The need to prepare for the arrival of the UAE corporate tax


However, the PDC has highlighted the important aspects, including the “taxable person” and the “tax base” that can be implemented with the introduction of a final regulation to cover income taxation. of a natural person (where income generated by a business or commercial activity in the UAE would be taxed but would require clarification of business license or permit requirements as a condition to consider part of the total income for tax purposes) and, legal person covers, entities incorporated/established under UAE law would be subject to CT and for foreign legal entities, the concept of permanent establishment (PE) as well as source-based income rule would come into play an important role in understanding applicable non-resident (NR) income tax. The PE of a foreign entity is determined by two tests (i) the test of the fixed place of business, where, instead of the management, the branch, the workshop, the head office of the employee are considered as PEs and must be subject to the CE, (ii) the dependent agent test, to verify whether the person can enter into the contract on behalf of a foreign entity and, therefore, the terms of the agency agreements should be reviewed to ensure that the person/agent is to undertake the activity as an independent agent (legally and economically).

Legal person also covers general partnership entities and unincorporated joint ventures, which may be taxed in the hands of the partners as internationally accepted, while in a limited partnership, a limited partnership shares may be taxed as a UAE incorporated entity. Remuneration of owners, partners and shareholders and related persons would be permitted subject to the principle of the arm’s length pricing rules of the OECD Transfer Pricing Guidelines.

Tax planning will go a long way in reducing business taxes.


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