The Ministry of Finance of the United Arab Emirates (MoF) has announced the publication of a Cabinet decision on a nexus for non-residents in the United Arab Emirates for corporate tax purposes.
Foreign companies and other non-resident legal entities are subject to UAE corporate income tax on income from real estate and other immovable property in the UAE, and they must register in the UAE for corporate income tax purposes, the Finance Ministry said in a statement, Zawya reported.
This applies to property held or used in a business as well as property held for investment purposes in the UAE, it said.
Younis Haji Al Khoori, Undersecretary of the MoF, said, “The Corporate Tax treatment of income derived from UAE real estate and other immovable property by foreign juridical persons is in line with international best practice which stipulates that income derived from immovable property is taxable in the country in which such property is located.”
Real estate investment income from real estate in the UAE owned by foreigners or UAE residents, either directly or through a trust, foundation or other vehicle that is treated as fiscally transparent for UAE corporate tax purposes, would generally not be subject to corporate tax, provided it is not a licensed business activity, the statement said.
Real Estate Investment Trusts (REITs) and other qualifying investment funds are eligible for a corporate income tax exemption on income derived from investing in real estate in the UAE provided the relevant conditions are met.
The UAE introduced a 9% corporate tax with relief for SMEs and likely exemptions for export-oriented free zone activities.
UAE Corporate Income Tax applies to a Recorded Person on gains from the sale of goods and services. The law regulates the taxation of business profits of UAE residents (profits made in the UAE and profits abroad). It applies to both companies and individuals. However, certain income would be exempt from corporation tax.