Article 5 of the UAE Corporate Tax Law classifies all business activities of local government bodies as a single taxable entity. With ongoing changes in the UAE’s taxation system, this has significant implications for local governments. A key development is Ministerial Decision No. 68 of 2023, which outlines the conditions for registering local government businesses as a single taxable individual. This guide will detail these conditions, the potential tax implications for local government activities, and the role of corporate tax consultants in Dubai.

Conditions for treatment as one taxable person 

According to the Ministerial Decision, several conditions must be met for a local government entity to be considered as a single taxable person. The above-mentioned conditions are laid down to promote the much-needed transparent, legal, and efficient tax system. 

• All businesses and activities that are related to the application. 

One of the key requirements to apply for recognition as a single taxable person is the cover up of all businesses and activities within the local government entities. This means that activities are required to be disclosed, and the fact that it is not limited to any specific size and type of business means that everything has to be recorded. Thus, the holistic incorporation prevents any piece of information regarding the operations of the local government’s business from lacking the tax authority’s attention, making it easier to employ the right taxes and see to it that every one of them is complied with. 

• Valid License to Carry Out Businesses Activities  

Every kind of business and activity performed by the local government entities should be run under a license from a recognized licensing authority. This condition brings the aspect of legality and legitimacy in business into focus. This makes sure that all the activities that are being carried out are legal as per the license agreements that are aIso preferred regarding taxes. 

• Same Emirate Business Activities 

Having all business activities within the same emirate is a geographic limitation that assists the government in tracking the particular business activities to complete and all others, thus facilitating a much easier process of taxation for the authorities since all the business undertakings are well captured in the specified region. 

• Deemed as one ‘taxable person’  

The application for the purpose of treating a local government entity as one ‘taxable person’ has to be made by a designated ‘representative’ local government entity. In this capacity, this representative offers technical and administrative liaison between the taxman and the organization’s hierarchy. This is because the organization is better off avoiding confusion and all the information flows as well as compliance issues are controlled in one main representative. 

• Representative appointment For Local Government Entity 

Tax authority must be informed regarding whether the entity is obliged to meet all liabilities stated under the Corporation Tax Law and the Ministerial Decision. Communication in relation to this appointment makes it easy for the tax authority to identify the responsible person for tax compliance hence effective enforcement of the tax laws. 

• Substitution of the Local Government Entity (RLGE) 

When the representative of some local government entities wants to be replaced, they can do it by applying at the tax authority where it will not interrupt the treatment as a single taxable person. Such flexibility makes, for instance, it easier for local governments to update their representation as they continue to exist as one taxable entity. These provisions are very important for establishing continuity in tax treatment and for compliance. 

• Notification of New Businesses/Activities 

If the local governing body starts any new business or activities falling under the provisions of Clause 1 of the aforesaid Ministerial Decision, it has to report the same to the tax authority within twenty business days. This notification is sent in a timely manner making sure that all the new activities get integrated into the single taxable person regime thus maintaining compliance and avoiding penalties that may be associated with it. 

Withdrawal of Single Taxable Person Regime 

Local government entities can be treated as a single taxable person only under certain conditions can treatment be stopped. First of all, it is necessary to note that the above-said measure applies only in the case of the representative local government entity’s application to the tax authority for permission to stop the treatment and receipt of such permission. In that case, the entities formed would not be regarded as a single taxable entity anymore, thus requiring a different treatment in terms of tax. 

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.  

Conclusion 

The latest Dubai corporate tax law UAE offers guidance to the local government entities to qualify for a single taxable person. These conditions are important to guarantee that all business actions are legal and properly reported within the framework of tax laws. In relation to local government entities, it is very advisable to involve professional tax consultants in UAE to help in dealing with the aforementioned requirements. These professionals can help to a great extent to improve the work on the application of correct and perfecting corporate tax strategies and compliance with existing legal and regulatory acts. Consulting with a professional tax consultancy firm will enable the local government structures to adapt into the structure of a single taxable person and adhere to the laws of the UAE corporate tax 

Choose Corporate tax consultants in the UAE 

Taxable persons should seek the services of Corporate Tax Consultants Dubai, UAE to seamlessly implement corporate tax strategies and to stay compliant with corporate tax UAE regulations and standards. Thus, contact us today and we shall be glad to assist you.  

FAQs 

What criteria must local government entities meet to qualify as one taxable entity? 

Entities must operate in the same emirate, conduct similar activities, and have their application and representative properly communicated to the tax authority. 

Why is a representative needed for a local government entity’s single taxable person status? 

A representative ensures clear communication with tax authorities, preventing confusion and maintaining regulatory compliance. 

Can the representative of a local government entity be changed?

Yes, the representative can be changed with proper notification to the tax authority while maintaining single taxable person status. 

What must local government entities do for new businesses or activities?  

They must declare new businesses or activities to the tax authority within twenty business days to stay compliant. 

When can the single taxable person status be revoked?  

The status can be revoked if the conditions for single taxable treatment are no longer met or by application for suspension to the tax authority. 

How can tax consultants assist with these regulations?

Tax consultants help local government entities navigate tax compliance, optimize tax strategies, and integrate into the single taxable person framework effectively.