UAE CORPORATE TAX: CABINET DECISION CONCERNING THE DETERMINATION OF A NON-RESIDENT JURIDICAL PERSON’S NEXUS IN THE STATE IN RESPECT OF IMMOVABLE PROPERTY

UAE CORPORATE TAX:  CABINET DECISION CONCERNING THE DETERMINATION OF A NON-RESIDENT JURIDICAL PERSON’S NEXUS IN THE STATE IN RESPECT OF IMMOVABLE PROPERTY

The UAE Govt. on 05th June 2023, issued a cabinet decision concerning the determination of a non-resident juridical person’s nexus in the state.

According to Cabinet decision No.56 of 2023, a Juridical Non-Resident Person shall have a nexus in the State if it earns income from any Immovable Property in the State (UAE) which shall include any income from the right in rem, sale, disposal, assignment, direct use, letting, including subletting and any other form of exploitation of Immovable Property. Such income from immovable property is taxable in the hands of a Non-Resident juridical Person. The income is taxable irrespective of the use of immovable property, whether the immovable property is used in a business or held as an investment.

Further, the Cabinet decision clarifies that if a Non-Resident juridical Person artificially transfers or otherwise disposes of its right in immovable property to another person that is not for a valid commercial or other non-fiscal reason which reflects economic reality, this would be considered an arrangement to obtain a Corporate Tax advantage and the income from the transfer will be taxable. It means that any transaction and arrangement to transfer the property in UAE unless made with a real objective will be disregarded.

Foreign companies and other non-resident juridical persons will be subject to UAE Corporate Tax on income derived from real estate and other immovable property located in the UAE and will be required to register in the UAE for Corporate Tax purposes.

For any update or clarification, please get in touch with kamal@luthraadvisors.com