Non-Residents Subject to Corporate Tax in the UAE

The United Arab Emirates Federal Tax Authority (FTA) has recently unveiled a comprehensive guide outlining the criteria for determining non-residents subject to corporate tax in the country. This development follows the implementation of the corporate tax law, effective from June 1, 2023.

In a public statement, the FTA extended an invitation to all non-residents generating income in the UAE to refer to the newly published guidelines and the relevant legal framework available on their official website.

Corporate Tax Implications for Non-Resident Individuals

The FTA’s guide provides clear insights into the conditions under which non-resident individuals may become liable for corporate tax. There are two specific scenarios:

1. Permanent Establishment and Exceeding AED 1,000,000 Turnover: The first case applies when a non-resident natural person possesses a Permanent Establishment within the UAE and achieves an annual turnover exceeding AED 1,000,000.
2. State-Sourced Income: The second scenario applies when non-resident individuals derive State-Sourced Income from the Emirates.

Non-Resident Natural Persons

A non-resident natural person may be subject to corporate tax under two specific conditions:

• If they have a Permanent Establishment (PE) in the UAE and their turnover exceeds AED1,000,000 during a calendar year.
• If they derive State-Sourced Income from the UAE.

Non-Resident Juridical Persons (Corporations)

Non-resident juridical persons (corporations) must meet one of the following criteria to be subject to corporate tax:

• Having a PE in the UAE
• Deriving State-Sourced Income from the UAE
• Having a nexus in the UAE, such as earning income from Immovable Property in the country

Registration for Corporate Tax Purposes

Non-resident juridical persons who meet the relevant criteria must register for corporate tax purposes and obtain a Tax Registration Number (TRN). This is crucial to avoid compliance delays and possible administrative penalties.

Non-resident juridical persons who solely derive State-Sourced Income and do not have a PE or nexus in the UAE are not required to register for corporate tax purposes.

Non-Resident Natural Persons with a PE in the UAE

A non-resident natural person who has a PE in the UAE must register for corporate tax purposes and obtain a TRN if their turnover attributable to their PE in the UAE exceeds AED1,000,000 within a calendar year.

The FTA encourages all non-residents who derive income in the UAE to consult the new guidelines and the relevant legal framework on their official website.