting policies across subsidiaries
3.Track Thresholds – Monitor group’s annual revenue to potentially identify when group will be liable to audit requirements.
4.Engage Auditors Early – Plan the audit requirements promptly to avoid last minute compliance issues and significant costs.
5.Document Eliminations – Keep correct and accurate records of intra-group eliminations to be submitted for FTA inspection.
How Flyingcolour Tax Consultant Can Help?
At Flyingcolour Tax Consultant, we provide end-to-end support for businesses forming and managing tax groups, including:
- Group Structuring advice to ensure tax group eligibility
- Preparation of aggregate financial statements under International Financial Reporting Standards (IFRS)
- Engagement with licensed auditors for compliance assurance
- Ongoing advisory to optimize group tax positions
To learn more about Aggregate Financial Statements and Audit Requirement for UAE Tax Groups, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.