Corporate Tax for Non-Resident Persons in the UAE

Non-Resident Persons for UAE Corporate Tax

UAE has implemented Corporate Tax with effect from 01/06/2023 and the taxation is applicable to businesses or business activities. This means, that even if the natural person conducts business or business activities in UAE and exceeds AED 1 Million turnover from the business is subject to UAE Corporate Tax. The implication of UAE Corporate Tax is on residents as well as non-resident persons. In this article, we are going to dive into the Corporate Tax for non-resident persons in the UAE.

Resident for UAE Corporate Tax

Who is a resident of UAE Corporate Tax?

It is important to understand the concept of resident for Corporate Tax purposes before jumping into the Corporate Tax for non-resident persons. Below are the residents for UAE Corporate Tax purposes;

Juridical person incorporated or established or recognized in the UAE – All the companies registered in the UAE as per the local law of the country are coming under this category which includes all companies including free zone and offshore entities registered in the UAE.
Foreign companies that are effectively managed and controlled by UAE – Any company that is incorporated outside the UAE but whose businesses are managed and controlled by the UAE comes into this category. Example:- a company established in Cayman Island and the Board of Directors of the Cayman Island company is in the UAE to conduct the board meetings as well the major business decision. This concept is widely called Place of Effective Management (PoEM)
Natural person conducting business or business activities in UAE – As per Cabinet Decision No.49 of 2023, the authority has clarified that any natural person who is earning more than 1 Million dirhams from business or business activities conducted in the UAE is subject to Corporate Tax. While calculating the 1 Million threshold, wages, and personal real estate investment income, personal investment income is required to be excluded. If the natural person generates foreign income which is connected to his/her business activity in UAE, such income is also considered under the purview of UAE Corporate Tax.

The tax base for residents in the UAE Corporate Tax

Residents are subject to Corporate Tax for their worldwide income.

Non-Resident for UAE Corporate Tax

Who is a non-resident for UAE Corporate Tax purposes?

Non-residents are generally those who established the business outside the UAE.

Are always the non-residents taxed in UAE Corporate Tax?

Non-residents are taxed in the UAE only if;

any permanent establishment in the UAE
any nexus in the UAE
any UAE source income generated by non-resident

What is a Permanent Establishment for non-residents?

Permanent Establishment in simple words can be defined as a non-resident who has having presence in the UAE through a fixed place (For example: a branch or office) or through a dependent agent who exclusively works for non-residents.

The general form of Permanent Establishment for non-residents is a “branch of foreign companies”. Many foreign entities are extending their business to the UAE through branch or representative offices. Always the judgment cannot be made that such branches/ Rep offices are considered as permanent establishments of foreign companies. It depends on the level of operation conducted by the foreign company through the branch/rep office in the UAE. We have written a detailed article on this Read more.

Another form of Permanent Establishment for non-residents in the UAE is through an agent in the UAE. If the non-resident has an agent in the UAE who exclusively works for the foreign company or who concludes or almost concludes the contracts in the UAE on behalf of a foreign company are the classic cases of an Agency Permanent Establishment

What is the nexus for non-residents in the UAE Corporate Tax?

Nexus, in simple words, can be explained as a connection. Any foreign company that has a connection with the UAE can explain that they do have a nexus in the UAE. Cabinet Decision No.56 of 2023 has clarified the concept of Nexus for Corporate Tax purposes and the key points are as below;

The concept of nexus is applicable only to foreign companies, not to foreign individuals.
The immovable properties owned by foreign companies in the UAE are considered a nexus in the UAE.
The immovable property shall generate revenue to be considered as a nexus in the UAE.
If the immovable properties are owned by a foreign company and the income generated from such immovable property is from the core business activity, this may be considered a Permanent Establishment as well as a nexus.

Is there any difference in tax liability for non-residents who have either a Permanent Establishment or Nexus?

There is no difference in tax liability for Permanent Establishment or nexus. In both cases, the non-resident is subject to tax in the UAE on the income which is attributable to the PE or nexus. A non-resident who has a Permanent Establishment or nexus in the UAE is required to register for Corporate Tax and obtain a Tax Registration Number (TRN). Based on the financial year of the

To learn more about Corporate Tax for Non-Resident Persons in the UAE, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.