The United Arab Emirates (“UAE”) adopted Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (hence referred to as the “Corporate Tax Law”) on December 9, 2022. According to the legislation, non-residents will only be taxed on income earned within the UAE. Legal persons that have a permanent presence in the UAE and receive state-sourced revenue will be liable to corporation tax on their taxable income.

The implementation of the Corporate Tax Law in the UAE is an important step toward an enhanced and long-term taxation structure. The law intends in broadening the country’s revenue streams, assist the development of infrastructure in the UAE, and improve public services. Non-resident individuals and legal entities having a permanent presence in the UAE should be informed of their tax duties and follow the appropriate legislation to avoid penalty and legal ramifications.

Who needs to be registered for Corporate Tax?

Any Taxable Person shall register for Corporate Tax with the Authority in the form and manner and within the timeline prescribed by the Authority and obtain a Tax Registration Number, except in circumstances prescribed by the Minister.

Is there any exception to Corporate Tax registration available?

As per Article 51 of Decree Law, any Taxable Person (Resident and Non-Resident Person) shall register for Corporate Tax with the Authority in the form and manner. However, Ministerial Decision No (7) of 2023 (43) of 2023, provides the exceptions from Registration and allows following person not to register for corporate tax,

• A Government Entity
• A Government Controlled Entity
• A Person engaged in an Extractive Business (subject to certain conditions)
• A Person engaged in a Non-Extractive Natural Resource Business (subject to certain conditions)
• A Non-Resident Person that derives only State Sourced Income and does not have a Permanent Establishment in UAE

Additionally, the UAE’s Corporate Tax Law and Withholding Tax provisions give a defined structure for companies doing business in the region. The government’s attempts to reform its taxation system will foster economic growth and stability, attract international investment, and assist the country achieve its strategic goals.

A Resident, as defined by the Corporate Tax Law, is any legal entity registered in the UAE, including those in Free Zones, or a legal entity formed in another country but effectively managed and controlled in the UAE. Natural individuals who do business in the UAE may also be deemed residents.

 A Non-Resident Person is someone who does not meet the criteria of a resident yet has a Permanent Establishment (PE) in the UAE or receives revenue from the UAE. Non-Resident Persons with a PE in the UAE must pay Corporate Tax on the Taxable Income attributable to the PE. However, certain UAE-sourced income that is not traceable to PE may be subject to 0% withholding tax.