UAE: Domestic tax residency rules to benefit individuals and companies

UAE: Domestic tax residency rules to benefit individuals and companies

The Domestic Tax Residency allows a UAE tax resident to be exempted from paying double taxation in their home country as well as the UAE

By Nasreen Abdulla Published: Sat 11 Mar 2023, 11:18 AM

International companies as well as individual consultants will benefit from the domestic tax residency rules, say experts. Arun Leslie John, Chief Market Analyst of Century Financial gave the example of a German-incorporated company with a trading branch in Dubai that has a taxable income of Dh100 million in the fiscal year beginning June 1, 2023.

“The company is subject to a 15 per cent corporate tax rate in Germany on its global income, including its branch income in Dubai,” he said.

“However, under UAE corporate tax law, the company can choose between two options for its branch profits. They can either claim foreign tax credit for taxes paid in Germany or elect to be taxed at the UAE corporate tax rate of 9 per cent and repatriate its branch profits to Germany without further taxation.”

If the company chooses the second option, resulting in a corporate tax liability of Dh9 million in the UAE, the company can repatriate its branch profits of Dh1 million to Germany without incurring any additional