Is income earned abroad by a UAE resident individual taxed?

Article 11 – Taxable Person 1. Corporate Tax shall be imposed on a Taxable Person at the rates determined under this Decree-Law. 2. For the purposes of this Decree-Law, a Taxable Person shall be either a Resident Person or a Non-Resident Person. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 16 3. A Resident Person is any of the following Persons: a. A juridical person that is incorporated or otherwise established or recognised under the applicable legislation of the State, including a Free Zone Person. b. A juridical person that is incorporated or otherwise established or recognised under the applicable legislation of a foreign jurisdiction that is effectively managed and controlled in the State. c. A natural person who conducts a Business or Business Activity in the State. d. Any other Person as may be determined in a decision issued by the Cabinet at the suggestion of the Minister. 4. A Non-Resident Person is a Person who is not considered a Resident Person under Clause 3 of this Article and that either: a. Has a Permanent Establishment in the State as under Article 14 of this Decree-Law. b. Derives State Sourced Income as under Article 13 of this Decree-Law. c. Has a nexus in the State as specified in a decision issued by the Cabinet at the suggestion of the Minister. 5. A branch in the State of a Person referred to in Clause 3 of this Article, shall be treated as one and the same Taxable Person. 6. The Cabinet shall, upon a suggestion of the Minister and in coordination with the relevant competent authorities, issue a decision specifying the categories of Business or Business Activity conducted by a resident or non-resident natural person that are subject to Corporate Tax under this Decree-Law.

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.

Income derived from the UAE Corporate Tax implications • Income from Business Activity: Mr C has an office in the UAE to meet and conduct meetings with his UAE clients of his fashion design Business. Mr C is conducting a Business in the UAE. Hence, he will be treated as a Resident Person for Corporate Tax purposes and income generated from consulting clients in the UAE will be subject to Corporate Tax, provided the total Turnover from Mr C’s Business or Business Activities conducted in the UAE exceeds AED 1 million within a Gregorian calendar year.23 • Rental income: Mr C has an apartment in the UAE that he has rented out to earn rental income for which he does not require a Licence from a Licensing Authority. The apartment is not used to conduct his Business. The rental income from the apartment will be treated as Real Estate Investment income and, hence, is not be subject to Corporate Tax.24 Mr C earns the following income from Country C: Income derived from Country C Corporate Tax implications • Wages from working part time for Although Mr C is a Resident Person under the Corporate Tax Law, Mr C’s an employer based in Country C. wages will not be subject to Corporate Tax, as Corporate Tax does not apply to a natural person’s salary, wages and other employment income.25 • Rental income from an apartment in Although Mr C is a Resident Person Country C not used for Business under the Corporate Tax Law, the rental income from the apartment, which does purposes. not require a Licence from a Licensing Authority in the UAE, will be treated as Real Estate Investment income and, therefore, will not be subject to Corporate Tax.26 23 Article 11(6) of the Corporate Tax Law read with Cabinet Decision No. 49 of 2023. 24 Article 11(6) of the Corporate Tax Law read with Cabinet Decision No. 49 of 2023. 25 Article 11(6) of the Corporate Tax Law read with Cabinet Decision No. 49 of 2023. 26 Article 11(6) of the Corporate Tax Law read with Cabinet Decision No. 49 of 2023. Corporate Tax Guide | Taxation of foreign source income | CTGFSI1 22

Article 24 – Foreign Permanent Establishment Exemption 1. A Resident Person can make an election to not take into account the income, and associated expenditure, of its Foreign Permanent Establishments in determining its Taxable Income. 2. Where Clause 1 of this Article applies, a Resident Person shall not take into account the following in determining its Taxable Income or Corporate Tax Payable for a Tax Period: Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 31 a. losses in any of its Foreign Permanent Establishments, calculated as if the relevant Foreign Permanent Establishments were a Resident Person under this Decree-Law; b. positive income and associated expenditure in any of its Foreign Permanent Establishments, calculated as if the relevant Foreign Permanent Establishments were a Resident Person under this Decree-Law; and c. any Foreign Tax Credit that would have been available under Article 47 of this DecreeLaw had the election under Clause 1 of this Article not been made. 3. For the purposes of this Article, “income and associated expenditure” of a Taxable Person’s Foreign Permanent Establishments for a Tax Period is the aggregate of the income and associated expenditure in each of the relevant foreign jurisdictions. 4. In determining the income and associated expenditure of a Foreign Permanent Establishment, a Resident Person and each of its Foreign Permanent Establishments shall be treated as separate and independent Persons. 5. For the purposes of Clause 4 of this Article, a transfer of assets or liabilities between a Resident Person and its Foreign Permanent Establishment shall be treated as having taken place at Market Value at the date of the transfer for the purposes of determining the Taxable Income of that Resident Person. 6. The exemption under Clause 1 of this Article shall apply to all Foreign Permanent Establishments of the Resident Person that meet the condition specified in Clause 7 of this Article. 7. The exemption under Clause 1 of this Article shall only apply to a Foreign Permanent Establishment that is subject to Corporate Tax or a tax of a similar character under the applicable legislation of the relevant foreign jurisdiction at a rate not less than the rate specified in paragraph (b) of Clause 1 of Article 3 of this Decree-Law.