Is income from a foreign branch taxed in the UAE?

Answered by TI from the Federal Tax Authority’s own law · 15 September 2026. Guidance, not tax advice: rely on the official text.

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It depends on a choice you can make. If your foreign branch pays tax of at least 9% in its own country and you elect the exemption, its income is not taxed in the UAE; if you don't, it is taxed (with a credit for foreign tax paid).

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The detail

Yes if you do not elect under Article 24, or if the branch is not taxable in its foreign jurisdiction at 9% or more; no if you do elect and the branch meets that rate. The exemption is per Article 24(1) but applies to all foreign branches together, and gives up foreign tax credits (Article 24(2)(c)). If not exempt, the income is taxable with a foreign tax credit to avoid double taxation (Article 47).1 2

What the law says

A Resident Person may elect to exclude the income and associated expenditure of its Foreign Permanent Establishments (FPEs) from Taxable Income — Article 24(1).1
The exemption applies only to FPEs subject to corporate income tax of at least 9% in their local jurisdiction (the rate in Article 3(1)(b)), and applies to all qualifying FPEs together — Article 24(6)–(7).1
If the election is not made (or is unavailable), foreign income is taxed, but Corporate Tax is reduced by a foreign tax credit capped at the tax due on that income, with no carryforward or carryback — Article 47(1)–(3).2

What it depends on

The foreign branch must be a permanent establishment of a Resident Person and subject to a local statutory corporate tax rate of 9% or more.1
The election applies to all qualifying foreign branches of the taxpayer together — you cannot choose selectively.1
Losses and income of exempt branches are excluded, and the branch is treated as a separate independent person for accounting and transfer pricing (Articles 24(4)–(5)).1

Check before you rely on it

Confirm the local statutory rate in the branch's country (it must be at least 9% to qualify).
Decide and document whether to make the election — it applies to all your foreign branches at once.
If you do not elect, keep evidence of foreign tax paid to claim the credit.

Note: The processes for making the election and for calculating the 9% rate (e.g. effective vs. nominal) are not in the supplied sources; confirm them with the FTA.

Sources (2) — read the official text

1Corporate Tax LawArticle 24Law

Article 24 – Foreign Permanent Establishment Exemption

Read the article
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.

Official PDF, pp. 31–32Captured from the FTA website on 9 Sep 2026Found by following a reference in another source
2Corporate Tax LawArticle 47Law

Article 47 – Foreign Tax Credit

Read the article
Article 47 – Foreign Tax Credit 1. Corporate Tax due under Article 3 of this Decree-Law can be reduced by the amount of Foreign Tax Credit for the relevant Tax Period. 2. The Foreign Tax Credit under this Decree-Law cannot exceed the amount of Corporate Tax due on the relevant income. 3. Any unutilised Foreign Tax Credit as a result of Clause 2 of this Article cannot be carried forward or carried back. 4. A Taxable Person shall maintain all necessary records for the purposes of claiming a Foreign Tax Credit. Chapter Fourteen – Payment and Refund of Corporate Tax

Official PDF, p. 52Captured from the FTA website on 9 Sep 2026Found by following a reference in another source

Helpful?

What the law says:
- A Resident Person may elect to exclude the income and associated expenditure of its Foreign Permanent Establishments (FPEs) from Taxable Income — Article 24(1). [1]
- The exemption applies only to FPEs subject to corporate income tax of at least 9% in their local jurisdiction (the rate in Article 3(1)(b)), and applies to all qualifying FPEs together — Article 24(6)–(7). [1]
- If the election is not made (or is unavailable), foreign income is taxed, but Corporate Tax is reduced by a foreign tax credit capped at the tax due on that income, with no carryforward or carryback — Article 47(1)–(3). [2]

What it depends on:
- The foreign branch must be a permanent establishment of a Resident Person and subject to a local statutory corporate tax rate of 9% or more. [1]
- The election applies to all qualifying foreign branches of the taxpayer together — you cannot choose selectively. [1]
- Losses and income of exempt branches are excluded, and the branch is treated as a separate independent person for accounting and transfer pricing (Articles 24(4)–(5)). [1]

Check before you rely on it:
- Confirm the local statutory rate in the branch's country (it must be at least 9% to qualify).
- Decide and document whether to make the election — it applies to all your foreign branches at once.
- If you do not elect, keep evidence of foreign tax paid to claim the credit.

Note: The processes for making the election and for calculating the 9% rate (e.g. effective vs. nominal) are not in the supplied sources; confirm them with the FTA.

Sources:
1. Corporate Tax Law — Article 24
2. Corporate Tax Law — Article 47

Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer

Is income from a foreign branch taxed in the UAE?

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