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Permanent Establishment - Corporate Tax UAE

Taxability of income of non resident has a direct interface with the permanent establishment as the income of non resident would get taxed if it is earned from permanent establishment.

Concept of permanent establishment is of great significance to the entities which are conducting business internationally. It implies that a business may be exposed to tax in foreign jurisdiction even though such business has not set up any subsidiary or legal entity there.

The Concept of permanent establishment in corporate tax law of the UAE is outlined on the basis of Article 5 of the OECD Model Tax Convention which enumerates the guiding principles for determining what constitutes permanent establishment.


According to the Decree-Law, permanent establishment means “a fixed place of business through which the business of an enterprise is wholly or partly carried on.” It especially includes:


1. A place of management where management and commercial decisions that are necessary for the conduct of the Business are, in substance, made

2. A branch

3. An office

4. A factory

5. A workshop

6. Land, buildings and other real property

7. An installation or structure for the exploration of renewable or non-renewable natural resources.

8. A mine, an oil or gas well, a quarry or any other place of extraction of natural resources, including vessels and structures used for the extraction of such resources

9. A building site, a construction project, or place of assembly or installation, or supervisory activities in connection therewith,

However, permanent establishment shall not include the following:

  • The use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the person

  • The maintenance of a stock of goods or merchandise solely for the sole purpose of processing by another person

  • Purchase of stock of goods or merchandise or collecting information solely for the non-resident person

  • The maintenance of a fixed place of business solely for the purpose of carrying on any activities of preparatory or auxiliary character

  • The maintenance of a fixed place of business solely for any combination of activities as specified, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.



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