The United Arab Emirates (UAE) government is constantly striving to develop its economic framework to attract foreign investment and boost its economic growth. One of the steps taken in this direction is the introduction of a corporate tax law that is applicable to all businesses operating in the UAE. However, the application of this law to the businesses conducted by the Federal Government Entities was ambiguous until the issuance of Ministerial Decision No.68 of 2023. This decision clarifies the conditions that need to be met for treating the Federal Government Businesses and Business Activities as a single Taxable Person. In this article, we will discuss these conditions in detail.
- Application to be Treated as a Single Taxable Person
The first condition that needs to be met for treating the Federal Government Businesses and Business Activities as a single Taxable Person is that the application for such treatment should encompass all businesses and business activities performed by the Federal Government Entities. This means that Federal Government Entities cannot choose to include only some of their businesses and business activities in the application. It has to be an all-or-none approach.
- License Issued by a Licensing Authority
The second condition is that the businesses and business activities supervised by the Federal Government Entities should be conducted under a license issued by a licensing authority. This condition ensures that the businesses and business activities conducted by the Federal Government Entities are legitimate and authorized by the relevant authorities. Any business or business activity that is not conducted under a license will not be included in the treatment as a single Taxable Person.
- Application by the Representative Federal Government Entity
The third condition is that the application to be treated as a single Taxable Person shall only be made by the Representative Federal Government Entity. This means that only one Federal Government Entity can apply for this treatment on behalf of all other entities. This is done to ensure that there is no confusion or overlap in the application process.
- Notification of Representative Federal Government Entity
The fourth condition requires that the Authority be informed of the nomination of the Representative Federal Government Entity that is directed to harmonize with all obligations set out in the Corporate Tax Law and the Ministerial Decision. This condition ensures that the Authority is aware of the entity that will be responsible for complying with the tax law and the decision. It also assures that there is no complication or overlap in the compliance procedure.
- Replacing the Representative Federal Government Entity
The fifth condition allows for an application to be prepared to the Authority to renovate the Representative Federal Government Entity without suspending the treatment as a single Taxable Person. This means that if the Representative Federal Government Entity is no longer able to fulfill its obligations, another entity can take its place without affecting the treatment as a single Taxable Person.
- New Businesses or Business Activities
If a new business or business activity is started by the Federal Government Entity, it will automatically be treated as part of the single Taxable Person without the need for a new application. However, the Representative Federal Government Entity needs to notify the Authority of such an event within 20 business days.
- Circumstances for Notification
The seventh condition imposes that the Representative Federal Government Entity shall inform the Authority within 20 business days from the happening of any of the subsequent circumstances:
- Any industry or industry action is no longer administered by the Federal Government Entity.
- Any business or job workout is no longer performed under a license granted by a licensing administration.
This means that the Federal Government Entity must keep the Authority informed about any changes in its business operations that may affect its status as a single taxable person. It is important to note that failure to meet any of the conditions under Clause 1 of this Article may result in the cessation of treatment as a single taxable person.
Ceasing treatment as a single taxable person
The Ministerial Decision also outlines the circumstances under which the treatment as a single taxable person will cease. This includes:
- Following authorization by the Authority of a plea brought in by the Representative Federal Government Entity to terminate the treatment as a single taxable person.
- Failure to fulfill the requirements under Clause 1 of this Article.
Choose the Best Consultation
Ministerial Decision No. 68 is an addition to the wide tax structure of the UAE. Newer tax laws are a result of the UAE’s efforts to enhance the tax arrangements so that every taxable person pays his due tax to the government. To comprehend these tax laws better, you can consult corporate tax UAE expert tax agents. They have adequate knowledge of the UAE’s tax system and can guide you precisely on every tax matter.
