The Federal Tax Authority (‘FTA’) has recently issued FTA Decision No. 7 of 2025 titled Determination of the Requirements for Preparing and Maintaining Audited Special Purpose Financial Statements for a Tax Group.
Effective for Tax Periods commencing on or after 1 January 2025, the decision introduces a framework for preparing Aggregated Financial Statements (‘AFS’) for a Corporate Tax (‘CT’) Tax Group. The AFS must be audited under a special purpose framework in accordance with the relevant International Standards on Auditing, regardless of the Group’s revenue threshold.
The AFS must be prepared annually, based on standalone financial statements of each member of the Tax Group and comply with International Financial Reporting Standards (‘IFRS’) or IFRS for Small and Medium-sized Entities (‘IFRS for SMEs’), subject to provisions as outlined in Clause 3 of Article 3 of the Decision
The following key principles must be applied while preparing AFS:
- Elimination of Intra-Group items: Any income, expenses, unrealised gains and losses, and any other transactions between members of the Tax Group shall be eliminated.
- Exclusion of Non-Group Entities: Standalone Financial Statements of entities outside the Tax Group must not be aggregated, and transactions with such entities must not be eliminated as part of the AFS of the Tax Group.
- Uniform Accounting Framework: Standalone Financial Statements of all Tax Group members must be prepared in accordance with IFRS or IFRS for SMEs using uniform accounting policies
- Pre-tax Aggregation: The accounting profit or loss to be aggregated must be the pre-tax profit or loss of each the Tax Group member.
- Valuation of Non-Group Investments: Investments in subsidiaries, joint ventures and associates outside the Tax Group must be carried at cost less impairment.
- Presentation Currency: The AFS must be presented in the United Arab Emirates Dirham (‘AED’)
A set of AFS includes:
- Aggregated statement of financial position.
- Aggregated statement of profit or loss.
- Aggregated statement of other comprehensive income.
- Aggregated statement of changes in equity.
In addition, the AFS should include all prescribed disclosures, such as basis of aggregation, material accounting policies and other required information.
Financial statements of members leaving the Tax Group
- A member leaving the Tax Group shall adopt the values of the relevant assets and liabilities as recorded by the Tax Group as the opening values of those assets and liabilities in its standalone Financial Statements.
- Where the applicable Accounting Standards do not permit using such values, the member leaving the Tax Group shall calculate its Taxable Income as if the Accounting Standards would have allowed using such values.
It is imperative for the businesses forming Tax Groups to ensure readiness to comply with these audited financial reporting requirements, including aligning accounting systems, policies, and audit arrangements.