Applying for Fiscal Unit Registration Process
The enactment of the Consolidated Group (Income Tax) Rules (Legal Notice 110 of 2019) has introduced a new possibility for group companies – the option to consolidate their income tax returns. Starting from the year of assessment 2020, companies that are part of a group can choose to be treated as a single taxpayer, forming a fiscal unit. This means that the parent company, along with its subsidiaries, can elect to be treated as one entity for tax purposes, with the subsidiaries being considered fiscally transparent.
Obligations of the Principal Taxpayer
The principal taxpayer, which is the parent company in the fiscal unit, has certain obligations to fulfill. They are responsible for filing the consolidated income tax return, along with any supplementary documents requested by the Commissioner for Revenue. Additionally, a consolidated set of audited financial statements needs to be prepared for the fiscal unit in order to submit the consolidated income tax return.
It’s important to note that individual members of the fiscal unit are not required to submit individual tax returns. However, all members of the fiscal unit are jointly and severally liable for the payment of the tax.
Conditions for Registration
In order to be eligible for fiscal unit registration, the parent company must hold at least 95% in two out of three criteria of its subsidiaries. These criteria include the actual percentage holding, voting rights, and profits available for distribution. Furthermore, the accounting period of all the companies involved must have the same year end. Lastly, the entities forming part of the fiscal unit must not have any pending liabilities for income tax, VAT, or FSS (Final Settlement System) with the Commissioner for Revenue.
Main Benefit of the Fiscal Unity
The main benefit of forming a fiscal unit is the improvement of taxpayers’ liquidity position. By consolidating their income tax returns, companies can benefit from the immediate payment of the effective tax rate. This helps address cashflow problems that may arise under the normal tax regime, where there can be a time lag between the date of tax payment by the taxpayers and the date of receipt of the refund by their shareholders.
How We Can Assist
Our team of tax specialists is here to assist you throughout the entire process of applying for fiscal unit registration. We can help you determine whether your group is eligible for the consolidated group rules, provide guidance and assistance with the registration process, and handle the preparation and submission of the consolidated income tax return for the fiscal unit.
For additional insights on this subject, get in touch with us, and a member of our team will be available to provide assistance
