The Federal Tax Authority (FTA) has released a new Guide for natural persons or juridical persons who are not treated Resident Persons under the Corporate Tax regime but derive an income from the UAE. This guide has been designed to help understand why non-resident persons are subject to corporate tax in the UAE.
To avoid compliance failure, businesses need to understand aspects such as the definition of non-resident persons; their corporate tax obligations; and what income of a Non-Resident Person is subject to Corporate Tax in the UAE. Corporate tax consultants in Dubai can help you answer these questions and make informed decisions. Read ahead for more insights:
Who is a non-resident person under UAE Corporate Tax?
The UAE corporate tax regulations define the following persons as non-resident persons:
- A non-resident natural person who has a Permanent Establishment in the UAE and has a Turnover attributable to their Permanent Establishment that exceeds AED 1,000,000 within a Gregorian calendar year, or derives State Sourced Income, (i.e. income accruing in, or derived from, the UAE)
- A juridical person that is incorporated or formed outside the UAE and not effectively managed and controlled in the UAE to the extent they,
- have a Permanent Establishment in the UAE
- derive State Sourced Income; or
- have a nexus in the UAE
When is a Non-Resident Juridical Person required to register for Corporate Tax?
A non-resident juridical person is required to register for corporate tax in the UAE and obtain a Tax Registration Number (TRN) when that person is subject to corporate tax due to having a PE in the UAE or having a nexus in the UAE. Not registering for corporate tax in the UAE will lead to compliance delays that may result in administrative penalties.
However, a Non-Resident Person juridical person carries out corporate tax registration in the UAE, if that person derives only State Sourced Income and does have neither a Permanent Establishment in the UAE nor a nexus in the UAE. Hire the best corporate tax advisers in Dubai for registration assistance.
When is a non-resident natural person required to register for corporate tax?
A non-resident natural person is required to carry out the UAE Corporate Tax registration and obtain a TRN when that person has a turnover attributable to their PE in the UAE that exceeds AED 1,000,000 within a Gregorian calendar year.
What income of a Non-Resident Person is subject to UAE Corporate Tax?
Taxable Income attributable to a Non-Resident Person’s PE or nexus in the UAE is subject to Corporate Tax. Corporate Tax is imposed on the Taxable Income of a Non-Resident Person at the same rate as for a Resident Person: 0% on Qualifying Income and 9% on Taxable Income that is not Qualifying Income.
If the non-resident person is a Qualifying Free Zone Person (for example, a branch operating in a Free Zone), then Corporate Tax will be imposed as 0% on Qualifying Income and 9% on Taxable Income that is not Qualifying Income.
Is Small Business Relief available to Non-Resident Persons?
The UAE corporate tax law states that only a resident person can apply for small business relief. This provision makes a non-resident person ineligible for the small business relief. However, this may be affected by applicable Double Taxation Agreements. Consultants providing corporate tax services in Dubai can guide you further in this regard.
How can a non-resident person determine taxable income?
The taxable income of a non-resident person can be determined on the basis of adequate and standalone Financial Statements prepared for financial reporting purposes in accordance with accounting standards accepted in the UAE (“IFRS”). However, a Taxable Person can calculate its Taxable Income on the basis of Financial Statements prepared using the Cash Basis of Accounting, if specific conditions are met.
A Non-Resident Person must determine its Taxable Income which is attributable to a Permanent Establishment or nexus in the UAE. Attribution of income and expenditure to a Permanent Establishment should be based on the arm’s length principle and internationally accepted attribution methodologies as a Non-Resident Person and its Permanent Establishment are considered to be Related Parties.
Submission of tax returns for non-resident person
A non-resident person needs to file a corporate tax return in the UAE and settle the payable tax no later than nine months from the end of the relevant Tax Period. The tax period for filing the UAE corporate tax is normally the Gregorian calendar year, or the 12 period for which the Taxable Person prepares Financial Statements. Corporate tax advisors in Dubai can help you submit the tax returns on time.
Record-keeping Obligations for Non-Resident Persons
A Non-Resident Person is required to maintain all records and documents for a period of seven years following the end of the Tax Period to which they relate.
Hire the Best Corporate Tax Consultants in Dubai, UAE
Non-resident persons need to perform an assessment of their UAE corporate tax obligations to avoid compliance failure. The best corporate tax consultants in Dubai such as Tax Gian can ensure your tax compliance strategy is robust. Tax Gian is a flagship brand of Jitendra Tax Consultants (JTC), a leading provider of corporate tax services in Dubai, UAE. We have a team of highly qualified tax experts who can guide businesses on all aspects of the UAE corporate tax law including tax registration, formation of tax groups, transfer pricing etc. Call us today to avail yourself of comprehensive corporate tax advisory services in Dubai, UAE.