The Federal Tax Authority (FTA) has issued detailed guidance on the preparation of Aggregated Financial Statements and the related audit requirements for Tax Groups under the UAE Corporate Tax Law. These clarifications are vital for businesses forming tax groups to ensure compliance with the law and its implementing regulations.
Background
The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (“Corporate Tax Law”) applies to tax periods commencing on or after 1 June 2023.
Under Article 40 of the law, two or more taxable persons may apply to form a Tax Group, subject to FTA approval. Once approved, the group is treated as a single taxable person and must prepare Aggregated Financial Statements to determine its taxable income.
Key Definitions
The decision introduces the concept of Aggregated Financial Statements, which are prepared by combining the standalone financial statements of the Parent Company and each Subsidiary in the tax group, based on a defined framework.
These statements differ from consolidated statements as they focus on aggregation without certain consolidation adjustments.
What Are Aggregated Financial Statements?
Aggregated Financial Statements are prepared by:
- Combining the standalone financial statements of all members of the tax group.
- Eliminating intra-group transactions (e.g., parent-subsidiary dealings, inter-subsidiary balances).
- Presenting the results, assets, and liabilities of the tax group as a single taxable entity.
These differ from consolidated financial statements prepared under IFRS or IFRS for SMEs, as certain consolidation principles do not apply. Instead, a special purpose framework is used, specifically designed for corporate tax purposes.
The primary aggregated statements include:
- Statement of financial position
- Statement of profit or loss
- Statement of other comprehensive income
- Statement of changes in equity
Key Requirements for Preparation
When preparing aggregated financial statements, tax groups must ensure the following:
- Reporting currency: Must be presented in AED (as per FTA Decision No. 13 of 2023).
- Uniform financial year: All members of the tax group must have the same financial year.
- Consistent accounting policies: Subsidiaries’ statements must align with the parent company’s accounting policies.
- Pre-tax profit/loss basis: Aggregation is done before corporate tax adjustments.
- Intra-group eliminations: Certain adjustments (e.g., valuation provisions, impairment losses, unrealised gains/losses) must be excluded.
- Commercial tax allocation: The parent company pays the group’s corporate tax liability, although all members are jointly and severally liable.
Audit Requirements
- Before 1 January 2025
Under Ministerial Decision No. 82 of 2023, tax groups must prepare audited financial statements if their consolidated revenue exceeds AED 50 million during the tax period.
- From 1 January 2025
As per Ministerial Decision No. 84 of 2025, all tax groups must prepare and maintain audited special purpose aggregated financial statements, regardless of revenue.
Audits must be conducted in accordance with the International Standards on Auditing (ISA) and submitted to the FTA at the time of filing the tax return.
Treatment of Members Entering or Leaving a Tax Group
When a subsidiary leaves a tax group, or when a tax group ceases to exist:
- Standalone financial statements must continue to apply the same accounting basis and policies as the group.
- Assets and liabilities must carry forward the values recorded in the aggregated financial statements.
- Specific clawback provisions (e.g., on intra-group gains eliminated earlier) may apply if a member exits within two years of a transaction.
Disclosure Requirements
Aggregated financial statements must include:
- The framework under which they are prepared (special purpose for tax compliance).
- Basis of aggregation, including ownership and voting rights.
- Significant accounting policies and estimates.
- Supporting notes consistent with IAS 1 presentation requirements.
Conclusion
The FTA’s clarification underscores that tax groups must treat aggregated financial statements as a compliance tool tailored for corporate tax purposes—distinct from conventional consolidated accounts.
With the mandatory audit requirement effective from January 2025, tax groups must ensure robust financial reporting systems, consistent accounting policies, and timely coordination with auditors to meet these obligations.
For businesses considering tax group formation, it is essential to align internal processes with these requirements to avoid compliance risks and ensure smooth tax reporting.
Need Professional Assistance? Connect with RVG
At RVG, we support businesses in navigating the new UAE Corporate Tax requirements with ease. Our experts assist tax groups in preparing aggregated financial statements, aligning accounting policies and financial years, eliminating intra-group transactions, and ensuring audit-readiness in line with FTA Decision No. 7 of 2025 and related clarifications. With RVG by your side, you can focus on growth while we ensure compliance, accuracy, and peace of mind.
