Does a non-resident individual pay Corporate Tax on UAE property rent?

Article 13 – State Sourced Income 1. Income shall be considered State Sourced Income in any of the following instances: a. Where it is derived from a Resident Person. b. Where it is derived from a Non-Resident Person and the income received has been paid or accrued in connection with, and attributable to, a Permanent Establishment of that Non-Resident Person in the State. c. Where it is otherwise accrued in or derived from activities performed, assets located, capital invested, rights used, or services performed or benefitted from in the State. 2. Subject to any conditions and limitations that the Minister may determine, State Sourced Income shall include, without limitation: a. Income from the sale of goods in the State. b. Income from the provision of services that are rendered or utilised or benefitted from in the State. c. Income from a contract insofar as it has been wholly or partly performed or benefitted from in the State. d. Income from movable or immovable property in the State. e. Income from the disposal of shares or capital of a Resident Person. f. Income from the use or right to use in the State, or the grant of permission to use in the State, any intellectual or intangible property. g. Interest that meets any of the following conditions: 1) The loan is secured by movable or immovable property located in the State. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 18 2) The borrower is a Resident Person. 3) The borrower is a Government Entity. h. Insurance or reinsurance premiums in any of the following instances: 1) The insured asset is located in the State. 2) The insured Person is a Resident Person. 3) The insured activity is conducted in the State.

Article 12 – Corporate Tax Base 1. A Resident Person, which is a juridical person, is subject to Corporate Tax on its Taxable Income derived from the State or from outside the State, in accordance with the provisions of this Decree-Law. 2. The Taxable Income of a Resident Person, which is a natural person, is the income derived from the State or from outside the State insofar as it relates to the Business or Business Activity conducted by the natural person in the State as set out in Clause 6 of Article 11 of this Decree-Law. 3. A Non-Resident Person is subject to Corporate Tax on the following: Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 17 a. The Taxable Income that is attributable to the Permanent Establishment of the NonResident Person in the State. b. State Sourced Income that is not attributable to a Permanent Establishment of the Non-Resident Person in the State. c. The Taxable Income that is attributable to the nexus of the Non-Resident Person in the State as determined in a decision issued by the Cabinet pursuant to paragraph (c) of Clause 4 of Article 11 of this Decree-Law.

9. Nexus in the UAE Corporate Tax is imposed on juridical Non-Resident Persons who have a nexus in the UAE. Non-Resident Persons that have a nexus in the UAE are required to register for Corporate Tax purposes. The nexus concept does not apply to natural persons. A juridical Non-Resident Person will be considered to have a nexus in the UAE if it derives income from any Immovable Property in the UAE, which means:72 a. any area or land over which rights or interest or services can be created; or b. any building, structure or engineering work attached to the land permanently or attached to the seabed; or c. 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. Income from Immovable Property will include income derived by way of sale, disposal, assignment, direct use, leasing or sub-leasing or any other form of exploitation of Immovable Property.73 Taxable Income from Immovable Property will be subject to Corporate Tax as follows: • • 0% (zero percent) on the first AED 375,000 of Taxable Income 9% (nine percent) on the amount above AED 375,000 of Taxable Income If a Non-Resident Person is a Qualifying Free Zone Person, then the provisions related to the Free Zone Corporate Tax regime will apply on income from Immovable Property received by such Person. Example 39: ATM machine in the UAE Company B, a bank not established in the UAE, installs, operates and maintains ATM machines in various malls, hotels and movie theatres in the UAE from which it earns service fees. In this case, Company B will be considered to have a nexus in the UAE because the ATM is “machinery or equipment which is permanently attached to a building”. Note that a fixed place Permanent Establishment in the UAE is also created in this 72 Cabinet Decision No. 56 of 2023. 73 Article 2(2) of Cabinet Decision No. 56 of 2023. Corporate Tax Guide | Non-Resident Persons | CTGNRP1 55

Income is considered to be State Sourced if: • it is derived from a Resident Person;30 or • it is derived from a Non-Resident Person in connection with the Non-Resident Person’s Permanent Establishment in the UAE;31 or • it is derived from activities or contracts performed in the UAE, assets located in the UAE, capital invested, rights used, or services performed or benefitted from in the UAE.32 State Sourced Income may include: • income from the sale of goods in the UAE;33 • income from movable or Immovable Property in the UAE;34 or • income from the disposal of shares of a Resident Person.35 In instances where a Non-Resident Person earns State Sourced Income only and where this income is not attributable to a Permanent Establishment in the UAE, the income is currently subject to a 0% Withholding Tax. Practically, this means no Corporate Tax liability arises in this situation. 5.4.4. Non-resident juridical person that has a nexus in the UAE (derives income from UAE Immovable Property) Corporate Tax is also applicable when there is a nexus between a Non-Resident juridical person and the UAE. The nexus is the connecting link for Corporate Tax purposes. Cabinet Decision No. 56 of 2023 specifies that when any Non-Resident juridical person earns income from Immovable Property in the UAE, the Non-Resident juridical person will have a nexus in the UAE.36 As a result, Non-Resident juridical persons are subject to Corporate Tax on income attributable to the Immovable Property in the UAE.37 Immovable Property includes rights over areas of land, buildings, structures, or engineering work permanently attached to land or seabed, or any fixture or equipment 30 Article 13(1)(a) of the Corporate Tax Law. 31 Article 13(1)(b) of the Corporate Tax Law. 32 Article 13(1)(c) of the Corporate Tax Law. 33 Article 13(2)(a) of the Corporate Tax Law. 34 Article 13(2)(d) of the Corporate Tax Law. 35 Article 13(2)(e) of the Corporate Tax Law. 36 Article 2(1) of Cabinet Decision No. 56 of 2023. 37 Article 12(3)(c) of the Corporate Tax Law. General Corporate Tax Guide | Corporate Tax | CTGGCT1 30