Is a company owned by the government subject to Corporate Tax?
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It depends: if it's a government department itself, it's normally exempt unless it runs a licensed business, in which case that business is taxed. If it's a separate company owned by government, it's taxed on Corporate Tax unless it's listed in a Cabinet Decision as exempt for specific mandated activities - you should check if it's listed and register if not.
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The detail
A Government Entity (the government body itself) is exempt from Corporate Tax under Article 5(1), but becomes subject to tax on any Business or Business Activity it conducts under a Licence, which must be accounted for separately (Article 5(2)-(4)). A Government Controlled Entity (a separate juridical person wholly owned and controlled by government) is only exempt if it is listed in a Cabinet Decision together with its Mandated Activities; any non-mandated business activity it conducts remains taxable and triggers a registration obligation.12
What the law says
- Government Entities are exempt from Corporate Tax unless they conduct a licensed Business or Business Activity, which is then taxed as an independent business.1
- Government Controlled Entities are exempt only if listed in a Cabinet Decision together with their Mandated Activities; non-mandated business activities are taxable and require registration.2 Based on FTA guidance
What it depends on
- Whether the entity is the Government Entity itself or a separately incorporated Government Controlled Entity changes which exemption rule applies.12
- Even an exempt Government Entity becomes taxable on any activity it conducts under a Licence from a Licensing Authority, tracked separately from its other activities.1
- A Government Controlled Entity's exemption is limited strictly to the Mandated Activities specified in its Cabinet Decision listing; any other activity is taxable.2 Based on FTA guidance
Check before you rely on it
- Confirm whether the entity is a Government Entity or a separately incorporated Government Controlled Entity
- Check whether it (and its specific activities) is listed in a Cabinet Decision as exempt
- Check whether it holds any business licence or conducts activities outside its mandated scope
Note: The sources do not identify which Cabinet Decision lists a specific entity, so you'll need to check the relevant Cabinet Decision to confirm its exempt status.
Sources (2) — read the official text
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Article 5 – Government Entity
Read the article
Article 5 – Government Entity 1. A Government Entity shall be exempt from Corporate Tax and the provisions of this Decree-Law shall not apply to it. 2. Notwithstanding Clause 1 of this Article, a Government Entity shall be subject to Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 10 the provisions of this Decree-Law if it conducts a Business or Business Activity under a Licence issued by a Licensing Authority. 3. Any Business or Business Activity conducted by a Government Entity under a Licence issued by a Licensing Authority shall be treated as an independent Business, and the Government Entity shall keep financial statements for this Business separately from the Government Entity’s other activities. 4. The Government Entity shall calculate the Taxable Income for its Business or Business Activity specified in Clause 2 of this Article independently for each Tax Period, in accordance with the provisions of this Decree-Law. 5. Transactions between the Business or Business Activity specified under Clause 2 of this Article and the other activities of the Government Entity shall be considered Related Party transactions subject to the provisions of Article 34 of this DecreeLaw. 6. A Government Entity may apply to the Authority for all its Businesses and Business Activities to be treated as a single Taxable Person for the purposes of this DecreeLaw subject to meeting the conditions to be prescribed by the Minister.
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Read the article
5.2.3. Exempt Persons if listed in a Cabinet Decision and meet relevant conditions Government Controlled Entities A Government Controlled Entity is any juridical person, directly or indirectly wholly owned and controlled by a Government Entity, as specified in a decision issued by the Cabinet at the suggestion of the Minister.17 Government Controlled Entities that conduct Mandated Activities and are listed in a Cabinet Decision will be exempt from Corporate Tax.18 However, a Government Controlled Entity that conducts Business that is not its Mandated Activity will be subject to Corporate Tax in relation to that activity and must register for Corporate Tax. 19 Example 6: A Government Controlled Entity that undertakes Mandated Activities Company R is incorporated in Abu Dhabi, and is wholly owned and controlled by Abu Dhabi’s Department “D”. Company R is listed in a Cabinet Decision as a Government Controlled Entity along with its Mandated Activities. Company R does not conduct any other Business Activities. As Company R and all of its activities are listed in a Cabinet Decision, the entity will be exempt from Corporate Tax and will not be required to register for Corporate Tax. Example 7: A Government Controlled Entity that undertakes both Mandated Activities and non-Mandated Activities Company S is an entity wholly owned and controlled by the Department “D” in Sharjah. The entity conducts Mandated Activities and is listed in a Cabinet Decision as a Government Controlled Entity. Company S also conducts non-Mandated Activities. As Company S conducts non-Mandated Activities, these Business Activities will be taxable. Company S will be required to register for Corporate Tax. Any income earned and relevant expenses incurred for the Mandated Activities will be exempt from Corporate Tax. 17 Article 1 of the Corporate Tax Law. 18 Article 6(1) of the Corporate Tax Law. 19 Article 6(2) of the Corporate Tax Law. Corporate Tax Guide I Registration of Resident Juridical Persons I CTGRJP1 19
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Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer
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