Determining residence for Corporate Tax purposes solely on the basis of place of incorporation may not reflect the economic reality of where the business is actually managed or controlled. Accordingly, determination of residence for Corporate Tax purposes will take into account whether the juridical person incorporated or otherwise recognised in a foreign jurisdiction is effectively managed and controlled in the UAE,

in line with tax regimes in other countries that apply the concepts of “central management and control” and “place of effective management” rules for this same purpose.

Whether a juridical person is effectively managed and controlled in the UAE needs to be determined with regard to the specific facts and circumstances of the juridical person and its activities. A key factor is where key management and commercial decisions that are necessary for the conduct of the juridical person’s Business are in substance made. This could be the place where the highest level of decisions that are essential for the management of the juridical person are made, or where decisions that play a leading part in the management of a company from an economic and functional perspective are made. Typically, this will be where a company’s board of directors (or any equivalent body for other types of juridical persons) makes these decisions.

However, depending on the specific facts and circumstances, other factors such as where the controlling shareholders make decisions, the location of another Person or body to which the board has delegated its decision-making powers, or the location where the board members or executive management of the juridical person reside may also need to be considered. It is important to note that there can only be one place of effective management and control at any one time.

For a juridical person to be considered effectively managed and controlled in the UAE, it is not necessary for its board members (or equivalent) to be resident in the UAE.