Corporate tax applicability to Resident Taxable Persons
Resident Taxable Persons
1. Resident juridical persons
Refers to an entity incorporated or otherwise established or recognised
- under the laws and regulations of the UAE or;
- under the laws of a foreign jurisdiction but is effectively managed and controlled in the UAE
2. Effective management and control
Residence for Corporate Tax purposes should not be determined solely on the basis of place of incorporation of the entity but on the basis of where the business is actually managed or controlled.
Factors to determine whether a juridical person is effectively managed and controlled in the UAE are:
Where key management and commercial decisions that are necessary for the conduct of the juridical person’s Business are in substance made; i.e.
- the place where the highest level of decisions that are essential for the management of the juridical person are made
- where decisions that play a leading part in the management of a company from an economic and functional perspective are made
Typically, this will be where a company’s board of directors (or any equivalent body for other types of juridical persons) makes these decisions.
- where the controlling shareholders make decisions
- the location of another Person or body to which the board has delegated its decision-making powers
- the location where the board members or executive management of the juridical person reside
3. Residence natural persons
For natural persons, residence for corporate tax purpose is not dependent on:
- where a natural person resides or is domiciled
- their nationality
- whether they hold a residency visa in the UAE
- whether their income is sourced in the UAE or from abroad
- how much time they may physically spend in the UAE
Corporate Tax only applies to natural persons who are engaged in Businesses or Business Activities in the UAE and earn Turnover in excess of AED 1,000,000 in a year.
This includes sole establishments and individual partners in Unincorporated Partnerships that conduct a Business or Business Activity in the UAE.
Corporate Tax does not apply to a natural person’s salary, wages and other employment income. It also does not apply to income from Personal Investments and Real Estate Investments.