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Post By: admin January 25 2024

When Does a Non-resident Juridical Person Have a UAE Nexus Under the UAE CT Law?

The United Arab Emirates (UAE) has recently introduced corporate tax laws with the aim of increasing the scope of tax income and reducing dependency on income from oil and gas. After the introduction of the new regime, there have been a lot of additional clarifications brought forward by the FTA to enable the public to get clearer insights. One such recent clarification laid out by the FTA is the determination of the nexus of non-resident juridical persons in the country. These laws aim to provide clarity on when a non-resident juridical person has a UAE nexus for corporate tax purposes. Understanding these rules is crucial for businesses operating in the UAE or deriving state-sourced income from the country. In this article, we will explore the key aspects of the UAE corporate tax law and discuss when a non-resident juridical person can be considered to have a UAE nexus.

UAE Corporate Tax Law and Non-Resident Juridical Person

The UAE Ministry of Finance has announced a cabinet decision on the determination of non-resident persons' nexus in the country. This decision outlines the criteria for establishing a UAE nexus for non-resident juridical persons.

Before understanding the criteria, it is important to have an idea about who is a non-resident juridical person in the UAE.

Under CT law, a non-resident juridical person is the juridical entity who is a non-resident in the UAE by:

  • Being incorporated or formed outside the UAE and
  • Being controlled and managed outside the UAE

As per the corporate tax law, the non-resident juridical person will be subject to the CT under the following circumstances:

  1. When the juridical person has a permanent establishment in the UAE
  2. When the juridical person derives any state-sourced income
  3. When the juridical person has a nexus in the UAE.

The non-resident juridical entity as defined above will be considered to have a nexus in the UAE if it has any kind of immovable property in the UAE, which includes:

  • Any land over which it can create services, rights, or any kind of interest
  • Any building, engineering work, or some sort of structure that is permanently attached to the land or is attached to the seabed
  • Any kind of fixture or attachment to the land that forms a permanent part of the land or is attached to the building, structures, or seabed.

The income earned will be attributable to the corporate tax that is earned by the sale, disposal, right in rem, assignment, letting or subletting, or any form of exploitation or direct use of the immovable property listed above that is present in the UAE.

Key Considerations for Non-Resident Juridical Persons

Non-resident juridical persons should consider the following key points to determine their UAE nexus for corporate tax purposes:

  • Permanent Establishment: A non-resident juridical person can be considered to have a UAE nexus if it has a permanent establishment in the country. 
  • Building or Structure for Specific Purposes: Non-resident juridical persons can have a UAE nexus if they have a building or structure in the country that is used for specific purposes, such as the exploration, extraction, or exploitation of natural resources; the construction, installation, or assembly of a project; the provision of consulting, management, or technical services; or the provision of other services, subject to tax in the UAE.
  • State-Sourced Income: Non-resident juridical persons should also consider whether they derive state-sourced income in the UAE. If they do and meet any of the above criteria, they can be considered for corporate tax purposes.

A Guide for Non-Resident Persons

The Federal Tax Authority (FTA) of the UAE has issued a guide for non-resident persons for corporate tax purposes who derive state-sourced income in the UAE. This guide provides detailed information on the rules and procedures for non-resident persons to determine their UAE nexus for corporate tax purposes. It also explains the obligations and responsibilities of non-resident persons regarding their corporate tax liabilities in the UAE. Non-resident juridical persons who have nexus as explained above in the UAE are required to get themselves registered under the CT and obtain the TRN as per the regulations.

Understanding when a non-resident juridical person has a UAE nexus is crucial for businesses operating in the UAE or deriving state-sourced income from the country. The UAE Ministry of Finance has provided clear guidelines on the criteria for establishing a UAE nexus for non-resident juridical persons. Non-resident juridical persons should carefully consider these rules and consult with tax professionals to ensure compliance with the UAE corporate tax law.

CDA, as Your Tax Advisor

Being one of the leading accounting and auditing solution providers in the UAE has made CDA one of the most reliable places to seek advice on any financial matter, including corporate tax. The well-equipped team of CDA can assist your firm in the UAE to get proper insights about the new tax regime. Get premium tax consulting services from our veteran employees and simplify your tax environment in the UAE. To learn more about our varied auditing and accounting services, contact us right away and set your business to new heights.