Ministerial Decision No. 83 sheds light on taxation of non-residents under new Corporate Income Tax regime

Ministerial Decision No. 83 of 2023 (Decision) sets out specific conditions under which the presence of a natural person (i.e., an individual) would not create a Permanent Establishment (PE) in the United Arab Emirates (UAE) for Corporate Income Tax (CIT) purposes. The Decision, which was issued on 10 April 2023, operates in conjunction with Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (CIT law), and aims to provide a detailed and precise interpretation of the legislation in light of the unexpected events that could impact the presence of a non-resident in the country.

The decision focuses on specific circumstances where the presence of a natural person may be deemed as temporary and exceptional.

This will in particular be the case in the following situations:

• The presence of the natural person in the UAE is a consequence of exceptional circumstances of a public or private nature.
• The exceptional circumstances cannot reasonably be predicted by the natural person or the non-resident person.
• The natural person did not express any intention to remain in the UAE when the exceptional circumstances end.
• The non-resident person does not have a PE in the UAE before the occurrence of the exceptional circumstances.
• The non-resident person did not consider that the natural person is creating a PE or deriving income in the UAE as per the tax legislation applicable in other jurisdictions.

The decision also provides a comprehensive definition of what qualifies as exceptional circumstances. These circumstances are broadly categorized into those of a public nature, such as public health measures, travel restrictions, legal sanctions, acts of war, natural disasters, and those of a private nature, such as emergency health conditions affecting the individual or their close relatives.

Key takeaway

Ministerial Decision No. 83 of 2023 serves as a significant addition to the broader tax regulations as it lays out clear definitions and guidelines for understanding the conditions under which a non-resident's presence in the UAE does not result in a permanent establishment for tax purposes. The decision provides greater clarity for corporations and businesses, helping them better understand the legal and tax implications of unexpected and exceptional circumstances.

Non-resident entities should familiarize themselves with these new conditions to avoid misinterpretations of their tax status and ensure compliance with the updated tax laws.