Who is considered a resident for UAE CT purposes

As we know that the corporate tax in UAE has finally been released, many questions and concerns are appearing from businesses. One such question is who considered a resident of the UAE for corporation tax purposes.

Defining a Resident

To what extent a company’s earnings are subject to taxation under the UAE corporate tax law; residence status is the deciding element. Also, The corporate tax system will treat as a “resident” any legal person who is residing in the UAE; but not limited to limited liability corporations; private shareholder companies, public corporate entities, and other entities. Also, If a foreign company’s management and control are based in the UAE; then it must comply with the corporate income tax UAE.

All that the legislation says about Resident Persons

Following is all you need to know about a resident for corporate tax in UAE;

• The legislation mandates that the taxable person pay corporation tax and the registered person might be a resident or a non-resident. However, Any entity formed in the UAE, including businesses operating in Freezones, any entity formed outside the UAE but controlled from the UAE, any native person who conducts a specific business task in the UAE, and any other person defined in a factor caused by the Cabinet is all considered resident taxable persons.
• However, Income earned by a non-resident in the United Arab Emirates (UAE) is subject to taxation by the UAE, but only if such income is earned via a permanent establishment (PE) in the UAE. The taxable person who is a legal resident will be required to pay corporate tax on their global taxable income, whereas the taxable person who is a permanent resident will only be required to pay corporate tax on their UAE-related taxable income. Also, In the case of a non-resident taxable person, the tax must be paid on the income tax attributable to the permanent establishment, any taxable income derived from the UAE that is not due to the permanent establishment, and any taxable income relevant to the non-resident taxable person’s nexus with the UAE.

• Also, Income in excess of the threshold is subject to a UAE corporate tax rate of 9%, while income under the threshold is subject to a corporate tax rate of 0% for a resident person. The threshold has been detailed in the Cabinet Decision; based on the Ministry’s first Corporate Tax statement, i.e, Dh375,000.

Income-Related Laws:

• Any non-UAE national who establishes a permanent establishment or employs a local representative is said to have a PR (Permanent Residence) in the UAE. Also, The words used to describe these provisions in the Law are generally consistent with those used by the Organization for Economic Cooperation and Development (OECD). However, According to the UAE’s Corporate Tax Law, the Minister of Finance will decide on any additional kinds of connectivity in the UAE that might result in a PE.
• Revenue from the United Arab Emirates earnings from the following activities are all regarded to have originated in the UAE; and are thus subject to taxation under the Corporate Tax Law; Earnings of a resident of the United Arab Emirates are considered to originate in the UAE. Any earnings made in the United Arab Emirates (UAE) as a result of work done there; property owned there, or legal rights exercised there will likewise be considered UAE-sourced income.
• However, If a person is from any other country and serves in the UAE, they must have an office in the country to be considered a resident of the UAE. These offices may be head offices, workshops, satellite offices, or any other offices. Also, If these offices serve for more than six months in the UAE then they are considered permanent residents of the UAE and the corporate tax will be implemented on them. 
• If a “fixed site or office” is simply utilized for preliminary or auxiliary activities; such as product storage, display, or delivery; or if goods are held in stock with the intention of making them available to some other person for processing; it will not be regarded as a permanent business under UAE law so it will not be considered as the permanent resident of the UAE.

Are natural persons treated as resident persons under the corporate tax law?

Yes, natural persons treated as resident persons and are subject to corporate tax. The income of natural persons, whether it is foreign income or domestic income; is subject to corporate tax in UAE only if the natural persons execute a business inside the country. 

Choose corporate tax advisory services

Its very important to understand your tax obligations when living in a country like the United Arab Emirates as the laws here strictly imposed and there no space for non-compliance. If you want assistance to learn your tax liabilities right, you can consult tax consultant Dubai UAE.

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