Corporate - Branch income

Last reviewed - 03 December 2023

Tax rates on branch profits are the same as on corporate profits. However, the Income Tax Law allows the Tax Department to assess income tax on branches of foreign companies as a percentage of turnover via the 'deemed profit' basis of assessment. Tax is therefore payable even where tax losses are declared.

The level of deemed profit applied to turnover varies according to the branch's type of business activity. This ranges from 10% to 15% for civil works and contracting (turnkey projects), 15% to 25% for oil service, and between 25% and 40% in the case of design/consulting engineers. A deemed profit of between 5% and 7% is also assessed on supply. The deemed profit percentage applied to any year will be higher than the profit percentage declared in the annual tax return since the deemed profit basis is applied during the course of a tax audit and is effectively a revenue generating exercise for the tax authorities. Historically, tax audits have not resulted in credits or reimbursements.