Business Activities Conducted by Government Entities as Single Taxable Person

As per Cabinet Decision No. 68 of 2023, businesses and business activities held by Federal Government Entities are to be treated as a single taxable person under specific conditions. This Decision aims to simplify Corporate Tax procedures and ensure consistency in tax treatment for government entities, specifying the conditions federal and local government entities must meet to be treated as single taxable persons. Taxable Persons should consult Tax Consultants in the UAE to effectively determine their taxability under Corporate Tax in compliance with the statutory regulations.

Conditions for Government Entities

For Federal Government Entities, the following conditions must be fulfilled:

• The petition to be treated as a Single Taxable Person must incorporate all Businesses and Business Activities controlled by the Federal Government Entity.
• The Businesses and Business Activities of the Federal Government Entity must be conducted under a License issued by a Licensing Authority.
• The petition for the Authority to recognize a Single Taxable Person can only be made by the Representative Federal Government Entity.
• The Representative Federal Government Entity is mandated to comply with all obligations set out in the Corporate Tax Law and this Decision, and to pay Corporate Tax accordingly. Where the Representative Federal Government Entity needs to be replaced, an application can be made to the Authority without any discontinuation of the single taxable person treatment.

Also check: Corporate Tax Services in UAE

New Business or Business Activity

Any new Business or Business Activity under the control of the Federal Government Entity that meets the conditions above is directly treated as part of the single Taxable Person. The Representative Federal Government Entity must inform the Authority within 20 business days of such an addition occurring, for the purpose of calculating Corporate Tax accurately.

Ceasing the Treatment as a Single Taxable Person

The single taxable person treatment ceases once the Authority accepts an application from the Representative Federal Government Entity to cease the treatment, or where the conditions above are no longer met.

Must check: Corporate Tax Registration

Conditions for Local Government Entities

For Local Government Entities, the following conditions must be met:

• The petition to be treated as a Single Taxable Person must incorporate all Businesses and Business Activities held by the Local Government Entity.
• The Businesses and Business Activities of the Local Government Entity must be controlled under a License issued by a Licensing Authority.
• The Businesses and Business Activities of the Local Government Entity must be conducted within the same Emirate.
• The request for the Authority to recognize a Single Taxable Person can only be made by the Representative Local Government Entity.
• The Representative Local Government Entity is mandated to comply with all obligations under the Corporate Tax Law and this Decision, and to pay Corporate Tax accordingly. As with Federal Government Entities, an application to replace the Representative Local Government Entity can be made without suspending the single taxable person treatment.

New Business or Business Activity (Local Government)

Any new Business or Business Activity conducted by the Local Government Entity that meets the conditions above is directly treated as part of the single Taxable Person, with the Representative Local Government Entity required to notify the Authority within 20 business days of the addition occurring, for the purpose of calculating Corporate Tax accurately.

Ceasing the Treatment as a Single Taxable Person (Local Government)

The single taxable person treatment ends once the Authority accepts an application from the Representative Local Government Entity to cease the treatment, or where the relevant conditions are no longer met.

Beginning and End Dates of the Treatment

The single taxable person treatment begins from the start of the tax period specified in the application submitted to the Authority, or from the start of another tax period the Authority determines. The treatment ends from the start of the tax period specified in the application submitted to the Authority, or from the start of another tax period the Authority determines.

Worked Example: A Federal Government Entity Adding a New Business Activity

A Federal Government Entity has already been approved as a Representative Entity for single taxable person treatment, covering three existing licensed business activities. Six months into the tax period, the entity’s government body launches a fourth licensed business activity meeting all the required conditions. Since this new activity automatically becomes part of the single taxable person treatment, the Representative Entity must notify the Authority within 20 business days of the activity’s launch, ensuring the fourth activity’s income and expenses are properly incorporated into the group’s Corporate Tax calculation for that period. Missing this 20-day notification window doesn’t remove the activity from the single taxable person treatment automatically, since inclusion is based on meeting the conditions, but it does create a compliance gap the Representative Entity would need to resolve with the Authority.

Conclusion

This Decision outlines the conditions federal and local government entities must meet to be treated as single taxable persons. By simplifying Corporate Tax procedures and ensuring consistency in tax treatment for government entities, this Decision supports government entities’ compliance with tax laws and regulations.

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How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, helps government entities determine Corporate Tax taxability and manage single taxable person compliance requirements.

Contact Farahat & Co. today to discuss your Corporate Tax requirements.