United Arab Emirates

Corporate - Corporate residence

Historically, UAE corporate tax residence has been certified by UAE tax authorities based on a number of documents submitted for UAE incorporated legal entities only, both in mainland and in free zones. 

Under the UAE CT Law, companies and other juridical persons that are incorporated or otherwise formed or recognised under the laws of the UAE will be considered a Resident Person. This covers juridical persons incorporated in the UAE under either mainland legislation or applicable Free Zone regulations.

Foreign companies and other juridical persons may also be treated as Resident Persons for Corporate Tax purposes where they are effectively managed and controlled in the UAE. 

A Non-Resident Person, which is a UAE Taxable Person, is a Person who is not considered a Resident Person and that either:

1. Has a Permanent Establishment in UAE;
2. Derives state sourced income; and 
3. Has a nexus in UAE as specified in a Cabinet decision.

Permanent establishment (PE)

Under the UAE CT Law, the definition of a PE is aligned with the definition in the OECD Model Tax Convention. 

In terms of the UAE CT law, a Non-Resident Person would generally be considered to have a PE in the UAE where it has a fixed or permanent place in the UAE through which the Business of the Non-Resident Person, or any part thereof, is conducted or where a Person has and habitually exercises an authority to conduct a Business or Business Activity in the UAE on behalf of the Non-Resident Person. This will also include cases where UAE persons exercise the authority to conclude contracts in the name of the foreign entity. An additional instance is included in the UAE CT Law whereby a PE can be created where the non-resident has any other form of nexus in the UAE as specified through a subsequent Cabinet decision.

A fixed or permanent place in the UAE will not be considered a PE if it is used solely for conducting activities of a preparatory or auxiliary nature and the Minister may prescribe conditions in this regard in terms of which the mere presence of a natural person in the UAE will not create a PE for a non-resident. 

The UAE CT Law does not make reference to a Service PE but more clarity on how this aspect will be interpreted may be provided in the Cabinet decision addressing what “any other form of nexus” will encompass.

The UAE CT Law further provides an investment manager exemption, which allows an Investment Manager (i.e. a Person who provides brokerage or investment management services subject to regulatory oversight) to be considered an independent agent when acting on behalf of a Non-Resident Person for purposes of determining whether or not the Investment Manager will create a PE in the UAE. This is applicable to Investment Managers who deal in transactions involving amongst others commodities, real property, bonds, shares, derivative, securities or foreign currency.