Is UAE-sourced income of a non-resident taxed?

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.

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 45 – Withholding Tax 4 1. The State Sourced Income of a Non-Resident Person shall be subject to tax at a rate of (0%) zero percent in the form of Withholding Tax or any other rate of Withholding Tax determined by a decision issued by the Cabinet at the suggestion of the Minister, to the extent that such income is not attributable to a Permanent Establishment or nexus pursuant to Paragraph (a) or Paragraph (c) of Clause 3 of Article 12 of this Decree-Law. 2. As an exception to Clause 1 of this Article, the Cabinet may, at the suggestion of the Minister, issue a decision determining categories of State Sourced Income that will be subject to Withholding Tax at rates specified in such decision. 3. The Cabinet, may, at the suggestion of the Minister, issue a decision determining any other income that is subject to Withholding Tax at rates specified in such decision. 4. The Withholding Tax payable under this Article shall be deducted from the gross amount of the payment and remitted to the Authority in the form and manner and within the timeline as prescribed by the Authority, and the Authority may add controls or conditions for the implementation of the provisions of this Clause.

8. State Sourced Income Corporate Tax shall be imposed on a Taxable Person, including a Non-Resident Person, if the Non-Resident Person derives State Sourced Income, i.e. income accruing in, or derived from, the UAE. 66 This condition (deriving State Sourced Income) is one of three independent conditions for identifying whether a Person is a Non-Resident Person. Accordingly, a Person that is not a Resident Person in the UAE, and that derives income from the UAE should determine if the income qualifies as State Sourced Income. There will not be a need for the Non-Resident Person to register for Corporate Tax if the State Sourced Income they derive is not attributable to a UAE Permanent Establishment or a nexus in the UAE. State Sourced Income, derived by a Non-Resident Person, that is not attributable to a Permanent Establishment, may be subject to Withholding Tax; however, as mentioned in Section 5.4, Withholding Tax is currently levied at the rate of 0%.67 In the case of a Non-Resident Person, State Sourced Income includes: 1. Income derived from a Resident Person, i.e. income derived from a juridical person or natural person that is considered a Resident Person as per the Corporate Tax Law:68 Example 34: Sale of goods in the UAE Company A (incorporated in and tax resident of Country A) sells goods to Company B (a UAE Resident Person) in the State. The income for Company A received from these sales will be considered State Sourced Income because the income is derived from a Resident Person in the UAE. 2. Income derived by a Non-Resident Person from another Non-Resident Person to the extent it is attributable to a Business or Business Activity conducted by that other Non-Resident Person through a Permanent Establishment in the UAE.69 66 Article 11(4)(b) of the Corporate Tax Law. 67 Article 45(1)(a) of the Corporate Tax Law. 68 Article 13(1)(a) of the Corporate Tax Law. 69 Article 13(1)(b) of the Corporate Tax Law. Corporate Tax Guide | Non-Resident Persons | CTGNRP1 51