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Welcome to our website blog, where we provide valuable information and insights into the corporate tax regulations in the United Arab Emirates (UAE) for foreign entities. Understanding the tax obligations and exemptions is essential for businesses operating in the UAE or considering establishing a presence in this dynamic country. In this article, we will discuss the key aspects of UAE corporate tax and its implications for foreign entities.
Scope of UAE Corporate Tax
Foreign entities that operate in the UAE through a permanent establishment or are considered residents in the UAE are subject to UAE corporate tax. However, it’s important to note that merely earning UAE sourced income would not trigger corporate tax payable or require the foreign entity to register and file for UAE corporate tax.
Taxation for Non-Residents
A non-resident person will be subject to UAE corporate tax if they have a permanent establishment in the UAE or earn income sourced from the UAE, which is subject to 0% taxation. Income is generally considered to be sourced from the UAE if it is derived from a UAE resident, a UAE Permanent Establishment, or if the income is derived from activities performed or assets located, capital invested, and rights used in the UAE.
Residency and Taxation for Foreign Juridical Persons
A foreign juridical person may be treated as a UAE resident for corporate tax purposes and subject to UAE corporate tax on income sourced from both the UAE and abroad if it is effectively managed and controlled in the UAE.
Residency and Taxation for Foreign Individuals
A foreign individual will be subject to UAE corporate tax as a “Resident Person” if they are engaged in a business or business activity in the UAE. However, being treated as a Resident Person for UAE corporate tax purposes does not automatically mean the foreign individual will be considered a resident in the UAE for all other taxes or for the application of a double tax agreement.
It’s important to note that a foreign individual who does not conduct a taxable business in the UAE would generally not be subject to UAE corporate tax.
Permanent Establishment
In general, a foreign person will have a Permanent Establishment in the UAE if:
- They have a fixed or permanent place in the UAE through which the business of the foreign person is carried on, or
- There is a person who has and habitually exercises authority to conduct business in the UAE on behalf of the foreign person.
However, a fixed place of business used solely to store, display, deliver goods, or conduct preparatory or auxiliary activities would not be considered a Permanent Establishment. Similarly, if the person who has and habitually exercises authority to conduct business in the UAE on behalf of the foreign person acts as an independent agent, a Permanent Establishment would not arise.
It’s important to consider the application of an international agreement when determining whether a permanent establishment exists.
Taxation of Foreign Individuals Owning Property
A foreign individual who owns property in the UAE in their personal capacity would generally not be subject to UAE corporate tax and related compliance obligations.
Taxation of Foreign Juridical Persons Investing in Real Estate
The investment in UAE real estate by a foreign juridical person may give rise to a taxable permanent establishment if the real estate represents a fixed place of business in the UAE through which the business of the foreign person is wholly or partially carried out.
UAE Sourced Income and Withholding Tax
Income will be considered sourced from the UAE if:
- The income is derived from a UAE resident.
- The income derived is attributed to a Permanent Establishment in the UAE of a non-UAE resident.
- The income is derived from activities performed, assets located, capital invested, rights used, or services performed or benefited from in the UAE.
The Corporate Tax Law includes a non-exhaustive list of income that is considered as being
Registered Tax Agency and Agents
Tax Agency Registration Name: PARKER RUSSELL OBAID AUDITING
Tax Agency Registration Number: 30000269
Tax Agent Registration Name: Mansour Abdulwahab Mohamed Ahmed
Tax Agent Registration Number: 20037867
To speak with our corporate tax expert kindly email us at: infodubai@pr-uae.com or sales@pr-uae.com