Basis of Taxation
Understanding how UAE Corporate Tax applies to different types of persons and business structures, including residents, non-residents, and permanent establishments.
Taxation Framework
UAE Corporate Tax applies differently based on the taxpayer's residence status, business structure, and the source of income. Understanding your tax status is crucial for compliance.
Resident Persons
Taxed on worldwide income
Non-Resident Persons
Taxed only on UAE-source income
Resident Persons
Resident Juridical Persons
UAE incorporated entities and foreign entities managed from the UAE
Who Qualifies:
- UAE incorporated companies and entities
- Foreign entities effectively managed and controlled in the UAE
- Entities with central management and control in the UAE
Tax Treatment: Taxed on worldwide income at 9% on taxable income above AED 375,000
Resident Natural Persons
UAE resident individuals conducting business activities
When Natural Persons Are Subject to Corporate Tax:
- Conducting business activities through a permanent establishment
- Operating as a sole proprietorship or individual business
- Meeting specific business activity thresholds
Note: Most individual employment income is not subject to Corporate Tax
Non-Resident Persons
Non-Resident Taxation
Foreign entities and individuals with UAE-source income
Who Are Non-Residents:
- Foreign incorporated entities not managed from the UAE
- Non-UAE resident individuals
- Entities with management and control outside the UAE
UAE-Source Income Subject to Tax:
- Income from UAE permanent establishment
- UAE immovable property income
- Other UAE-sourced business income
Tax Treatment: Only UAE-source income is subject to corporate tax
Permanent Establishment
What Constitutes a PE
- Fixed place of business: Office, factory, workshop
- Construction sites: Projects exceeding 6 months
- Service PE: Services provided for 183+ days
- Agency PE: Dependent agent acting on behalf
PE Tax Obligations
- Register for UAE Corporate Tax
- File annual corporate tax returns
- Pay tax on PE attributable income
- Maintain separate PE accounting
Effectively Managed and Controlled in UAE
A foreign entity may be considered a UAE tax resident if it is effectively managed and controlled from the UAE, regardless of where it was incorporated.
Key Factors Considered:
- Location of board meetings
- Where key decisions are made
- Location of senior management
- Day-to-day management location
- Where strategic decisions are made
- Administrative center location
Important: Foreign entities effectively managed from the UAE are treated as UAE tax residents and taxed on worldwide income.
Tax Rate Application
Standard Rate
On taxable income above AED 375,000
- • Applies to all resident and non-resident persons
- • 0% on taxable income up to AED 375,000
- • Small Business Relief: 0% for qualifying entities (revenue ≤ AED 3M)
Special Rates
Various rates for specific situations
- • Qualifying Free Zone Persons: 0%
- • Small Business Relief: 0%
- • Large multinationals: Additional considerations
Need Help Determining Your Tax Status?
Understanding your UAE corporate tax obligations can be complex. Our tax experts can help determine your residence status and applicable tax treatment.