Taxation of Non-Residents and Permanent Establishments

As a vibrant open economy, the United Arab Emirates (UAE) is among the very few growing economies with a low-tax jurisdiction status. However, the tax landscape in the UAE is expected to witness significant changes with the introduction of the UAE Corporate Tax law effective from 1 June 2023.

Lokesh Gupta, Associate Director, Tax and Transfer Pricing and Trupti Mehta, Principal Consultant elucidated more on this topic through a webinar.

During the webinar, the speakers drew attention to the scope of taxation under the new Corporate Tax law and its implications on residents as well as non-residents. They stated that UAE-sourced income is wide and inclusive while highlighting the parameters on which it is defined.

The experts also spoke at length about Permanent Establishments (PEs) and stated the required conditions that a non-resident in the UAE needs to have in order to set up a PE. While stating the conditions and defining the concept of a domestic PE in the UAE, the leaders also provided a detailed overview of the different types of PEs under the UAE Corporate Tax law such as Fixed Place PE, Agency PE, Installation PE, Service PE, and more.

Furthermore, both the speakers listed the activities that fall under the preparatory and auxiliary services while highlighting the PE attributions. To accentuate, the leaders also defined the Place of Effective Management (POEM) and its scope of taxation as per the Organization of Economic Cooperation and Development (OECD) guidelines while stating the list of countries having POEM regulations.

Towards the end of the webinar, the leaders also mentioned the ‘nexus’ of a non-resident person and how the persons covered under a ‘nexus’ are taxed, the anti-avoidance rules, and more while stating the tax implications for a person having a PE, POEM, or ‘nexus’ in the UAE.