The UAE Corporate Tax Law divides a "Taxable Person" into two categories under Article (11) of Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses: a Resident Person, taxed on income earned both inside and outside the State, and a Non-Resident Person, taxed only on income connected to its presence in the State.
Who Qualifies as a Resident Person?
Article (11) sets out the following categories of Resident Person:
- A juridical person incorporated, established or otherwise recognized under the legislation in force in the State, including a Free Zone Person.
- A juridical person incorporated under the legislation of a foreign jurisdiction that is effectively managed and controlled in the State.
- A natural person who conducts a Business or Business Activity in the State.
The law also leaves room for the Cabinet, on the Minister's proposal, to designate any other category of persons treated as a Resident Person.
Who Qualifies as a Non-Resident Person?
A person is a Non-Resident Person if it does not fall within the Resident Person categories and either of the following applies:
- It has a Permanent Establishment in the State as provided for in Article (14) of the Corporate Tax Law.
- It derives State Sourced Income as provided for in Article (13) of the same Law.
The Cabinet may also determine additional cases in which a Non-Resident Person is considered to have a "nexus" in the State that triggers tax liability.
Categories of Natural-Person Business Subject to Tax
Not every activity carried out by a natural person is automatically subject to Corporate Tax; the law provides that the Cabinet, on the Minister's proposal and in coordination with the competent authorities, shall issue a decision specifying the categories of Business or Business Activity conducted by a Resident or Non-Resident natural person that are subject to Corporate Tax under the Law.
Branches Treated as the Same Taxable Person
The Law treats a branch in the State of a Resident Person as the same Taxable Person, meaning the branch does not create a separate Taxable Person distinct from the resident entity to which it belongs.
Why the Distinction Matters in Practice
Whether a Taxable Person is classified as resident or non-resident makes a fundamental difference to the scope of taxable income. A Resident Person is subject to Corporate Tax on its worldwide income regardless of source, while a Non-Resident Person is taxed only on income connected specifically to its Permanent Establishment in the State or on State Sourced Income. The classification also affects procedural obligations, such as registration with the Federal Tax Authority and filing Tax Returns, since both Resident and Non-Resident Persons are subject to registration and filing duties whose details can differ depending on the nature of their presence in the State.
Illustrative Example
A company incorporated and registered in the State is a Resident Person under Article (11) and is subject to Corporate Tax on its income earned both inside and outside the State. A foreign company with no Permanent Establishment in the State and no State Sourced Income, however, does not fall within the scope of Taxable Persons under this Article at all. If that foreign company later establishes a branch or fixed office in the State that meets the definition of a Permanent Establishment, it becomes a Non-Resident Person taxable only on the income connected to that branch, not on its worldwide income.
Legal References
- Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses — Article (11).
- Cabinet Decision No. (116) of 2022 on Determining the Annual Income Subject to Corporate Tax — Article (1) (Definitions).
For questions about your specific situation, you can ask the UAE Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.