Does a sole establishment pay Corporate Tax?

Therefore, the rental income received by the natural person (via the real estate management company), relates to a Real Estate Investment activity, that is the leasing of real estate by a natural person for which the natural person does not have nor is required to have a Licence. Hence, the income shall be excluded from the scope of Corporate Tax by the natural person. 4.2.4. Sole establishments and sole proprietorships A sole establishment or sole proprietorship is a Business which is owned and conducted by a natural person on his/her own account and in their own name, as the case may be. In such situations, the natural person and the sole establishment/sole proprietorship are the same Person, which is distinguishable from a single owner company which has its own legal personality where the owner and the company are separate Persons. The sole establishment or sole proprietorship and the natural person are one and the same because of their direct relationship and Control over the Business and their unlimited liability for the debts and other obligations of the Business. For Corporate Tax purposes, the Taxable Person is the natural person conducting the Business and not the sole establishment or sole proprietorship. Example 6: Natural person with sole establishment A natural person owns several real estate properties in both Abu Dhabi and Dubai and conducts no other Business. The natural person created a sole establishment in February 2024 which has a Licence to manage self-owned properties. The sole establishment is not considered to have a separate legal personality from the natural person. As the natural person, through the sole establishment, holds a Licence to manage his real estate, the rental income will not be classified as Real Estate Investment income, and will be subject to Corporate Tax (if the AED 1 million turnover threshold is exceeded within the 2024 Gregorian calendar year). 4.3. Corporate Tax implications of Real Estate Investment If income from Real Estate Investment is excluded from the scope of Corporate Tax, then expenditure that relates directly or indirectly to Real Estate Investment income is not deductible for Corporate Tax purposes. Consequently, any profits will not be included in the calculation of any Taxable Income, and any loss will not be eligible for any Corporate Tax relief. Corporate Tax Guide | Real Estate Investment | CTGREI1 14

A No, a sole establishment does not have a legal personality that is independent of its owner, and is therefore considered to be the same Taxable Person as its owner. However, the LLC is considered as a distinct and separate legal person from its owner. As the LLC is a different Taxable Person, the sole establishment will need to deregister for Corporate Tax (assuming the owner has no other Business carried on as a natural person) and the LLC will need to register for Corporate Tax 108. Q A Business is carried on by a natural person with a trade licence as a sole establishment. If the natural person dies, and the Business is carried on by the heirs under the same trade licence, does the Business need to de-register and register for Corporate Tax as a new establishment? A A Business carried on by a natural person ceases on the death of its owner, and must de-register from Corporate Tax. The treatment of the Business carried on by the heirs will depend on the agreement between them. If the relationship constitutes an Unincorporated Partnership109, then the partners (i.e., the heirs) must appoint one of them to act as the authorised partner on behalf of all partners and register the Unincorporated Partnership with the FTA for Corporate Tax purposes. Q Does a US company with a branch in the UAE need to register for Corporate Tax if its income is exempt under an international agreement between the USA and the UAE? A Yes, all non-resident companies110 with a permanent establishment in the UAE 111 need to register for Corporate Tax112 and file Corporate Tax Returns113, even if their income is Exempt Income under an international agreement114. Where the activities conducted by the Applicant fall into the scope of Exempt Income, the gross income generated from these activities would not be subject to Corporate Tax. Q Do Jointly Owned Properties set up and licensed under Dubai Law need to register for Corporate Tax, even though they are not juridical persons and have no independent legal personality? A No, such entities are not juridical or natural persons so do not need to register for Corporate Tax115. However, management entities that are set up as juridical persons to manage Jointly Owned Properties must register for Corporate Tax and file Tax Returns of their income based on financial statements prepared according to IFRS. Q An Owners’ Association set up under Abu Dhabi Law is classified as a non-profit entity established to manage and oversee a building on behalf of all individual property owners, and is registered as a sole proprietorship LLC. Does it need to register for Corporate Tax? A Yes, an Owner’s Association must register for Corporate Tax116 if it is a juridical person with a separate legal personality to its owners, founders and directors, such as a sole proprietorship LLC. Q Does a natural person who has a Business that buys and sells real estate and also derives rental income, where both activities have trade licences, need to register for Corporate Tax117? 108 Article 52(1) of the Corporate Tax Law 109 Article 1 of the Corporate Tax Law 110 Article 11(4) of the Corporate Tax Law 111 Article 14 of the Corporate Tax Law 112 Article 51 of the Corporate Tax Law 113 Article 53 of the Corporate Tax Law 114 Article 66 of the Corporate Tax Law 115 Article 1, Article 51(1) and Article 66 of the Corporate Tax Law 116 Article 1 and Article 51(1) of the Corporate Tax Law 117 Article 51 of the Corporate Tax Law 18