Determination of a Non Resident Person’s Nexus in the UAE

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06 Jul 2023

The Ministry of Finance UAE has recently released a significant decision, Cabinet Decision No. 56 of 2023, addressing the determination of a non-resident person's nexus in the state. This decision provides valuable guidelines and regulations to define the presence of non-resident entities in the United Arab Emirates (UAE). Let's delve into the key points outlined in this decision
Nexus in the State: Article 2
  • According to paragraph (c) of Clause (4) of Article (11) of the Corporate Tax Law, a non-resident person will be deemed to have a nexus in the state if they earn income from any immovable property located within the UAE.
  • In the context of paragraph (c) of Clause (3) of Article (12) of the Corporate Tax Law, the taxable income attributable to immovable property in the state includes the income derived from various activities such as the right in rem, sale, disposal, assignment, direct use, letting (including subletting), and any other form of exploitation of immovable property.
Artificial Transfer of Rights in Immovable Property: Article 3
  • The cabinet decision also addresses the issue of artificial transfer or disposal of the right in rem of any immovable property within the state by a non-resident person.
  • Suppose such a transfer or disposal is deemed to lack a valid commercial or non-fiscal reason that reflects economic reality. In that case, it will be considered an arrangement aimed at obtaining a corporate tax advantage, as per Clause (1) of Article (50) of the Corporate Tax Law.
The requirement to Register for Corporate Tax: Article 4
  • A non-resident who establishes a nexus in the state, as defined in Article (2) of this decision, must register with the Authority in compliance with Article (51) of the Corporate Tax Law.
The release of Cabinet Decision No. 56 of 2023 by the Ministry of Finance UAE is crucial to clarify the nexus of non-resident persons in the state. These guidelines provide a comprehensive framework to determine non-resident entities' presence and tax obligations in the UAE. By establishing clear regulations, the decision ensures fairness, transparency, and compliance within the corporate tax landscape. Non-resident entities are encouraged to review and adhere to these provisions to comply with UAE tax laws.
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