Newsletter | Corporate Tax – No.8


UAE CT Law, released on 9th December 2022, is broadly aligned with Organisation for Economic Co-operation and Development (OECD) standards. All taxpayers are required to file a UAE Corporate Tax return, irrespective of the level of income or the status of the company. Thus, UAE businesses subject to CT are required to register and obtain a Tax Registration Number. Also, a foreign business may be required to tax register if they have a Permanent Establishment in the UAE, i.e. they have a fixed place or a dependent agent in the country. Thus, businesses have to ensure that they are tax registered as per their Tax Period, i.e. the Financial Year for which a Tax Return is required to be filed. In this article, we are describing the Permanent Establishment principle.

Permanent Establishment

Article 14 defines the term “Permanent Establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on. It includes especially a place of management or a branch or an office, etc.

An enterprise’s “Permanent establishment” (PE) shall be deemed not to include: 

  • Use of facilities or maintenance of a stock of goods solely for the purpose of storage, display or delivery of goods or for the purpose of processing by another enterprise. 
  • Maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information; or solely for the purpose of carrying on any other activity of a preparatory or auxiliary character.
  • The activities being conducted by the PE are not part of the core income-generating activities of the enterprise or its Related Parties. 
  • Where the enterprise does not derive State Sourced Income.
  • Where such PE is a consequence of a temporary and exceptional situation.
  • A broker, general commission agent or an agent of an independent status, merely because it carries on business in the foreign country; 

 Agent – Independent status vs Dependent status:

  • Dependent agent: When the activities of an agent in the UAE are devoted wholly or almost wholly on behalf of non-resident company, unless the activities of such person are limited to the purchase of goods for the enterprise –
      • Habitually exercise the authority to conclude contracts
      • Negotiates or concludes contracts without material intervention 
  • Independent Agent: Acting in the ordinary course of their business. Does not work exclusively for the foreign company and are truly legally and economically independent.

Determining profits of a Permanent Establishment:  Article 12, Cl.3 states the profits of a company shall be taxable only in the country where a permanent establishment is situated. 

  • The profits which might be expected to make if –
    • Both Parent and branch company were a distinct and separate enterprise engaged in the same or similar activities; and 
  • Dealing wholly independently with the parent company of which it is a permanent establishment.

Expenses are allowed to be considered as an expense which are incurred for the business purposes of the permanent establishment, including executive and general administrative expenses.

UAE Corporate Tax
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