Aggregated Financial Statements for a Tax group under UAE Corporate Tax

For Corporate Tax purposes, a Tax Group must prepare Special Purpose Aggregated Financial Statements (“AFS”) for the tax filing. These are not the same as consolidated financial statements under IFRS. AFS has to be prepared by the tax groups irrespective of their revenue threshold for tax periods beginning on or after 1^st January 2025 .

Aggregated financial statements (“AFS”) are Financial Statements prepared on the basis of the aggregation of the standalone financial statements of the Parent Company and each subsidiaries that are members of the Tax Group in accordance with the framework specified in Article 3 of Federal Tax Authority Decision No. 7 of 2025. This decision is applicable from 1^st January 2025.

How AFS are prepared for a Tax Group in UAE ?

AFS are prepared by:

• Taking the standalone financial statements of the parent and each tax group member;

• Aggregating them line by line; and

• Eliminating intra-group transactions between members of the Tax Group.

What gets eliminated and what does not

1. Intra-group transactions between tax group members are eliminated

   Transactions/balances between members of the same Tax Group should be eliminated in the AFS. This is because the Tax Group is treated as one taxable person for CT purposes.

2. Investment in subsidiaries within the Tax Group and corresponding equity are not eliminated

   The parent’s investment in a subsidiary that is also a Tax Group member, and the subsidiary’s equity are aggregated without elimination.

Why no elimination of investment against equity?

The AFS should not bring in IFRS 3 / IFRS 10 consolidation adjustments such as goodwill, bargain purchase gains and acquisition accounting adjustments generally.

So, the tax AFS should not mimic a full IFRS business-combination consolidation.

Exception to the above

If a business combination happens without acquisition of a separate legal entity, then the resultant assets, liabilities, goodwill, or bargain purchase gain, that are already part of the acquirer’s separate financial statements are to be fully aggregated into the Tax Group AFS.

3. No elimination on impairment recorded on Investment in Subsidiary

   No elimination is required in case of any impairment recorded for investment in a subsidiary which is a member of the tax group.

4. No elimination on tax losses for the tax period prior to joining tax group

   Where a member in the tax group recognized a deductible loss (e.g. an impairment loss on a loan receivable) in a tax period prior to joining the Tax Group, the related transaction cannot be eliminated until the deductible loss is reversed. The reversal will be taxable in the hands of the Tax group.

How to account for non- group Investments?

Investments in subsidiaries, joint ventures and associates that are not members of the Tax Group must be carried at cost less impairment.

Tax balances / tax expense treatment

When preparing the AFS, UAE Corporate Tax balances already recognised in standalone financial statements are not to be aggregated for purposes of determining the Tax Group’s aggregated accounting net profit. At the same time the income taxes under other legislations remain relevant in aggregation, such as foreign taxes, and other taxes levied in the UAE.

Principles to be applied while preparing the AFS

1. The standalone Financial Statements of entities which are not part of a Tax Group must not be aggregated as part of the Aggregated Financial Statements of the Tax Group.

2. Transactions with entities which are not members of the Tax Group must not be eliminated for the purposes of preparing the Aggregated Financial Statements of the Tax Group.

3. The standalone Financial Statements of the members of the Tax Group must be prepared using uniform accounting policies.

4. The Aggregated Financial Statements of the Tax Group must be presented in the United Arab Emirates Dirham.

5. The Aggregated Financial Statements must be prepared annually based on the standalone financial statements of the Tax Group members for the relevant financial year.

Disclosure Requirements for Aggregated Financial Statements Purposes

The statements to be presented in a set of Aggregated Financial Statements are:

1. Aggregated statement of financial position.

2. Aggregated statement of profit or loss.

3. Aggregated statement of other comprehensive income.

4. Aggregated statement of changes in equity.

The disclosure requirements for the Aggregated Financial Statements should include the following:

1. The framework under which the Aggregated Financial Statements have been prepared.

2. The basis of aggregation.

3. The material accounting policies, estimates and judgments based on which the Aggregated Financial Statements are prepared.

4. The explanatory information and notes that sufficiently support the numbers presented in the Aggregated Financial Statements.

Comparables for the previous period

The Aggregated Financial Statements of the Tax Group should present comparative information in respect of the preceding Tax Period for all amounts reported in the current Tax Period, with the exception of the first Tax Period for which the Tax Group exists (as it does not have a preceding Tax Period).

Applicability of AFS requirements

The applicability of AFS requirements under corporate tax in UAE depends on the relevant tax period:

• Tax periods commencing before 1 January 2025: All Tax Groups are required to maintain AFS. An audit will only be required where the consolidated revenue of the Tax Group exceeds AED 50 million during the relevant tax period.

• Tax periods commencing on or after 1 January 2025: Mandatory audit is required for all Tax Groups, regardless of revenue threshold.

Tax liability of the tax group

In a Tax Group in UAE, the Parent Company is required to make the payment of the Corporate Tax on behalf of the Tax Group. However, all members of the Tax Group are jointly and severally liable for the Corporate Tax Payable.

Exit of a member from a Tax Group

Where a member exits a Tax Group, the following rules apply:

1. When a member exits a Tax Group or the Tax Group is dissolved, the entity must continue to prepare its standalone financial statements using the same accounting policies and basis of accounting that were applied by the Tax Group.

2. The opening carrying amounts of assets and liabilities should be based on the values reflected in the Aggregated Financial Statements of the Tax Group, subject to any limitations under the applicable accounting standards.

3. Where a member leaves the Tax Group within two years of an intra-group transaction, the UAE Corporate Tax Law may require previously eliminated intra-group gains or losses to be reinstated under the applicable clawback provisions.

FAQs

1. Whether aggregated financial statements (AFS) and the consolidated financial statements as per IFRS 10 are same?

Ans : No. Aggregated Financial Statements (AFS) prepared under the UAE Corporate Tax regime are not the same as Consolidated Financial Statements prepared under IFRS 10. While both combine the financial information of multiple entities and eliminate intra-group transactions, AFS are prepared solely to determine the taxable income of a Tax Group under the UAE Corporate Tax Law, whereas IFRS 10 Consolidated Financial Statements are prepared to present the financial position and performance of a group as a single economic entity for financial reporting purposes.

2. Is audit mandatory for special purpose aggregated financial statements?

Ans: Mandatory audit is required for all Tax Groups, regardless of revenue threshold for tax period commencing on or after 1^st January 2025. On the other hand, for Tax periods commencing before 1 January 2025, all Tax Groups are required to maintain AFS and audit will only be required where the consolidated revenue of the Tax Group exceeds AED 50 million during the relevant tax period.

3. Who is responsible for the tax payment in a tax group?

Ans : The Parent Company is required to make the payment of the Corporate Tax on behalf of the Tax Group. However, all members of the Tax Group are jointly and severally liable for the Corporate Tax Payable.

4. Are comparative figures required for aggregated financial statements (AFS)?

Ans: The Aggregated Financial Statements of the Tax Group should present comparative information in respect of the preceding Tax Period for all amounts reported in the current Tax Period, with the exception of the first Tax Period for which the Tax Group exists (as it does not have a preceding Tax Period).