Case scenario on Article 6– Government Controlled Entity:

Question–  ZSR (Government controlled Entity) having two Units as follow:

1. Unit ‘A’ engage in Business activity and earned income from the said activity of AED    400 Lakh
2. Unit ‘B’ engage in other than business activity and having income of AED 250 Lakh.

Determine whether the income of ZSR is Exempt?

Ans.  As per the Provision of the Article 6, Government Controlled Entity is Exempt from Corporate Tax However if any Government controlled entity conduct any business activity then such activity shall be treated as independent business and liable to corporate Tax.

In the given scenario, Unit ‘B’ of ZSR is engage in other than business activity and all income of Unit ‘B’ shall be Exempt from Corporate Tax.

Unit ‘A’ is engaged in business activity and hence it shall be treated as independent business therefore income of Unit ‘A’ shall be liable to Corporate Tax.