Corporate Tax Decisions: Determining a Non-Resident Person’s Nexus in UAE

The Ministry of Finance has released the Cabinet Decision No. 56 of 2023, clarifying the conditions for determining a Non-Resident Person’s Nexus in the UAE. The decision that took effect from June 1st 2023 has been issued by the Ministry for the purposes of paragraph (c) of Clause (4) of Article (11) of the UAE Corporate Tax Law.

This article will help you understand the conditions under which a non-Resident person will have Nexus in the UAE. However, it is advisable to consult with corporate tax consultants in Dubai for interpreting the Decision accurately. Here are the key provisions stated in the Cabinet Decision No. 56 of 2023 on the Determination of a Non-Resident Person’s Nexus in the UAE:

When shall a Non-Resident Person be said to have a Nexus in the UAE?

As per the Decision, any non-resident juridical person will have a nexus in the UAE if the person earns income from any immovable property in the state. The Decision defines immovable property as any of the following:

  • Any area of land over which rights or interests or services can be created.
  • Any building, structure or engineering work attached to the land permanently or attached to the seabed.
  • Any fixture or equipment which makes up a permanent part of the land or is permanently attached to the building, structure or engineering work or attached to the seabed.

What shall be the Taxable Income if there is a Nexus in the UAE?

As per Article 12 of the UAE Corporate Tax Law, a non-resident person is subject to Corporate Tax on the taxable Income attributable to the nexus of the person in the UAE. In line with this, the Ministerial Decision states that the taxable income that is attributable to the Immovable Property in the UAE may include income derived from the right in rem, sale, disposal, assignment, direct use, letting, including subletting and any other form of exploitation of Immovable Property.

UAE Corporate Tax Registration for Non-Resident Property Owners

A non-resident person having a nexus in the UAE is required to register with the Federal Tax Authority (FTA) for corporate tax. The process of corporate tax registration in the UAE must be carried out as per Article (51) of the Corporate Tax Law. It means the non-resident person with a nexus in the UAE must obtain a Tax Registration Number (TRN) as well. Corporate tax advisers in Dubai can assist you with the registration process.

Application of General Anti Avoidance Rules provisions

The Decision states that if a Non-Resident Person artificially transfers or otherwise disposes of its right in rem in any Immovable Property in the UAE to another person and that transfer or disposal is not for a valid commercial or other non-fiscal reason which reflects economic reality, this would be considered an arrangement to obtain a Corporate Tax advantage as per the General Anti Avoidance Rules (‘GAAR’) stated in the Clause (1) of Article (50) of the Corporate Tax Law. Moreover, the Ministry of Finance will issue the necessary Decisions for the implementation of the provisions of the subject Decision.

Tax Gian can Help you Comply with the CT Law

The new Ministerial Decision is likely to have a huge impact on non-resident persons with property investments in the UAE. Non-resident persons with property investments need to register for corporate tax in the UAE and obtain TRN. Such non-resident persons need to immediately assess their situation and proceed with the registration process. Given its complexity, non-resident persons can consult with Tax Gian, their most reliable tax expert in Dubai and the new venture of Jitendra Tax consultants, a division of Jitendra Chartered Accountants (JCA).

At Tax Gian, a dedicated team of Chartered Accountants work nonstop to advise clients and share knowledge on Corporate Tax and Value Added Tax. We are one of the leading providers of corporate tax advisory services in Dubai with impeccable expertise and experience. Our corporate tax consulting services in Dubai include CT Assessment & Advisory Services (on a one-time or retainer basis), CT Transfer price assessment services, CT Compliance Services & CT Agent Services to Represent the Federal Tax Authority (FTA) of UAE in case of any notices served by FTA. Ensure corporate tax compliance and avoid relevant penalties by availing of JCA’s corporate tax services in Dubai, UAE. Talk to our consultants for tax solutions that you can count on.