When calculating the taxable income of a Tax Group, transactions between the Parent and the subsidiaries are eliminated as per UAE Corporate Tax regulations.

• Transactions Between Subsidiaries of same Tax Group: Transactions between two subsidiaries within the same Tax Group are also subject to elimination for tax calculation purposes.

• Transactions with Non-Tax Group Subsidiaries: If two subsidiaries have transactions and one is part of the Tax Group while the other is not, the transactions are not eliminated.

• Transactions Between Tax Group Subsidiaries: When both subsidiaries are part of the same Tax Group, their transactions are eliminated for the purpose of calculating the taxable income.

Key Point: Transactions between subsidiaries within a Tax Group are generally eliminated to ensure accurate and fair taxation, while transactions with non-Tax Group entities are not eliminated from the taxable income calculation.

Practical Case Study

XYZ Holdings, a multinational conglomerate operating in the UAE, established a Tax Group consisting of XYZ Holdings (Parent Company), Subsidiary A, and Subsidiary B. They encounter a scenario where transactions occur between their subsidiaries, leading to questions about the treatment of these transactions for tax calculation purposes.

Company Status:

1. XYZ Holdings: The parent company, a prominent multinational conglomerate operating in various sectors.

2. Subsidiary A: A subsidiary of XYZ Holdings, focused on manufacturing electronic components.

3. Subsidiary B: Another subsidiary of XYZ Holdings, involved in retail operations.

Key Questions:

1. Are transactions between two subsidiaries within the same Tax Group considered for tax calculation purposes?

Resolution:

1. Transactions Within Tax Group: Transactions between the two subsidiaries, Subsidiary A and B, that are part of the same Tax Group are indeed considered for tax calculation purposes. These transactions are subject to regulation.

2. Transactions with Non-Tax Group Subsidiaries: If one of the two interacting subsidiaries is part of the Tax Group, and the other is not, the transactions between them are not eliminated for tax calculation purposes.

Conclusion: In the case of XYZ Holdings and their Tax Group, transactions between subsidiaries A and B, are considered for calculating taxable income under the UAE Corporate Tax Law.