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Corporate Tax for Foreign Companies in UAE

The UAE is a highly attractive economic hub for international companies considering setting up permanent establishments (PEs). Foreign companies ought to have an operational presence to establish a permanent establishment. Thus, it is imperative and advisable for foreign companies to seek the services of top tax consultants in UAE to seamlessly establish their operational presence and permanent establishment subsequently. 

Scope of Permanent Establishment as Per the UAE Corporate Tax statute

 A permanent establishment (PE) is a legal concept under which foreign companies are liable to corporate tax in UAE. A PE is created when a non-resident company engages in substantial activities through a fixed place of business located in the UAE, such as an office, warehouse, or factory. 

The UAE corporate tax statute imposes tax obligations on all legal entities registered in the UAE with a permanent establishment (PE) created under Article 2 of the same law. Thus, it is important for such corporations to comprehend their tax liability and to stay compliant with the UAE corporate tax statute if they have a presence in the UAE. 

How is Corporate Tax for Foreign Companies Calculated?

The UAE corporate tax is calculated on the net profits of the company which includes income generated from services, selling or producing goods, renting out a property, and other business activities. In order to calculate corporate tax in UAE, companies should carefully consider their net profits before tax as well as any deductions applicable to them such as those from donations, expenses that are necessary for the business, and any tax credits.

 It is also essential for taxable persons to be aware of any applicable exemptions that may reduce their corporate tax burden. UAE Corporate tax deductions are applicable for expenses incurred for the purpose of generating income and must be properly documented and supported by invoices, receipts, or other relevant documents. 

How Can a Permanent Establishment Be Created?

Creating a permanent establishment can be done in two ways: either by having a fixed place of business or a dependent agent. 

1. Fixed Place PE

A fixed place of business is defined as any place where the foreign company habitually exercises its activities in the UAE, such as offices and warehouses. This can also include construction sites, installations, and assembly projects.

2. Dependent Agent PE

A dependent agent PE occurs when an agent habitually exercises authority to conclude contracts on behalf of a foreign company in the UAE. The agent must be dependent on the foreign company, by not having any authority to independently contract with clients and customers.

3. Possible Exclusion If…

Exclusions can also apply, such as if: a foreign company has no place of business or dependent agent in the UAE; if its activities are limited to those of a preparatory or auxiliary character; if its activities are limited to purchasing goods, to mention a few.

Read More: Corporate Tax Challenges and Opportunities to Foreign businesses in the UAE

Avail the Expert Services of Top Tax Consultants in the UAE. 

It is essential and commendable for foreign companies to seek the services of top tax consultants in the UAE to seamlessly establish their operational presence and permanent establishment subsequently. Further, taxable foreign companies ought to stay compliant with the UAE corporate tax statute to avert any fines and penalties for noncompliance. Thus contact us today and we shall be glad to assist you!  

Mohammad Alkhatim

Mohammad is a qualified Legal Consultant with over 5 years of experience gained in diverse intricate tax matters, he has high expertise in conducting tax negotiations and investigations with the Federal Tax Authority and other external Tax Bodies. He has vast experience in reviewing and drafting tax documents. Mohammad has also advised on a plethora of tax matters, he draws much attention to tax filing procedures and to offering professional investigations of underlying tax complexities.

Read More: Important Information for Business Owners Regarding FTA VAT Audit

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.