International Tax Advisor in Dubai, UAE

Businesses operating internationally face complex tax obligations across multiple jurisdictions. With the introduction of UAE Corporate Tax, transfer pricing requirements, and the UAE’s growing network of double taxation agreements, businesses need specialist advice to ensure they are compliant, not paying more tax than required, and structured efficiently for cross-border operations.

A Double Taxation Agreement is a bilateral treaty between two countries that prevents the same income from being taxed in both jurisdictions. The UAE has signed over 130 such agreements. For UAE businesses, these treaties can reduce or eliminate withholding taxes on dividends, interest, and royalties, and provide greater certainty on the tax treatment of cross-border income.

A Permanent Establishment is a fixed place of business through which a foreign company carries out significant activities — such as an office, branch, or warehouse. If a foreign business is deemed to have a Permanent Establishment in the UAE, it becomes subject to UAE Corporate Tax on the income attributable to that establishment. Managing PE risk is an important consideration for any business with cross-border operations.

The UAE currently applies a 0% Withholding Tax rate on payments made to non-residents that are not connected to a Permanent Establishment in the UAE. While no withholding tax is currently levied, foreign withholding tax credits from other jurisdictions can be applied to reduce Corporate Tax payable in the UAE.

Country-by-Country Reporting is an OECD requirement under BEPS Action Plan 13 that applies to large multinational enterprises. It requires an annual report providing a breakdown of revenue, profits, taxes paid, and business activities on a country-by-country basis. The purpose is to improve tax transparency and give tax authorities a clearer view of where multinationals generate income and pay tax.

The Federal Decree law 60 of 2023 has given a definition of the top-up tax as tax imposed on Multinational Enterprises in accordance with Decree-Law 60 of 2023 and the rules and controls to be determined by the Cabinet for the purposes of the Pillar Two rules issued by the Organization for Economic Cooperation and Development.

The Top Up Tax shall apply to Constituent Entities that are members of an MNE Group that has annual revenue of EUR 750 million or more in the Consolidated Financial Statements of the Ultimate Parent Entity in at least two of the four Fiscal Years immediately preceding the tested Fiscal Year.

The following Entities shall pay the Top-up Tax for a Fiscal Year: Constituent Entities located in the UAE during that Fiscal Year, including those that are members of a Minority-owned Subgroup; Joint Ventures and JV Subsidiaries located in the UAE during that Fiscal Year; and Stateless Constituent Entities created in accordance with the laws of the UAE and that are Reverse Hybrid Entities, with respect to any of their Pillar Two Income or Loss as allocated and computed in accordance to law.

A Group means a collection of Entities that are related through ownership or control such that the assets, liabilities, income, expenses and cash flows of those Entities are included in the Consolidated Financial Statements of the Ultimate Parent Entity, or are excluded from the Consolidated Financial Statements of the Ultimate Parent Entity solely on size or materiality grounds, or on the grounds that the Entity is held for sale. A Group also means an Entity that is located in one Jurisdiction and has one or more Permanent Establishments located in other Jurisdictions provided that the Entity is not a part of another Group.

MNE Group means any group that includes two or more enterprises the tax residence for which is in different countries, or includes an enterprise that is resident for tax purposes in one country and is subject to tax with respect to the business carried out through a Permanent Establishment in another country, which has a total consolidated group revenue that is equal to or more than 3,150,000,000 (three billion one hundred and fifty million) AED during the Fiscal Year immediately preceding the Reporting Fiscal Year as indicated in its Consolidated Financial Statements for such preceding Fiscal Year.

A Constituent Entity is any Entity that is included in a Group, or any Permanent Establishment of a Main Entity that is within such Group.

Ultimate Parent Entity means either an Entity that owns directly or indirectly a Controlling Interest in any other Entity, and is not owned, with a Controlling Interest, directly or indirectly by another Entity, or the Main Entity of a Group that is located in one Jurisdiction and has one or more Permanent Establishments located in other Jurisdictions provided that the Entity is not a part of another Group.

A Permanent Establishment that is a Constituent Entity shall be treated as separate from the Main Entity and any other Permanent Establishment of that Main Entity. However, if a Main Entity is an Excluded Entity, its Permanent Establishments will also be treated as Excluded Entities.

An Excluded Entity is an Entity that is a Governmental Entity, an International Organization, a Non-profit Organization, a Pension Fund, an Investment Fund that is an Ultimate Parent Entity, or a Real Estate Investment Vehicle that is an Ultimate Parent Entity.

A Constituent Entity does not include an Entity that is an Excluded Entity.

An Excluded Entity is also an Entity where at least 95% of the value of the Entity is owned directly, or through a chain of Excluded Entities, by one or more Excluded Entities, if other conditions are met. In another case, and when other conditions are met, an Excluded Entity could be where at least 85% of the value of the Entity is owned directly, or through a chain of Excluded Entities, by one or more Excluded Entities.

Transfer pricing governs how transactions between related parties within a multinational group are priced. Under UAE Corporate Tax Law, these transactions must comply with the arm’s length principle — meaning they must be priced as they would be between independent parties. Non-compliance can result in transfer pricing adjustments, increased taxable income, and penalties.

Taxable persons with related-party transactions that meet the relevant thresholds are required to maintain a Local File and a Master File for the relevant tax period. A Disclosure Form must also be submitted with the Corporate Tax return. Businesses that meet the Country-by-Country Reporting thresholds are also required to file a CbCR report.

Effective international tax risk management involves understanding the tax obligations in each jurisdiction where the business operates, maintaining proper transfer pricing documentation, correctly applying double taxation agreements, managing Permanent Establishment exposure, and staying current with changes to international tax rules including OECD BEPS measures. Working with an experienced international tax advisor is the most reliable way to manage these risks.

Yes. Farahat & Co. provides specialist international tax advisory services for businesses operating across borders — covering cross-border transaction structuring, transfer pricing compliance, double taxation agreement advisory, Permanent Establishment risk management, withholding tax planning, and Country-by-Country Reporting. Contact us to discuss your international tax requirements.