Lesson 4 — One structure, two answers
Everything so far has been two tests described separately. Now run a single structure through both of them. Gulf Fittings Holding LLC is a Dubai juridical person with a financial year ending 31 December. It has four subsidiaries, each of them a juridical person with a place of establishment in the State, none of them an Exempt Person, and all of them on the same financial year and the same accounting standards as the parent — except where the table says otherwise.
| Subsidiary | Share capital held | Voting rights held | Profits and net assets | Status note |
|---|---|---|---|---|
| Falcon Interiors LLC | 96% | 96% | 96% | None |
| Marina Fit-Out LLC | 50% | 50% | 50% | None |
| Coastal Glass LLC | 35% | 35% | 58% | Profit share set by shareholders' agreement |
| Jebel Ali Components FZ-LLC | 100% | 100% | 100% | Qualifying Free Zone Person |
Test one — the VAT group. Every company has a Place of Establishment in the State, so the first condition of Art. 14(1) is met by all of them. The relationship limb is then tested one company at a time, and any single route in Art. 9 will do.
| Company | Establishment in the State | Route under Art. 9 | In the VAT group |
|---|---|---|---|
| Gulf Fittings Holding LLC | Dubai | Representative member | Yes |
| Falcon Interiors LLC | Dubai | Voting 96% | Yes |
| Marina Fit-Out LLC | Sharjah | Voting 50% | Yes |
| Coastal Glass LLC | Dubai | Market value 58% | Yes |
| Jebel Ali Components FZ-LLC | Jebel Ali | Voting 100% | Yes |
Five companies, one VAT group, one representative member. Note what did not matter: the 35% voting interest in Coastal Glass, and the free zone status of Jebel Ali Components. Art. 14(1) asks about establishment in the State, about the relationship and about control, and it sets no free zone condition at all.
Test two — the Corporate Tax group. The same companies, on the same day, with the same figures. Now every condition in Art. 40(1) has to hold.
| Company | Share capital | Voting | Profits and net assets | Other conditions | In the CT group |
|---|---|---|---|---|---|
| Falcon Interiors LLC | 96% — met | 96% — met | 96% — met | All met | Yes |
| Marina Fit-Out LLC | 50% — below 95% | 50% — below 95% | 50% — below 95% | All met | No |
| Coastal Glass LLC | 35% — below 95% | 35% — below 95% | 58% — below 95% | All met | No |
| Jebel Ali Components FZ-LLC | 100% — met | 100% — met | 100% — met | Qualifying Free Zone Person | No |
The Corporate Tax group is two companies: Gulf Fittings Holding LLC as the Parent, and Falcon Interiors LLC as its only Subsidiary. The VAT group is five. Same ownership, same date, same share register — and two membership lists that differ by three companies, because the two regimes were never asking the same question.
This is the question that settles it: a 50% shareholding forms a VAT group and cannot form a Corporate Tax group. Marina Fit-Out is the case. Its 50% sits exactly on the VAT threshold and clears it, and it falls 45 percentage points short of the Corporate Tax threshold. The module's own guide puts the same answer in a single line: the Corporate Tax test needs 95%, the same 50% qualifies for a VAT group, and the two tests are independent by design.
And Jebel Ali Components is the failure that is not a number at all. The Parent owns 100% of it, so every percentage limb in Art. 40(1) is met with room to spare, and it still cannot be a member — because Art. 40(1) excludes a Qualifying Free Zone Person outright. A status condition cannot be argued down with a larger percentage. This is why the Corporate Tax side has five status conditions and not merely three thresholds, and it is why a group assembled by sorting a shareholding report in descending order will be wrong.
The failure mode: one membership list, reused. The two groups live in separate menus and separate models precisely so that this cannot happen inside the system, and the commonest way it happens anyway is outside it — a spreadsheet headed "group companies" that feeds both the VAT registration and the Corporate Tax filing. Maintain the two lists as two lists. When somebody asks which companies are in the group, the correct first question is which group.