Cabinet Decision No. 56 of 2023 on Determination of a Non-Resident Person’s Nexus in the State

The adoption of Cabinet Decision No. 56 of 2023 has brought about significant developments in the realm of UAE tax system. This decision aims to redefine the way non-resident persons are subject to corporate tax in the United Arab Emirates. This blog can be your go-to reference if you’re a non-resident and have concerns regarding your tax obligations. In particular, we will emphasize on the role that immovable property ownership has on your tax status.

How are Non-Resident Persons subject to UAE Corporate Tax?

Article 11 (4) – A Non-Resident Person is a Person who is not considered a Resident and either has a:

1. Permanent Establishment in UAE (Article 14 of the Corporate Tax Law).
2. Derives State Sourced Income (Article 13 of the Corporate Tax Law).
3. Has a Nexus in UAE.

This Cabinet Decision deals with UAE Nexus of the Non-Resident Person.

Important Points to be Noted

• Non-Resident Person shall have a nexus in the State if it earns income from any Immovable Property in the State.
  

  What is Immovable Property?

  Immovable Property: Means 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.
• Artificial Transfer of Rights in Immovable Property which is not for a valid commercial or other non-fiscal reason which reflects economic reality can invoke General Anti-abuse Rule as per Article 50 of the Corporate Tax Law.
• Non-Resident Person that has a nexus in the State shall be required to register with the Authority.

Illustration

XYZ Pte Ltd., a Singaporean company is a Non-Resident Person who owns a mixed-use building and earns Rental income by letting out the residential and commercial units in the building.

XYZ Pte Ltd., is not incorporated in UAE and does not have PE in UAE. However, by way of owning an immovable property in UAE, XYZ Pte Ltd. has a nexus in UAE.

The income from such immovable property will be subject to UAE Corporate Tax.

XYZ Pte Ltd. will have to apply for CT Registration and file tax returns when due.

Conclusion

A new era of taxes for non-residents in the UAE has begun with the implementation of Cabinet Decision No. 56 of 2023.  The ruling assures that non-resident individuals with a nexus in the UAE are liable to corporate taxes by underlining the ownership of immovable property as a crucial component. Non-resident individuals must abide by the registration requirements and submit their tax returns on time in order to complete their tax obligations.

As we have discussed these changes, let us embrace a tax structure that encourages equity, openness, and economic stability.

For any questions, please contact us at tax@hlbhamt.com OR Call us at +971 4 3277 775

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