The introduction of corporate tax in the UAE on June 1, 2023, has raised numerous questions for non-residents conducting business in the country. To address these concerns, the Federal Tax Authority (FTA) has issued a comprehensive guide clarifying the criteria for determining which non-residents are subject to corporate tax, the registration process, and the calculation of taxable income. This blog post provides a clear and concise explanation of these key points, drawing from the official FTA guide and relevant regulations.
Who is a Non-Resident Subject to Corporate Tax?
As a non-resident, you are liable for corporate tax in the UAE under three main scenarios:
- Permanent Establishment
If you have a fixed place of business in the UAE, such as an office or branch, you are considered to have a permanent establishment and are subject to corporate tax on income generated through that establishment.
- State-Sourced Income
Even without a permanent establishment, you are liable for corporate tax if you derive income from within the UAE. This includes profits from selling goods or services within the country, rental income from UAE property, and other income sources accruing within the UAE’s borders.
- Nexus with UAE Real Estate
If you earn income from immovable property located in the UAE, such as buildings or land, you are subject to corporate tax regardless of having a permanent establishment or other income sources in the country.
Registration and Tax Return Filing
If you fit into any of the above categories, you are required to:
– Register for Corporate Tax: Obtain a Tax Registration Number (TRN) from the FTA to comply with tax filing obligations.
– File Corporate Tax Returns: Submit annual tax returns declaring your taxable income and paying the applicable corporate tax.
Taxable Income Calculation
Your taxable income in the UAE comprises:
– Gross Income: All income earned within the scope of your permanent establishment or from state-sourced activities, including income from immovable property.
– Deductible Expenses: Expenses incurred in generating your taxable income, such as business expenses, employee salaries, and depreciation costs.
Guideline Key Takeaways for Non-Residents
The UAE’s Federal Tax Authority (FTA) has recently issued new guidelines to clarify the criteria for determining whether non-resident individuals and companies are subject to corporate tax in the country. This comes as the UAE’s national corporate tax regime took effect on June 1, 2023, for selected business sectors.
Criteria for Non-Resident Tax Liability
- Permanent Establishment: Non-residents with a fixed place of business in the UAE generating over AED 1 million in annual turnover attributable to that establishment.
- State-Sourced Income: Non-residents earning income from activities within the UAE.
- Nexus with UAE Real Estate: Revenues from immovable property assets located in the UAE, such as land, buildings, or fixtures.
Registration and Compliance
Non-resident entities that meet these criteria must register with the FTA and obtain a Tax Registration Number (TRN) to avoid penalties for non-compliance. However, non-resident juridical persons deriving only state-sourced income without a permanent establishment or property holdings in the UAE are not required to register for tax purposes.
Application Process for Non-Residents
How to Apply
Applications can be made through the Tamm website, the official portal for Abu Dhabi government services. The process involves:
- Registering: Create an account on the Tamm website.
- Payment: Pay the relevant fees for either an individual or company license.
Penalties for Non-Compliance
Unlicensed social media influencers and businesses face fines ranging from Dhs3,000 to Dhs10,000. Companies could also be subject to closure if they are found to be operating without the necessary permits. Non-compliance with regulations and conditions when contracting with influencers and social media sites will expose influencers to these penalties and fines.
Benefits of Holding Proper Licences
Having the appropriate licenses allows influencers and businesses to:
– Legally Engage: In advertising and promotional activities on digital platforms.
– Ensure Compliance: With Abu Dhabi’s regulatory standards.
– Avoid Fines and Legal Issues: Associated with unlicensed operations.
– Contribute to Transparency: In the digital advertising environment.
Comprehensive Examples and Clarification
The FTA guide provides simplified illustrative examples to aid comprehension. For instance, a non-UAE registered company with an office in Dubai qualifies as a permanent establishment. Any profits attributable to this office would be subject to corporate tax. The guide offers step-by-step calculations to demonstrate how taxable income is determined in such scenarios.
Ongoing Compliance Duties
Registered non-residents must fulfill ongoing compliance duties such as submitting annual tax returns, paying any tax amounts owed, and keeping accurate financial records for audit purposes if required.
How Unicorn Global Solutions Can Assist
Navigating the influencer licensing process in Abu Dhabi and the UAE can be complex. At Unicorn Global Solutions, we specialize in facilitating the establishment of influencer businesses among many other businesses. We offer comprehensive assistance in:
– Selecting the Optimal Jurisdiction: Helping you choose the best jurisdiction for your influencer license application.
– Document Preparation and Submission: Assisting with the preparation and submission of required documents to the relevant authorities.
– Application and Payment Process: Guiding you through the entire application and payment process for the influencer license.
Conclusion
Understanding and complying with corporate tax regulations in the UAE is crucial for non-residents conducting business in the country. Adherence to licensing requirements not only ensures legal compliance but also enhances credibility within the business community. For expert guidance and support in navigating the new corporate tax landscape, contact Unicorn Global Solutions.
With comprehensive yet simplified information, non-resident individuals and companies now have better guidance on their potential tax obligations and compliance requirements in the UAE. This should help facilitate a smooth transition following the introduction of the national tax framework.
Unicorn Global Solutions As Your Tax Advisor
Being one of the leading accounting firms in the UAE, Unicorn Global Solutions has strived to serve the various requirements of its clientele in the UAE. Our team of professional auditors and accountants is well equipped with the various regulations and standards required to meet the demands of its clients.
We are not only limited to accounting services, but we also provide strategic tax consulting services to our clients. Our best tax advisors at Unicorn Global Solutions are well aware of the various dimensions of the new corporate tax regime, helping you to simply understand the new CT landscape. To stay compliant and to explore corporate tax in depth, consult our team now. Text us on WhatsApp or call us today.
