The UAE Ministry of Finance issued Ministerial Decision No. 68 of 2023 to provide guidelines on how local government businesses and activities can be treated as single-taxable persons. The Ministerial Decision outlines the conditions that local government entities must meet to be treated as a single taxable person, following Article 5 (6) of the UAE Corporate Tax Law. The law provides that the Businesses and Business Activities conducted by the Local Government Entities shall be treated as a single Taxable Person.
Requirements to be treated as a single taxable person
The Decision states that the Local Government Entities must fulfil the following conditions to be treated as a single taxable person:
1. Inclusion of all businesses and activities in the application
The application to be regarded as a single taxable person must comprise all businesses and activities conducted by the local government entities. This means that all business activities, regardless of the nature or scope, must be listed in the application. This condition ensures that the application is comprehensive and provides the tax authority with all relevant information.
2. Conduct businesses and activities under a valid license
The businesses and actions administered by the local government entities must be administered under a valid license allocated by a licensing authority. Therefore, the license must be issued by a recognized authority, and the business activity must be authorized under the terms of the license. This condition ensures that the business activities are legal and legitimate.
3. Conduct businesses and activities within the same emirate
The businesses and activities conducted by the local government entities must be executed within the same emirate. This means that the business activities should be geographically concentrated in one emirate. This condition ensures that the tax authority has a clear understanding of the business activities being conducted.
4. Application to be made by the representative local government entity
The application to be treated as a single taxable person must be made by the representative local government entity. This means that the local government entity that is appointed as the representative must apply for all other local government entities. This condition ensures that the application is coordinated and provides the tax authority with a clear point of contact.
5. Notification of the appointment of the representative local government entity
The tax authority must be informed of the appointment of the representative local government entity that is required to comply with all liabilities set out in the Corporate Tax Law and the Ministerial Decision. This condition ensures that the tax authority has a clear understanding of the local government entity that has to enforce compliance.
6. Replacement of the representative local government entity
An application to the tax authority can be made to replace the representative local government entity without discontinuation of the treatment as a single taxable person. Thus, the local government entities can change their representative without disrupting the tax treatment. This condition ensures that the application can be updated as necessary.
7. Notification of new businesses or activities
Any new businesses or activities conducted by the local government that encounter the requirements under Clause 1 of this Article shall be directly treated as part of the single taxable person. The representative local government entity shall notify the Authority within (20) twenty business days of the occurrence of such an event. This implies that any new business activities must be reported to the Authority within the specified time frame to ensure compliance with the decision and avoid any penalties or legal consequences.
8. Cessation of single taxable person treatment
The treatment as a single taxable person under Clause 1 of this Article shall cease in certain circumstances. Firstly, if the representative local government entity applies to the Authority for approval to cease the treatment as a single taxable person and it is granted. Secondly, if the conditions under Clause 1 of this Article are not met, leading to a failure to meet the criteria for a single taxable person
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Abrar Ahmad holds a Master’s as well as an MPhil in Finance and has an extensive experience of 10+ years in managing all aspects of Taxation, VAT Consulting and Accounting. He also carries with him a working knowledge of corporate tax and has helped drive value and growth to the businesses of numerous clients.
