“UAE’s Taxable Persons and Tax Base: Understanding the Implications for Residents and Non-Residents”
The United Arab Emirates (UAE) has recently introduced a new tax system, the Corporate Tax Law (CT Law), that has far-reaching implications for all individuals and entities doing business in the country. Understanding the CT Law is crucial for ensuring tax compliance and avoiding any potential penalties. In this article, we will take a closer look at the definition of a taxable person, the distinction between resident and non-resident persons, and the tax base applicable to each.
Who is a Taxable Person under the CT Law?
According to the CT Law, a taxable person is an individual or entity that is subject to UAE Corporate Tax (CT). The CT Law distinguishes between resident and non-resident persons, and the applicable tax base will depend on the nature of the taxable person.
Resident Persons Tax Base
A resident person can be an entity that is incorporated in the UAE, including those registered in Free Zones, or a foreign entity that is effectively managed and controlled in the UAE. Additionally, a natural person or individual who conducts business or business activities in the UAE is also considered a resident person. In all cases, the resident person is subject to CT on their worldwide income.
Non-Resident Persons Tax Base
Non-resident persons, on the other hand, are subject to CT on taxable income that is attributable to their permanent establishment (PE) in the UAE, UAE sourced income not attributable to the PE, or taxable income attributable to their nexus in the UAE, as determined by a subsequent Cabinet Decision.
Tax Compliance Obligations
It is important to note that both resident and non-resident persons are regarded as taxable persons under the CT Law, meaning that tax compliance obligations must be carefully considered by all individuals and entities operating in the UAE.
In conclusion, the introduction of the CT Law has far-reaching implications for all individuals and entities doing business in the UAE. Understanding the distinction between resident and non-resident persons and the applicable tax base is crucial in ensuring tax compliance and avoiding any potential penalties. For foreign incorporated entities that are effectively managed and controlled in the UAE, taxpayers should rely on guidance from the OECD’s international tax commentaries to determine their effective management and control.
Keywords: UAE, Corporate Tax Law, taxable person, resident person, non-resident person, tax base, tax compliance, permanent establishment, OECD, international tax commentaries.
