FAQ – Article 14 Permanent Establishment
Source: https://mof.gov.ae/corporate-tax-faq/
- Will a UAE branch constitute a taxable Permanent Establishment for the foreign business?
A UAE branch of a foreign business would generally be subject to UAE CT, unless the activities of the branch do not give rise to a permanent establishment in the UAE for CT purposes (see Section I ‘Foreign persons’).
- How do I know if I have a Permanent Establishment in the UAE?
Generally, a foreign person will have a Permanent Establishment in the UAE if:
It has a fixed or permanent place in the UAE through which the business of the foreign person is carried on; or
● There is a person who has and habitually exercises an authority to conduct business in the UAE on behalf of the foreign person.
- A fixed place of business would not be considered a Permanent Establishment if it is used solely to store, display or deliver goods or merchandise belonging to the foreign person or to conduct any activities that are of a preparatory or auxiliary nature.
A Permanent Establishment would not arise if the person who has and habitually exercises an authority to conduct business in the UAE on behalf of the foreign person acts as an independent agent.
Where relevant, the application of an international agreement should be taken into consideration when determining whether a permanent establishment exists.
What determines whether income is sourced from the UAE?
Income will be considered to be sourced from the UAE, if:
the income is derived from a UAE resident;
● the income derived is attributed to a Permanent Establishment in the UAE of a non-UAE resident; or
● the income is derived from activities performed, assets located, capital invested, rights used or services performed or benefited from in the UAE.
The Corporate Tax Law includes a non-exhaustive list of income that is considered as being sourced in the UAE.
A Cabinet Decision may be issued in due course specifying the types of UAE sourced income subject to withholding tax. The UAE withholding tax rate is set at 0%.
