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Understanding Non-Resident and Resident Person Status
The Corporate Tax Law defines a non-resident person as an individual or legal entity that is not a resident person. As a result, it is necessary to first determine whether an individual or legal entity is a resident person.
An individual is considered a Resident Person, if: A resident person is an individual or legal entity that conducts business in the UAE or is incorporated or otherwise established in the UAE. It can also be an entity that is incorporated or otherwise established outside the UAE but is effectively managed and controlled in the UAE.
A Non-Resident Person is an individual who is not a resident person of the UAE but either: Has a permanent establishment in the UAE and has a turnover attributable to their permanent establishment that exceeds AED 1,000,000 within a Gregorian calendar year; or derives state-sourced income, which is income that accrues in or is derived from the UAE.
Not all non-residents are subject to corporate tax in the UAE, but the Corporate Tax Law defines a “non-resident person” as a taxable non-resident person. Therefore, throughout this guide, the term “non-resident person” refers to a non-resident person who is subject to corporate tax in the UAE unless otherwise specified.
Under What Circumstances Is a Non-Resident Person Required to Register
Non-resident legal entities that are subject to corporate tax in the UAE must register for corporate tax purposes and obtain a Tax Registration Number (TRN). This is required if the non-resident legal entity has: a permanent establishment in the UAE; or a connection to the UAE.
Once a person determines that their activities will create a permanent establishment in the UAE or that they have a connection to the UAE, they are considered a non-resident person for corporate tax purposes under the Corporate Tax Law. They should register with the Federal Tax Authority for corporate tax purposes to avoid any compliance delays and potential administrative penalties.
What Income is Subject to Corporate Tax
Non-resident businesses with a permanent presence in the UAE must pay corporate tax on their profits. The corporate tax rate for non-resident businesses is the same as the rate for resident businesses, which is 0% on the first AED 375,000 of profits and 9% on profits above AED 375,000. Non-resident businesses operating in free zones pay corporate tax at the following rates:
0% on qualifying income
9% on income that is not qualifying income
Commercial Activities Conducted by Non-Resident Individuals
Non-resident individuals will only be subjected to corporate tax in the UAE if their turnover from business or business activities in the UAE exceeds AED 1 million in a Gregorian calendar year. The following are not considered businesses or business activities for natural persons and therefore not subject to corporate tax:
Salaries and wages received from an employer under an employment contract.
Income from personal investments that are not made through a license from a licensing authority and are not considered commercial businesses under the UAE Commercial Transactions Law.
Income from real estate investments that are not conducted through a license from a licensing authority