The FTA has issued new Guidance with clarifications and 41 examples for individuals and legal entities that are non-resident for UAE corporate income tax purposes and receive UAE source income.
Let’s look at some examples.
Non-resident individual: is required to register for corporate income tax purposes and obtain a tax registration number if the non-resident’s turnover attributable to its permanent establishment (PE) in the UAE exceeds AED 1 million during a calendar year.
Non-resident entity: once it can determine that the activity will result in the establishment of a permanent establishment in the UAE or the existence of a “link” to the UAE, will be considered a non-resident entity under the Corporation Tax Law (CTA) and must register with the FTA to avoid any or delays in compliance, which may result in administrative penalties.
Examples in the Guide also include:
Some issues that may arise in determining whether a non-resident has a PP in the UAE – the above examples must be “tested” taking into account the facts and context of a particular case, including the provisions of the Land Code and the tax treaty (if applicable).
Cases for companies in the pharmaceutical industry (No.29. Agency PP: sale of medicines by a foreign company in the Middle East, including the UAE, through an exclusive foreign distributor; No.31. Marketing activities of foreign representatives; No.26. Internal accountant of a foreign company in the healthcare sector, who works in the UAE).
Example (No.8) of a manager of a foreign company who travels to the UAE for business meetings and is authorized to make management decisions, which in this case are not related to the day-to-day management of the foreign company, and therefore most likely will not lead to the creation of a PE (example 8).
Example (No.9) of a foreign company that entered into a contract to provide consulting services for a client, for which it sent its employees to the UAE, where they work in hotel apartments rented for 8 months.
An example of a foreign company (Co1), a manufacturer and seller of clothing, which entered into a commission agreement with another foreign company (Co2) to sell products to customers in the UAE.
There is also an interesting case, for example for mobile restaurants in the air, attached to a balloon and supported by a crane (p. 23; as an example of a fixed PE).