Alert | Clarification on Government Entity to be treated as Single Taxable Person for all Businesses and Business Activities

As per Article 5 of the Federal Decree Law No 47 on “Taxation of Corporations and Businesses” (Corporate Tax Law), a Government Entity shall be exempt from the levy of Corporate Tax unless it conducts Business or Business Activity under a License issued by a Licensing Authority. Further, as per Clause 6 of Article 5, a Government entity can apply to the Federal Tax Authority (FTA) for all its Business or Business Activities to be treated as a Single Taxable Person subject to meeting the conditions to be prescribed by the Minister.

In this relation, the Ministry of Finance has now issued a Ministerial Decision No. 68 of 2023 on the treatment of all the Business and Business Activities conducted by a Government Entity as a Single Taxable Person and prescribed the following conditions to be satisfied:

A- Eligibility Criteria

1- The Federal Government Entities undertaking Businesses and Business Activities under a License issued by a Licensing Authority can make an application to the FTA through the Representative Federal Government Entity to be treated as a Single Taxable Person for all its Businesses and Business Activities

2- The Local Government Entities undertaking Businesses and Business Activities under a License issued by a Licensing Authority can make an application to the FTA through the Representative Local Government Entity to be treated as Single Taxable Person for all Businesses and Business Activities. However, in the case of the Local Government Entities, Businesses, and Business Activities must be conducted within the same Emirate.

B- Procedure for Application to the FTA

1- The appointment of the Representative Federal Government Entity or the Representative Local Government Entity, as the case may be, is mandated to comply with all obligations set out in the Corporate Tax Law and this Decision will have to be notified to the FTA.

2- In case the Representative Federal Government Entity or the Representative Local Government Entity, as the case may be, is to be replaced without discontinuation of the treatment as a single Taxable Person, then an application for the same will also have to be made to the FTA.

1-Any activity conducted regularly, on an ongoing and independent basis by any Person and in any location, such as industrial, commercial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible properties.2-Any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of its Business. 3-A document issued by a Licensing Authority under which a Business or Business Activity is conducted in the State. 4-The competent authority concerned with licensing or authorizing a Business or Business Activity in the State. 5-The Federal Government, ministries, government agencies, authorities, and public institutions of the Federal Government. 6-The Federal Government Entity that is mandated by the Federal Government to represent the Federal Government Entities that are treated as a single Taxable Person in accordance with the provisions of Article 2 of the Ministerial Decision. 7-The Local Governments, ministries, government departments, government agencies, authorities, and public institutions of the Local Governments. 8-The Local Government Entity that is mandated by the Local Government to represent the Local Government Entities that are treated as a single Taxable Person in accordance with the provisions of Article 3 of the Ministerial Decision.

3- In case any new Businesses or Business Activities are conducted by the Federal Government Entity or the Local Government Entity, as the case may be, then the same shall be directly treated as part of the single Taxable Person, and the Representative Federal Government Entity or the Representative Local Government Entity, as the case may be, shall notify the FTA within (20) twenty business days from the occurrence of such an event.

4- The Representative Federal Government Entity or the Representative Local Government Entity, as the case may be, shall notify the Authority within (20) twenty business days from the occurrence of any of the following circumstances:

       a. Any Business or Business Activity is no longer conducted by the Federal Government Entity or the Local Government Entity, as the case may be.

          b. Any Business or Business Activity is no longer conducted under a License issued by a Licensing Authority.

5- The treatment as a single Taxable Person shall cease in any of the following circumstances:

         a. Following approval by the FTA of an application made by the Representative Federal Government Entity or the Representative Local Government Entity, as the case may be, to cease the treatment as a single Taxable Person.

          b. Failure to meet the eligibility criterion mentioned above.

C- Start and End Dates of the Treatment as a Single Taxable Person

1- The treatment as a Single Taxable Person shall start from the beginning of the Tax Period specified in the application submitted to the FTA, or from the beginning of any other Tax Period determined by the FTA.

2- The treatment as a single Taxable Person shall end from the beginning of the Tax Period specified in the application submitted to the FTA, or from the beginning of any other Tax Period determined by the FTA.

3- For the purpose of computing the Taxable Income, the Representative Federal Government Entity or the Representative Local Government Entity shall consolidate the financial results, assets and liabilities of all Businesses and Business Activities attributable to the single Taxable Person for the relevant Tax Period, eliminating transactions between the Businesses and Business Activities of the Government Entities within the same single Taxable Person.

This Decision shall be published and shall come into effect (15) fifteen days following its publication.

This Decision provides guidance to the Federal and Local Government entities on how to constitute their Businesses and Business Activities as a single taxable person under the Corporate Tax Law and prescribes procedural aspects associated with it which will help them to easily administer and streamline their compliance requirements under the Law.

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