Treatment of Foreign Entities is required to determine their taxability and ensure compliance with corporate tax regulations. Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses stipulates the conditions to whether Foreign Persons are subject to or exempt from corporate tax in UAE. Therefore, taxable persons should avail of expert consultation from Corporate Tax Consultants in the UAE to establish their taxability and to stay compliant, to which noncompliance accrues hefty fines.
Will foreign entities and individuals be subject to UAE corporate tax?
As per the UAE Corporate Tax Law, Foreign Entities that have business operations in the UAE through a permanent establishment or that are deemed resident in the UAE for Corporate Tax purposes will be subject to UAE Corporate Tax. Whereas, a non-resident person will be subject to UAE Corporate Tax if the non-resident person has a permanent establishment in the UAE or earns income sourced from the UAE. Juridical persons who are residents of the UAE will be required to pay UAE Corporate Tax on their income earned from both the UAE and other countries. However, certain income gained from foreign subsidiaries and income earned by foreign branches that are taxed in another jurisdiction will usually be exempt from UAE Corporate Tax.
Read more: Will foreign companies be subject to the UAE corporate tax?
Conditions to consider a Foreign Juridical person as a resident person
A Foreign Juridical person will be considered a UAE resident for Corporate Tax purposes and subject to its income derived from both the UAE and abroad if it is adequately handled in the UAE. Moreover, a foreign individual will be subject to UAE Corporate Tax and be deemed as a resident person if he or she conducts a business or business activity within the UAE.
How to determine a permanent establishment in the UAE?
A foreign person will have a Permanent Establishment in the UAE if:
- The foreign person has an established place in the UAE through which business is conducted.
- There is a person who has the authority to conduct business in the UAE on behalf of a foreign person.
For corporate tax UAE purposes, a fixed place of business will not be a deemed Permanent Establishment if it is utilized entirely to stock, exhibit or distribute goods or commodities belonging to the foreign person or to manage activities that are of a preparatory nature. Furthermore, a Permanent Establishment will not be deemed if the person who possesses the authority to carry out business in the UAE on behalf of the foreign person conducts as a self-reliant agent.
Does investment in UAE real estate create a taxable permanent establishment?
A foreign individual that owns property in the UAE in his or her personal capacity will not be subject to UAE Corporate Tax and akin compliance obligations. Investment into UAE real estate by a foreign juridical person will constitute a permanent establishment if the real estate represents a permanent place of business in the UAE through which the business of the foreign person is completely or partly conducted.
How to determine if income is derived from the UAE?
Income will be deemed to have derived from the UAE, if:
- The income is derived from a UAE resident.
- The income derived is associated with a Permanent Establishment in the UAE of a non-UAE resident.
- The income is sourced from activities conducted, assets located, capital invested, rights utilized or services carried out in the UAE.
Read more: Will the Real Estate Sector Be Subjected to the UAE Corporate Tax Regime?
Will investment income earned by a foreign investor in the UAE be subject to corporate tax?
Income accrued from dividends, capital gains, interest, royalties and other investment returns earned by foreign juridical persons or individuals will not be subject to UAE CT, except such income can be associated with a permanent establishment in the UAE of the foreign person.
Hire Tax Agent in the UAE
Essentially, Foreign Persons are required to determine their taxability and ensure compliance with the corporate tax regulations and standards in the UAE. Thus, it is advisable for taxable persons to avail of expert consultation from Corporate Tax UAE to establish their taxability and to stay compliant, to which noncompliance accrues hefty fines. You can appoint a tax agency by searching for 'info@corporatetaxuae.com in the 'Appoint tax agency' tab and submitting a request. Therefore, contact us today and we shall be glad to assist you.
Reference: https://mof.gov.ae/corporate-tax-faq/
Mostafa is a seasoned Tax Consultant with over 5 years years of experience gained in diverse taxations matters. He has vast expertise in settling tax disputes with the Federal Tax Authority and handling of tax procedures in compliance with tax laws. He is adept in investigating underlying tax intricacies and offering expert tax advisory. He is also well-versed in conducting tax analysis’s and negotiations with the Tax Regulators, upon tax preparation and filing. Mostafa specializes in the areas of Tax law, Auditing, Accounting and Banking law.
