Did you know your company could be charging itself VAT
unnecessarily? Under UAE VAT law, businesses with closely related entities can
register as a VAT Tax Group, potentially eliminating intra-company VAT,
simplifying compliance, and saving money. But it’s not automatic — and done
incorrectly, it can backfire with penalties and lost refunds.
Let’s break it down.
1. Eligibility Criteria
To form a VAT Tax Group:
- All
entities must be legal persons
- Must
be established in the UAE (main or fixed establishment)
- Must
be controlled by the same person/entity
- Must
be carrying on a business
✅ Example:
Mr. Fahed owns:
- EcoTech
Trading LLC (mainland)
- EcoLogistics
FZCO (free zone) Both 100% owned,
sharing staff and systems → Eligible for VAT grouping.
2. Intra-Group Transactions Are
Disregarded
No VAT is charged on transactions between group members.
✅ Example:
- Delta
Interiors LLC owes Delta Steel LLC AED 200,000 for materials.
- While
grouped: ❌ No VAT applies.
- After
Delta Interiors exits the group: ✅ AED 10,000 VAT (5%) must be
charged on that amount.
3. Only the Group TRN Can Be Used
Once grouped, individual TRNs are deactivated.
✅ Example:
- Delta
Interiors issues invoices using old TRN after leaving the group.
- FTA
can fine: ₨5,000 per incorrect invoice + penalties on underreported VAT.
- VAT
groups are powerful, but require compliance.
- Intra-group
invoices must be handled correctly before disbanding.
- Never
use old TRNs post-grouping.
We help businesses:
- Assess
tax group eligibility
- Register
& maintain VAT tax group compliance
- Review
intercompany balances before disbanding
- Update
ERP and contracts for correct TRN usage
