United Arab Emirates
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 the 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 United Arab Emirates will be considered a resident person. This covers juridical persons incorporated in the United Arab Emirates under either mainland legislation or applicable Free Zone regulations.
Foreign companies and other juridical persons may also be treated as resident persons for CT purposes where they are effectively managed and controlled in the United Arab Emirates.
A non-resident person, which is a UAE taxable person, is a person who is not considered a person and either:
- has a permanent establishment (PE) in the United Arab Emirates
- derives state-sourced income, or
- has nexus in the United Arab Emirates by way of earning income from immovable property in the United Arab Emirates.
Permanent establishment (PE)
Under the UAE CT Law, the definition of a PE is aligned with the definition in the Organisation for Economic Co-operation and Development (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 United Arab Emirates where:
- it has a fixed or permanent place in the United Arab Emirates through which the business of the non-resident person, or any part thereof, is conducted
- where a person has and habitually exercises an authority to conduct a business or business activity in the United Arab Emirates on behalf of the non-resident person (this means either the person habitually concludes contracts in the name of the non-resident person or the person habitually negotiates contracts that are concluded by the non-resident person without the need for material modification by the non-resident person), or
- the non-resident person has any other form of nexus in the United Arab Emirates as might be specified through a Cabinet decision.
A fixed or permanent place in the United Arab Emirates will not be considered a PE if it is used solely for conducting activities of a preparatory or auxiliary nature. The mere presence of a natural person in the United Arab Emirates will not create a PE for a non-resident person in the following instances:
- Such a presence is a consequence of a temporary and exceptional situation.
- The natural person is employed by the non-resident person and its activities in the United Arab Emirates are not part of the core income-generating activities of the non-resident person or its related parties.
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 in the United Arab Emirates) 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 United Arab Emirates. This is applicable to investment managers who deal in transactions involving, amongst others, commodities, real property, bonds, shares, derivative, securities, or foreign currency.