The federal decree law no. 47 of 2022, also known as the corporate tax law, was issued on Oct 10, 2022, with the aim of implementing a federal-level tax on business profits in the UAE. All businesses falling within the definition of taxable persons for corporate tax purposes are obligated to fulfil their tax obligations for each tax period commencing on or after June 1, 2023. For businesses, whether resident or non-resident, to carefully ascertain their tax status and ensure compliance with the corporate tax law, it is advisable to avail the expert services of Tax Consultants by Corporate Tax UAE. This article primarily concentrates on non-resident persons and outlines the circumstances under which they are required to register for corporate tax in the UAE.
Definition of a Non-Resident Person
Primarily, understanding the distinction between residents and non-residents is essential. As per the corporate tax guide for non-resident persons, a non-resident person is defined as someone who is not a resident person.
Resident Person includes;
- A natural person conducting business activities in the UAE.
- A juridical person registered or acknowledged within the UAE or registered outside the UAE but properly controlled and administered within the UAE.
Non-Resident Person includes;
- A natural person without residency but owning a Permanent Establishment (PE) in the UAE generating revenue exceeding 1,000,000 dirhams within a year.
- A natural person without residency earning income from the UAE.
- A juridical person registered and established outside the UAE without proper control and administration in the UAE, having a PE, presence, or fixed location for business in the UAE.
- A juridical person registered and established outside the UAE without proper control and administration in the UAE, having a nexus in the UAE (applies to non-resident juridical persons with earnings from immovable assets in the UAE).
Registration Requirements for Non-Resident Persons
Non-resident juridical persons in the UAE must register with the Federal Tax Authority (FTA) for corporate tax purposes and obtain a Tax Registration Number (TRN) if they fall under the definition of taxable persons. Such persons may be subject to corporate tax if they have:
- A PE in the UAE, or
- A nexus in the UAE.
Entities anticipating the creation of a PE or having a nexus in the UAE must submit a registration application to the FTA for corporate tax purposes to ensure compliance and avoid penalties.
For a non-resident juridical person exclusively earning UAE-sourced income with no PE or nexus in the UAE, registration with the FTA for corporate tax reasons is not required.
Examples for Clarification
Example One:
A tax resident and juridical person incorporated in China, ABC Company, operates outside the UAE but earns income from clients in the UAE without having a PE or nexus. ABC Company is exempt from registering or paying corporate tax in the UAE.
Example Two:
Another tax resident and juridical person from China, XYZ Company, earns income from UAE clients and rental income from a building it owns in the UAE. Since XYZ Company has a nexus due to the rental income, it is obligated to register and pay corporate tax in the UAE.
Registration for Non-Resident Natural Persons
Non-resident natural persons in the UAE must register and obtain a Tax Registration Number (TRN) from the FTA if they own a PE in the UAE generating revenue exceeding 1,000,000 dirhams within a year.
Corporate Tax Guide for Non-Resident Persons: Questions and Answers
Corporate Tax Advisory Services
Engaging corporate tax advisors is advisable to navigate the complexities of corporate tax laws, ensuring compliance, and avoiding penalties. Expert Tax Consultants in UAE can provide valuable assistance in identifying tax status and obligations in the UAE. Thus, for businesses, whether resident or non-resident, to carefully ascertain their tax status and ensure compliance with the corporate tax law, it is advisable to avail the expert services of Tax Consultants in UAE. Therefore, contact us today and we shall be glad to assist you.
Salah is a qualified Tax Consultant with over 5 years of experience gained in distinct intricate tax matters, he has high expertise in conducting tax negotiations and investigations with the Federal Tax Authority and other external Tax Bodies. He is well-versed with reviewing and drafting tax documents, upon tax preparation and filing. Salah has also advised on a plethora of tax matters, he draws much attention to tax filing procedures and to offering professional investigations to underlying tax complexities.
