How to register group companies under the same VAT Tax Group in UAE

          How to register group companies under the same VAT Tax Group in UAE

VAT in UAE

Value Added Tax (VAT) is a consumption tax applied on a good as its value is increased each stage of its production or distribution. It is an indirect tax that is related to a taxpayer’s consumption and not their income. VAT is applicable in more than 160 countries

Quick Go through: How to register group companies under the same VAT Tax Group in UAE

• UAE VAT will be effected from 1 st January 2018
• UAE VAT rate will be 5%
• UAE VAT will cover all products and services
• VAT is applicable to goods and services imported from abroad.

• The website available for registration tax.gov.ae
• Business should consider the Input and Output Tax, Zero Rated Tax and exempted transactions

• • Returns to be filed at period of every three months.
  • Group registration can be done for the companies subjected to the conditions
  • Record keeping is mandatory for at least 5 years
  • Taxpayers must file VAT within 28 days from the end of the tax period

• Penalties will be imposed for non-compliance.

Registering Tax Group under VAT in UAE: How to register group companies under the same VAT Tax Group in UAE

The threshold for registration will be:

• Mandatory registration threshold: AED 375,000
• Voluntary registration threshold: AED 187,500

Following sales are to be considered for arriving at the threshold.

1. Standard rated supplies
2. Zero-rated supplies
3. Reverse charged services received &
4. Imported Goods.

However, exempted supplies should not be considered for above calculation

What is VAT grouping?

Businesses that satisfy certain requirements provided by the legislation (such as being under the same ownership and located within the same GCC country) will be able to register as a VAT group.

For some businesses, VAT grouping will be a useful tool to simplify accounting for VAT. By registering under the Group VAT scheme, businesses will get a single VAT number and can file a single return. A VAT group allows people and entities that are closely linked financially, economically and organizationally to operate as a single VAT person.

Conditions applicable for Registering Tax Group under VAT  in  UAE: How to register group companies under the same VAT Tax Group in UAE

It is very important for businesses to understand the conditions of VAT group registration, determine the eligibility and accordingly opt for VAT Group in the registration form.

1. Each person shall have a Place of Establishment or Fixed Establishment in the State: 

This implies that each person should have either of the below mentioned establishments in UAE :

Place of Establishment: The place where a business is legally established in UAE pursuant to the decision of its establishment, or a place in which significant management decisions are taken and central management functions are conducted.

Fixed Establishment: Any fixed place of business, other than the place of establishment, in which the person conducts his business regularly or permanently and where sufficient degree of human and technology resources exist which enables the person to supply or acquire Goods or Services. This includes branches, which are also considered as the fixed establishment.

2.The relevant persons shall be Related Parties: Here related parties refers to two or more persons who are not separated on the economic, financial or regulatory level, where one can control others either by Law, or through the acquisition of shares or voting rights.

3. One or more persons conducting business in a partnership shall control the others:This implies that one or more person who are related, controls the other business. For example, officers or directors of one another’s businesses, partners in each other’s business etc.

The VAT Law provides that the Executive Regulations will:

1. determine the instances where the Federal Tax Authority (FTA) may reject an application to register a tax group;

1. specify the conditions under which the FTA may require a related party be part of a tax group, where such related party has not applied to be in a tax group;

1. set out the circumstances upon which the FTA may deregister a tax group; and

1. Determine when the FTA may include or remove a person from a tax group.

It is expected that one of the main reasons the FTA may reject an application for tax grouping will be where it suspects tax avoidance. In such cases, the Executive Regulations will likely set out various anti-avoidance provisions seeking to prevent third parties from controlling the group through bespoke commercial arrangements.

Benefits Of Tax Grouping: How to register group companies under the same VAT Tax Group in UAE

• Every single group, there will be only one VAT return per quarter; it is considered to have less work in the administration part. All the entities within a VAT Group will be treated as ‘ONE’ entity for VAT purpose. This will help the businesses in simplifying accounting for VAT, and also compliance reporting like VAT returns are required to be prepared and reported at the group level instead of entity level.
• Any supplies within the entities of a VAT group, are out of the scope of the VAT. This means, VAT will not be levied on the supplies between the entities of a VAT Group., there will be simplification of accounting and record-keeping process. However, supplies made by the VAT group to an entity outside the VAT group are subject to VAT
• There will be low-risk challenge of transfer pricing.
• In connection with intra-group charges, benefits with regard to cash flows can be expected.
• In regards to intra-group charges, there is a minor chance of incurring penalties.
• There may be more ease with regard to system configuration and implementation.
• Consultancy or compliance cost can be relatively cheaper.
• the ability to benefit in certain circumstances from exempt supplies made between group companies;

Who can opt for Group Registration?- How to register group companies under the same VAT Tax Group in UAE

In the UAE, many companies both corporates as well as SMEs operate with multiple licenses and work as one group. The companies might be registered in different emirates under different authorities, but operate together as a group. In such cases, they can look for registering together as a Tax Group. Following conditions are to be satisfied to opt for registering as a Tax Group.

1. All companies should have their main office with license (place of establishment) or a branch office or representative office (called fixed establishment) in the UAE.
2. They should be related parties.
3. Either one controls others, or two or more persons together control the others.

In practical scenario, even though one is not a shareholder in all companies but is controlling the companies by his power of attorney, it can be considered as related party for the purpose of VAT group and can choose Tax Group option.

Further while registering as a Tax Group, we should provide an evidence of the group structure showing the controlling or shareholding structure as well as a board resolution from each member companies resolving that they have appointed a company as the representative of the group for VAT purpose. 

Businesses can register for VAT tax through the e-services section on the FTA website. However, they need to create an account first. All businesses must submit an application to register for VAT as soon as possible to avoid the risk of missing the deadline that is 1 January 2018. Those who fail to apply for VAT would be liable to fine/s as per the Administrative Penalties stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE. 

How to register group companies under the same VAT Tax Group in UAE

Online Procedure for Registering a Tax (VAT) Group

Only the representative member of a prospective Tax group can apply to form a Tax group. In order to do so, the representative member must already be in possession of a Tax Registration Number (TRN) for VAT, or submit a VAT registration application at the time of applying to form a Tax Group.

Each of the prospective members of the Tax group must:

• Be a legal person
• Be resident in the UAE; and not a member of another Tax group 

Registration of the Representative Member for VAT purposes

Online Procedure For Vat Registration

1. Visit the official website of the Ministry of Finance
2. Click the option Register for VAT button
3. Select the “Yes” button for the field “Are you also applying to create or join a Tax group”
4. Complete the registration process and create your unique login id and password
5. Now you can login and reach the customer landing page
6. Click the option for “create a new tax request”
7. Fill up the required details
8. After submitting you will be directed to the payment gateway
9. Pay the online fees for VAT registration.

After payment an acknowledgement or confirmation receipt will be generated

Upon submission of the completed form, you will receive a Tax Identification Number (TIN). A TIN is not a valid TRN. It is a Tax Identification Number issued by the FTA for Tax group registration purposes and will be displayed on the Dashboard tab. As the representative member in possession of the TIN, you will now be able to apply to form a Tax group on behalf of the other prospective members.

Tax group registration by the Representative Member: How to register group companies under the same VAT Tax Group in UAE

The representative member of a Tax group, will see a button inviting to apply to Register for Tax group

1. When clicking on this button the Tax group registration application will commence.
2. Member will see the guide as soon as the Register for Tax group button is clicked.
3. It is recommended that member reads each of the sections carefully. Once done, check the Click here box to confirm that you have read it in order to move forward.
4. Select the “Yes” button for the field “Are you intending to apply as the Representative Member of the Tax Group?”
5. Member’s TRN/TIN and legal name in both English and Arabic will be auto-populated.
6. You can then proceed to add members of the Tax group in the next section of the registration form.
7. If one of the members of the intended Tax group is already registered with the FTA, please select the “Yes” button for the field “Is the Member already registered with FTA?”
8. You can provide the TRN/TIN of the member and click on the Verify button
9. Clicking on the Verify button will have the website verify whether the TRN/TIN entered by you is valid or not. If the TRN/TIN is valid, the legal names (both English and Arabic) of the member will be automatically populated on the registration form.
10. If a member of the intended Tax group is not already registered with the FTA, please select the “No” radio button for the field “Is the Member already registered with FTA?”. Click on the Add member button to fill out information of the member in the form.
11. Once you have completed the Add member form, click on the Add member to the group button.
12. Proceed to complete all the other fields in the registration form
13. Submit the Tax group registration form, carefully review all of the information entered on the form after clicking on Save and review.
14. Once you are certain that all of the information is correct, click on the Submit for Approval button at the bottom right hand corner of the screen.
15. The status of your application on the Dashboard will change to Pending and you will receive an email from FTA to confirm receipt of your application.

It is recommended that you save your progress as you complete the form. Click on the Save as draft button at the bottom of the screen. You will be logged out of the system after 10 minutes of inactivity

If the FTA requires any further details from you in order to assist with the verification of your application, you will receive an email notification setting out the information required from you

What are the documents to be kept ready before you proceed for registration?

1. Trade license copy
2. Memorandum of Association of the company
3. Articles of Association of the company
4. Passport copy of the manager/authorized signatory
5. Emirates ID copy of the manager/authorized signatory
6. Power of attorney copy (if any)
7. Financial Statement/Audit Report/Sales Calculation Sheet
8. Certificate of Incorporation (wherever applicable)
9. Customs Authority registration Certificate (if applicable)

What are the other Information required for VAT online registration? How to register group companies under the same VAT Tax Group in UAE

1. Business activities of the companies
2. Previous 12 months turnover figures
3. Projected Sales
4. Expected values of imports and exports
5. Whether you expect to deal with GCC suppliers
6. Whether you expect to deal with GCC customers
7. Bank account details etc.

What are the important points we have to consider while giving the bank account details?

If you are registering your company as standalone, you can give any one of the UAE bank accounts. You have to provide the name of the bank, branch name, account name and IBAN code. You should give the bank account of the company for which you are registering, and not of any other related party bank account.

If you are registering for VAT under TAX group option, you can give only one bank account number; not of all companies of the group. This bank account will be of the representative company which you choose while registering for VAT as Tax Group.

 Submit the VAT online registration in English or Arabic

You can submit the application in English as well. However, there are 3 columns where we have to submit the information in Arabic as well.

1. Name of the company
2. Name of the manager
3. Name of the authorized signatory

Need to upgrade to Reach online VAT Accounting Software :

Reach Accountant software is well designed to match all the needs for successful running of the business. The software can be used in different industries traders ,manufacturers, retailers,  workshop ,business projects etc. It is an accounting software that can automatically manage your book of accounts, taxes, inventory, sales, purchases and more online quickly and securely

Top Features of the Reach OnlineVAT Accounting Software are:

• Accounting Management: All functions relating to accounts are inbuilt with the software. You can manage your Accounting Ledgers, Bank & Cash Operations, Purchase & Sales Estimates, Warehouse Allocations, Expense Recording, Expense Grouping, Payments – Part or Full, Journal Entries, Income and loss a/c, Balance sheets, Receipts – Part or Full, Contra Entries, Financial Reports, Day book.

• Tax Management: Our accounting Software automatically calculates the taxes relevant for every bill created. The Software is designed as per the government norms for calculation of VAT. It also has the option to add any number of taxes relevant to the business. In case of change in tax percentages a change it in the software on your own. All you have to do is add your tax percentage and our software will calculate the taxes automatically. This multiple tax scheme can also be applied to multiple products on a single purchase.

• Income Management: The Company can create Quotations then the same can be converted as a Sales order or Pro-forma invoice or Invoice. From Invoice you can create Receipts as well. Accountants will be able to know what payments have been received and what are pending in the reports. You can also set reminders for receiving payments.

• Expense Management: You can create Purchase Orders then the same can be converted as bill or payments. You can also create Debit notes for purchase returns. Accountants will be able to know which purchase bills have been paid and which are pending in the reports. You can also set reminders for making payments.

         ·            Business Automation: Leads from all sources,Leads extractions via mail server,Converting leads to appointments,Quotes,Converting quotes to Invoices,Email-SMS update,Delivery status update,Work pending strategye.

• Business Intelligence Dashboard: The software has a feature of providing you key statistics of the business at any given point of time.The dashboard displays work status, profit and loss, expenses graphically.It also features  best Selling Executive, Highest Selling product, Largest value customer for the month. Every night the client gets a SMS summing up the entire sales , expenses ,case production ,and stock value for the day.

• Invoicing: Generates VAT compliant invoice of the company in the specified design as requested by the client or can choose from the available templates in the software. It also converts quotes to invoice .One of the features is the software can convert the Foreign currency invoices to base currency and further calculating the VAT at UAE standard rate.

·         Print Tax Invoice In Arabic: Reach software lets you print invoices in Arabic, English or both, as per the mandated guidelines of GAZT and FTA.

• Auditor View: Full-fledged Financial reports, Tax reports VAT reports, read process by auditor, with e-filing options, PF & ESI Reports, Tax Consulting Modules are some to be named.
• Check Post for VAT returns: As the software has been designed exclusively to aid individuals and entities to be VAT compliant in UAE, the set of rules and regulation laid by FTA (Federal Tax Authority) of UAE are embedded in the software. Hence any process error will be popped up by the application can be viewed .For instance wrong Tax Registration Number, incorrect taxable figure, wrong taxation period.
• Automatic Update on Tax legal Sections: As the Reach software are cloud computed software gets upgraded to update any revised tax laws and section if any in future.
• Computation Of VAT Returns: The software is inbuilt with all the detailed crucial information  on tax computation Tax Assesee can  fetch all the details of all the taxable transactions It lists down transactions which are included and excluded in the VAT return  calculate input tax, reverse charge and output tax to avail claim if any 

• Filing Of VAT Returns: The registered businesses in UAE are required to generate the VAT return File from their accounting software, login to the FTA’s e-tax portal and upload the return file. On the basis of the uploaded return file, the e-tax portal will validate the file and accordingly the details from the file will be auto-populated in the online return form. Reach VAT software is designed to ease the process of filing returns and comes under the purview of FTA prescribed set of rules and regulations.

• * VAT Reports etc.
• Calculate VAT automatically.
• VAT support in Sales, Purchase, Sales and Purchase returns, Journal entries.
• Generate Federal Tax Authority compatible tax reports.
• VAT Paid (charged by suppliers) and Vat Collection (Charged to customers) Analysis.
• Transaction wise details of VAT paid and VAT collected.
• Attach every Vendors/Customers VAT number and other details.
• VAT supported for Goods (stocked) and Service (non-stocked) items.
• Online application accounting.
• VAT Account Reconciliation, VAT Collection & VAT Paid analysis report.
• Report export to excel and other standard formats.
• VAT returns statement compatible with Federal Tax Authority standards.

Online accounting VAT software enables you to file vat returns, manage accounts and other business operations from any geographical area be it at the comfort of the house.

• Receipt: Receipts can either be manually entered or imported it in excel format easily.
• Payments: Payments can either be manually entered or imported it in excel format easily.
• Multi Company: Manage business through comfort of the smart phone.
• Tally Import: Tally files can be easily imported to Reach Software of various periods and manage business easily.
• Auditor’s Report: Full Financial Report are available,Read process by Auditor,Tax Reports,VAT Report with e-filing options,PF & ESI Reports,Tax Consulting Modules are some featuress mentioned.
• Mobile Application: Access business information through tabs and android smart phones, pick photos of expense vouchers and attach to expenses, daily profitability and other key reports can be viewed on phone.
• Bank Synchronization: Bank Statements can be imported in to Reach software through excel files.
• Security: There is complete security of data stored in the hard disk. Data can be accessed and control by creating access restriction. One time password facilities also ensures a check in the log in to the website. 

• Run Business from anywhere: The business can be run access data from anywhere at your comfort. Just like checking mails from the laptop or systems.

• Free and Automatic Upgrades: At Reach Accountant you will be provided free services of upgrading the software frequently with new features and use it absolutely free. 

• No investment in expensive hardware: The software is browser based. It just requires internet connection which can be connected to multi computers without using LAN and servers. 

• API: The client can integrate the existing software with Reach accounting application , 

• Automatic Data Backup: Reach stores all the data in servers offsite with regular backups. Hence business information is safe and secure

·         User Interface & Complexity:The software is designed to make its use friendly and easy,no cumbersome process to operate the application and software.

• Scalability:It is an VAT accounting software which can scale with your business needs. . Some software companies offer only one version of the product and some have progressive versions depending the business type or size. Reach Accounting software offers both integrated an entry level version as well as a feature rich version which you might not need for the current business processing but will definitely need in future for business development.

Top Two Features of the Reach Accounting Software

• Outsourced Accounting: The software enables to finish the outsourced accounts in less than 30 minutes.

• Real Time Accounting: Allows client to record sales and purchases online, while finalizing accounts that is checking the Audit trail, providing MIS reports, checking Tax reports, printing financial reports and filing taxes.

Technology Used

Reach has implemented the latest technology Cloud Computing to handle  day to day business transactions just  a click away from your browser from any part of the world.

Cloud Computing is a concept through which organizations can manage their data centres, processes and applications online via internet on the scheme of pay for use basis. Many of today’s small businesses find great advantages when adopting a virtual office environment. Rather than maintaining one centralized business location, employees are given the opportunity to work from home and connect via computer. Virtual offices can stretch across the country, or even exist within a small geographic area while still providing benefits to both employees and employers. Yet certain business functions need to be managed differently in a virtual environment. When it comes to accounting, a cloud system can improve virtual office management, especially for tasks such as expense tracking and financial report consolidation.

Benefits of Cloud Accounting

1. Spread the cost of the software by making payments by monthly subscription instead of one lump sum.
2. All the upgrades for cloud accounting software are carried out by the supplier at no extra cost, so you are always on the latest version.
3. You can access cloud accounting software anywhere that has an internet connection, so no need to use a particular computer or be stuck in the office.
4. As the name suggests, all the data is stored securely in “the cloud” which means on the supplier’s bank of servers, continually backed up, so you never have to worry again about using up your own hard-drive or taking regular backups.
5. Best of all, with cloud accounting software, your accountant can share your data, so they can help you if you are stuck on recording certain transactions in your accounts, like the purchase of a new laptop.  They can post their year-end journals directly, so your data is always up to date, but more importantly we can be more help to you.  For example if you would like your accountant to check the figures for your VAT Return or even file it,or prepare some management accounts for you, and even help you with key decisions in your business, the sky is the limit with cloud accounting software.