TLC issues guidance for non-residents for corporate tax purposes

He Federal Tax Authority (TLC) has clarified the criteria for determining non-residents subject to Corporate Tax in the UAE; the cases that require the registration of Non-Resident for the purposes of Corporate Tax; Taxable income and how it is calculated; as well as other compliance requirements by Non-Residents subject to the Corporate Tax Lawwhich came into effect on June 1, 2023.

The FTA included a comprehensive and simplified explanation, along with general guidance in its guidance, for non-resident persons, whether natural persons (individuals) or legal entities (including public and private corporations) earning income in the UAE, to help them determine if they are subject to Corporate Tax.

In a press release issued, the FTA invited all interested non-resident persons, who earn income in the UAE, or who carry on business or part of their business in the UAE to consult the new guidelines and consult the Corporate Tax Law and relevant standards. Implementation decisions, as well as any other guidance published on the FTA website.

The TLC emphasized the importance of reading the manual in its entirety to obtain a clear understanding of its content, definitions, and interactions between its comprehensive rules. The manual includes numerous simplified practical examples to clarify how key elements of the Corporation Tax system apply to non-resident individuals and legal entities.

According to the guide, a Non-Resident Person is subject to Corporate tax in specific cases, two of which apply to a natural person.

The first case is where a natural person has a permanent establishment in the UAE and has a turnover attributable to its permanent establishment that exceeds AED 1 million during a given calendar year.

The second case is when they earn state source income (accrued or derived income from the UAE under the Corporate Tax Law).

The guide clarified that a legal entity incorporated or formed outside the UAE and which is not effectively managed and controlled in the UAE is subject to Corporation Tax in three cases. Firstly, a legal entity is subject to Corporation Tax if he has a permanent establishment in the UAE, which is any fixed place of business or any other form of presence in the UAE. Secondly, a legal entity is subject to Corporation Tax if it earns income from a state source (income accrued in or derived from the UAE under the Corporation Tax Law). Thirdly, a legal entity is subject to corporation tax if it has nexus in the UAE, that is, if it derives income from immovable property in the UAE, such as land, a building, fixtures or equipment that constitute a permanent part. of the land or is permanently attached to a building or structure.

In this guide, the FTA established that Non-Resident Persons that are legal entities are required to register for Corporate Tax purposes and obtain a Tax Registration Number (TRN) where they are subject to Corporate Tax for having a Permanent Establishment, or a nexus in the United Arab Emirates; that is, if they earn income from real estate in the UAE, to avoid delays in compliance that may lead to administrative penalties.

Furthermore, the guidance clarified that Corporation Tax registration is not required for non-resident legal entities that earn only state-source income and do not have a permanent establishment in the UAE or a nexus in the UAE.

Additionally, a non-resident natural person must register for Corporation Tax purposes and obtain a TRN if they have a turnover attributable to their permanent establishment in the UAE that exceeds AED 1 million in a calendar year.

News source: Emirates News Agency