This chapter provides an overview of who is subject to Corporate Tax and who is specifically exempted. The chapter sets out the types of Persons that are subject to Corporate Tax and the activities that are within scope of the tax. It covers the main exemptions that apply to certain types of entities, such as Government Entities or Qualifying Public Benefit Entities. It also sets out treatments that apply to Free Zone businesses, and Family Foundations.

 

Taxable Persons

 

Persons subject to Corporate Tax are known as Taxable Persons.4 Taxable Persons are either Resident Persons or Non-Resident Persons as defined under Article 11 of the Corporate Tax Law.5

 

In broad terms, Corporate Tax applies to:

 

• Juridical persons (such as corporations) that are incorporated in the UAE or foreign juridical persons that are effectively managed and controlled in the UAE (see Section 5.3.1);6

• Non-resident juridical persons (foreign juridical entities) that have a Permanent Establishment in the UAE (see Section 5.4.1);7

• Non-Resident Persons deriving State Sourced Income (see Section 5.4.3);8

• Non-resident juridical persons that have a ‘nexus’ in the UAE by virtue of earning income from Immovable Property in the UAE (see Section 5.4.4);9 and

• Natural persons who conduct Business or Business Activities in the UAE and have a Turnover of over AED 1,000,000 per Gregorian calendar year from such Business or Business Activities (see Section 5.3.3).10

 

Resident Taxable Persons

 

There are specific rules for determining whether natural persons and juridical persons are Resident Persons for Corporate Tax purposes.

 

Resident juridical persons

 

A juridical person refers to an entity incorporated or otherwise established or recognised under the laws and regulations of the UAE, or under the laws of a foreign jurisdiction, that has a legal personality separate from its founders, owners and directors. Separate legal personality means that the entity has its own rights, obligations and liabilities distinct from its founders or owners.

 

A juridical person is a Resident Person for the purposes of Corporate Tax if it is either:

 

• incorporated or otherwise established or recognised in the UAE (this includes juridical persons incorporated, established or otherwise registered in Free Zones);11 or

• incorporated or otherwise established or recognised outside the UAE but is effectively managed and controlled in the UAE.12

 

Examples of juridical persons that are incorporated or otherwise established or recognised in the UAE include Joint Liability Companies, Limited Partnership Companies, Limited Liability Companies (LLCs), Public Joint Stock Companies (PJSCs), Private Joint Stock Companies (PJSCs), foundations, trusts that have been established under the UAE mainland legislation, and other entity forms that have a separate legal personality under the applicable UAE mainland legislation or Free Zone regulations. UAE branches of a domestic or foreign juridical person are regarded as an extension of their head office and, therefore, are not considered separate juridical persons.13