Under UAE VAT laws, the tax group registration mechanism enables different entities with the same business owner or under the same control to be regarded and treated as a single VAT recipient. This makes it easy for related businesses to deal with the issue of VAT because they can fill returns jointly which consolidates reports.

There are particular circumstances under which this tax group registration cannot be general, either by altering the structure of the group or by de-registering the group. Article 15 of the latest VAT law explains the procedures and guidance for businesses that seek to deregister for VAT.

Tax Group – Compulsory Deregistration

Compulsory Deregistration of a tax group under VAT law arises when the tax authority needs to de-register a tax group. Such circumstances applies when entities fail to meet the requirements to remain as a tax group.

Below are specific conditions under which deregistration becomes mandatory:

Failure to Meet Tax Group Requirements: If the tax group no longer satisfies the requirements, the tax authority can deregister the tax group. For instance, if the entities fail to have close ties of common ownership or control, or should one or more of the entities stop carrying out taxable activities, then the group does not qualify to be registered. This would happen through a restructuring of the broad group, alteration in the ownership of these businesses, or even when a business was in the process of closing.
Dissolution of Economic, Financial, or Regulatory Association: A tax group remains a coordinated body mainly due to the business, fiscal, or legal relationship between different members. However, if these associations cease to exist for any reason such as, a shift in managerial strategy, members’ financial autonomy, or internal restructuring, the tax group cannot be considered as a single taxable entity.
Risk of Tax Evasion or Significant Revenue Loss: This measure is intended to safeguard the substance of the tax system so that entities cannot use tax group registration for illegal ends. In such instances, the tax authority can deregister the tax group.

Amendments to Tax Group Registration

The following circumstances may facilitate amendments of a Tax Group:

Removal of a Member: According to related regulation, if one or several members of the tax group are no longer satisfying conditions provided in Article 15 (for instance, avoiding their taxable activity), the Tax Authority can exclude these members from the group. This, in turn, ensures that the tax group is still a viable account and only contains companies that are engaged in one or another taxable operation at the moment.
Removing Ineligible Members: To ensure compliance and maintain the accuracy of the group’s registration, the ineligible members can be removed.

Regulations on Member Notification by Representatives

If any member of the group ceases to meet the conditions for tax group membership (for example, by stopping its taxable activities), it is the duty of the representative member to notify the Tax Authority within 20 business days. This notification requirement ensures that the tax authority is kept informed of any changes in the group’s structure. This way, the tax authority receives information on time and can either make the required adjustments to the group registration or proceed with the process of deregistration.

The Authority’s Notice of Alterations or Revocation

If the tax administration has decided to make amendments or deregister a tax group, they are supposed to notify the representative member of that group within 10 business days of making that decision. This notification has to state the date from which the amendment or deregistration takes effect.

Communication can take place either in the form of publication of changes in legislation or in form of feedback after a company has filed its tax return. For instance, when the tax group is deregistered, it means that every business has to open an individual tax return and develop its own means of handling taxes.

Recovering of Tax Registration Numbers

When a member is removed from a tax group, the tax authority will issue the entity with either:

Another new number is the individual Tax Registration Number, or
The reactivation of the original Tax Registration Number that was issued when the entity was not a member of the tax group.
The businesses that moved out of the tax group are compelled to conform to tax regulations.
The transferring entity will be regarded as the different registrant and will prepare its own tax returns and be compelled to fulfill all other tax requirements on its own.

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In conclusion, tax group deregistration and amendment are key mechanisms for updating registration information and aligning the tax system’s data with current conditions. To avoid potential fines and penalties, businesses must ensure that their tax group remains eligible under applicable laws.

By understanding and following the guidelines outlined in Article 15, businesses can manage changes in their tax group’s structure effectively, and ensure compliance with the VAT laws.