Historically, corporate tax residency has been certified by tax authorities. But with the implementation of the UAE Federal Corporation Tax Act, corporations and other legal entities incorporated or recognized under the laws of the United Arab Emirates are considered tax residents. This covers both entities formed under continental legislation and under the regulations of free zones.

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In addition, foreign companies and other legal entities can be considered tax residents for corporate tax purposes if they are effectively directed and controlled from the UAE.
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A non-resident person will be subject to taxation in the United Arab Emirates if:
• It has a permanent establishment in the United Arab Emirates.
• Earns income from the United Arab Emirates.
• It has a link with the United Arab Emirates derived from income related to real estate in the country.

Permanent Establishment

According to the Act, the definition of permanent establishment aligns with that of the Model Fiscal Agreement of the Organization for Economic Cooperation and Development (OECD).
In general terms, a non-resident person is considered to have a permanent establishment in the UAE in the following situations:
1. Fixed Place: The non-resident person has a fixed or permanent place in the UAE through which they carry out, in whole or in part, their business activity.
2. Customary Authority: The person usually exercises authority to direct a business or business activity in the UAE on behalf of the non-resident person. This includes the regular conclusion of contracts on behalf of the non-resident person or the negotiation of contracts on behalf of the non-resident, without the need for substantial modifications.
3. Other Nexus: The non-resident person has any other type of link with the UAE that can be specified by a decision of the Council of Ministers.

A fixed or permanent place will not be considered a permanent establishment (EP) if it is used exclusively for preparatory or ancillary activities.
In addition, the mere presence of a natural person in the UAE will not constitute an EP for a non-resident person in the following cases:
• Temporary and Exceptional Situation: Presence is the result of a temporary and exceptional situation.
• Non-Income-Generating Activities: The natural person is employed by the non-resident, and their activities in the UAE are not part of the main income-generating activities of the non-resident or their related parties.
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Additionally, the Corporation Tax Act establishes a specific exemption for investment managers. Under this exemption, an investment manager (understood as an entity or person that provides brokerage or investment management services subject to regulatory oversight in the UAE) will be considered an independent agent for the purpose of determining whether to create an EP. This provision applies to investment managers who deal in commodities, real estate, bonds, stocks, derivatives, securities or currencies, among other assets.