UAE Corporate Tax for Foreign Entities

Created By : Yeeshu Sehgal | UAE Tax Lead

Foreign companies are not automatically outside the UAE Corporate Tax net. If a company is run from the UAE, has a permanent establishment (PE) here, or earns rent or other income from UAE property, it has to register.

1. Does the foreign entity need to register?

It comes down to what the company actually does in the UAE, not where it is incorporated.

A foreign company running a branch in a Free Zone may still qualify for the 0% Free Zone rate on qualifying income, provided it meets the usual Free Zone conditions.

2. How and when to register

Applications go through the FTA’s EmaraTax portal. The company describes its UAE PE or nexus, uploads supporting documents, and receives a Tax Registration Number once the FTA approves it. Missing the deadline costs AED 10,000.

A common oversight: a business that winds up during its first tax period still has to register first, and only then deregister.

3. Tax period and return options

First tax period. For a PE set up on or after 1 June 2023, the first period starts when the PE begins operating and ends at its first financial year-end. It must be at least 6 months and no more than 18. A PE created through an agent exists from the day the agent starts acting.

Changing the period. A company can ask the FTA to change its tax period. The most common reason for a foreign group is to line the UAE branch up with the financial year of its head office or parent. Other accepted reasons include claiming tax relief at home or abroad, liquidation, or another sound commercial or legal reason. Some practical limits apply:

•      the return for the period being changed must not have been filed yet;

•      the request has to reach the FTA within 6 months after the original period ends; and

•      the change can stretch the current period to 18 months at most, or cut the next one to between 6 and 12 months.

Filing. The return is filed and the tax paid within 9 months of each period-end. Only profit that belongs to the PE is taxed, and the PE is treated as a separate business for transfer pricing, so its dealings with head office need arm’s-length support.

4. Closing the UAE presence

Deregistration has to be applied for within 3 months of the business stopping, whether that happens through dissolution, liquidation or simply winding down. Late applications attract a penalty. In practice the steps look like this:

1.    Confirm the presence has ended. The activity has stopped, the agent no longer acts, or the property has been sold. Holding a valid licence alone does not mean the business is still running.

2.    File the final return up to the date the business stopped. If the period needs adjusting for liquidation, apply for that first.

3.    Clear all dues. The FTA will not deregister anyone with unpaid tax, penalties or missing returns.

4.    Apply on EmaraTax. Once approved, deregistration usually takes effect from the date the business stopped.

5.    Tidy up the rest. Keep records for 7 years, close any VAT registration separately, and, for large multinational groups, deal with Top-up Tax deregistration as its own filing.

How AKM Global can help

AKM Global helps foreign businesses with every stage of UAE Corporate Tax. We assess whether your UAE activities create a PE or nexus, and handle EmaraTax registration on time. We also advise on aligning your tax period with your head office and manage ongoing transfer pricing and audit requirements. If you exit the UAE, we take care of the final return and deregistration so you avoid penalties.