The UAE Tax Authority announces new rules for non-residents

The UAE Federal Tax Authority (FTA) has issued detailed guidelines describing the criteria that will be used to identify non-residents that would be required to pay UAE corporation tax.

UAE Tax Authority Releases Guide on Non-Residents' Corporate Tax

With the introduction of the corporate tax law on June 1, 2023, these regulations will provide much-needed certainty for UAE residents and businesses. The FTA's guide specifies two main cases under which non-residents may become liable for corporate tax:

1. Permanent Establishment and High Turnover:

If an individual maintains a permanent establishment in the UAE and achieves a turnover exceeding AED 1,000,000 (approximately US$272,300) during a calendar year, they become eligible for corporate tax.

2. Derivation of State-Sourced Income:

If non-residents fulfill the requirements stated in the guidance, they will be liable for corporate tax on income they receive from the UAE.

Criteria for Non-Resident Corporations

Non-resident corporations must also meet specific criteria to be subject to corporate tax. These include:

  1. Permanent Establishment: Having a permanent establishment in the UAE makes corporations eligible for corporate tax.

  2. State-Sourced Income: Earning state-sourced income from the UAE is another condition for corporate tax liability.

  3. Nexus in the UAE: Corporations with connections to the UAE, such as deriving rental income from property within the country, may also be subject to corporate tax.

Importance of Tax Registration

A Tax Registration Number (TRN) is required for corporate tax reasons, and the FTA stresses the necessity of non-resident juridical persons registering for corporate tax purposes when they are eligible to do so. To avoid delays in compliance and possible administrative penalties, registration is required.

Exemptions for Certain Non-Residents

For corporate tax reasons, non-resident juridical persons who derive only from state-sourced income and who have no permanent establishment or connection in the Emirates are exempt from registering under the FTA.

Registration for Non-Resident Natural Persons

A non-resident natural person is required to register for corporate tax purposes and obtain a TRN if their annual turnover attributable to their permanent establishment in the United Arab Emirates is more than AED 1,000,000 in any given calendar year.

Compliance with these guidelines is crucial for individuals and entities involved in income generation within the UAE, ensuring proper adherence to corporate tax regulations and avoiding potential penalties.

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