ABC Group is a conglomerate with various subsidiaries operating in the UAE. In 2024, they formed a Tax Group in accordance with UAE tax regulations. Company A, Company B, and Company C were all legitimate members of this Tax Group. However, in 2028, Company A experienced a significant change in its tax residency status, which had implications for its membership in the Tax Group.

Company Status:

1. ABC Group: A diversified conglomerate with a presence in multiple industries within the UAE.

2. Company A: A subsidiary of ABC Group, involved in manufacturing.

3. Company B: Another subsidiary of ABC Group, focused on retail operations.

4. Company C: A member of ABC Group, initially part of the Tax Group.

Tax Residency Change Dilemma: In 2028, Company C underwent a change in its tax residency status, becoming a tax resident of the United States. ABC Group had to address the implications of this change on Company C’s membership in the Tax Group.

Key Questions:

1. Can Company C, which was initially part of the Tax Group, continue to be a member after becoming a tax resident of another country?
2. What is the effective date of Company C’s departure from the Tax Group?

Resolution:

1. Change in Tax Residency: Following Company C’s change in tax residency to the USA, it could no longer continue as a member of the UAE Tax Group.

2. Effective Date of Departure: The date considered as Company C leaving the Tax Group is the beginning of the tax period in which it became a tax resident of the USA. In this case, it was effective from January 1, 2028.

Conclusion: In the scenario involving ABC Group and Company C, the change in tax residency due to a new tax treaty with the USA had significant implications. Company C, which was initially a legitimate member of the UAE Tax Group, had to be excluded from the Tax Group, effective from January 1, 2028. This case demonstrates how changes in tax residency status can impact an entity’s membership in a Tax Group.