New clarification on corporate tax in the UAE: what non-residents need to know!

The Federal Tax Authority (FTA) has published comprehensive guidance to determine the UAE corporate tax requirements for non-residents.

Under the new Corporation Tax Law, which came into force on June 1, 2023, the FTA has clarified the criteria for determining whether non-residents are subject to this tax and the cases that require non-residents to register for corporate tax purposes.

Important points such as taxable income and how it is calculated have also been covered in the FTA guidelines. The guidance provided in the free trade agreement will help non-residents, whether individuals or legal entities, understand whether they are subject to corporate tax when receiving income in the UAE.

The FTA encourages all non-residents and those doing business in the UAE to carefully review the guidance to fully understand its contents and apply all corporate tax rules.

The guide includes practical examples to help you better understand the tax system and its application to non-resident individuals and legal entities:

Individuals subject to corporate tax:
1) If you have a permanent establishment in the UAE and your revenue associated with this establishment exceeds 1,000,000 dirhams (AED) during the year.
2) If you receive income from state sources in the UAE in accordance with the new Corporate Tax Law.

Legal entities subject to corporate tax:
1) If your company has a permanent establishment, place of effective management or any other form of presence in the UAE.
2) If your legal entity receives income from state sources in the UAE.
3) If your company has a connection with the UAE, for example, receives income from real estate, such as land, buildings or equipment located in the UAE.

FTA guidance states that non-resident corporate entities are required to register for corporate taxation and obtain a Tax Registration Number (TRN) if they fall under one of the above conditions. This will help avoid delays and administrative fines.
Non-resident legal entities that do not have any commercial or financial activities, nor do they have a permanent establishment or any other connections in the UAE, are not required to register for corporate tax purposes.

However, if you are a non-resident individual and have a permanent establishment in the UAE, you are required to register for corporate tax and obtain a Tax Registration Number (TRN) if your annual revenue attributable to that establishment exceeds 1 million AED.