VAT grouping – key advantages & disadvantages

GroupingUAE VAT law allows certain enterprises to register themselves as one Tax Group and thus get treated as single taxable person for VAT purposes. Here are certain advantages and disadvantages of taking registration as one Tax Group:

 

Key Advantages

  1. Transaction between common VAT group entities would not be considered as supplies and thus no tax liability would arise on intra-group transactions.
  2. Otherwise exempt supplies made by one group entity to another group entity would not be regarded as supply and the nature of final supply would only be seen or considered for tax liability, thus the same would result in proper utilization of input tax credit available.
  3. As one return needs to filed, one audit needs to be done, if tax group properly managed will add less administrative burden on the Management.

Key Disadvantages

  1. All VAT group entities would be jointly and severally liable for the VAT dues of any of the VAT group entity.
  2. Various exemption limits in the VAT Law would apply to the whole VAT group as if one entity.
  3. In case VAT Group is selected for VAT Audit, VAT Audit will happen for all the entities irrespective of their size or turnover.

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