Global Presence, local impact: Understanding the impact of UAE corporate tax on foreign entities

Global Presence, local impact: Understanding the impact of UAE corporate tax on foreign entities

Published: Thu 28 Dec 2023, 7:49 PM

In the ever-changing landscape of UAE corporate tax, businesses expanding beyond the UAE encounter a network of complex tax regulations. Article 11 of the UAE corporate tax federal decree law no. 47 of 2022, applicable to both UAE-incorporated entities and foreign entities effectively managed and controlled within the UAE, establishes them as taxable entities.

Effectively overseeing a business for corporate tax purposes necessitates a meticulous analysis of decision-making locations, board meetings, the influence of stakeholders, operational decision hubs, and economic perspectives. This thorough assessment seeks to pinpoint where crucial management decisions occur, offering a nuanced understanding of effective management and control beyond the formalities of place of incorporation.

In the context of the UAE’s corporate tax framework, the treatment of foreign entities registered outside the UAE as tax residents carries significant implications. If recognised as tax residents under UAE corporate tax regulations, as per Article 40 of federal decree law No. 47 of 2022 and guidelines on the taxation of foreign source income, a resident juridical person is subject to corporate tax on worldwide income, encompassing earnings within and outside the UAE. These entities become subject to taxation at a rate of nine per cent. This