As part of the efforts of the UAE government to enhance a flexible business environment and improve the tax system in the country for Emirati and foreign companies, Ministerial Decision No. 83 in the UAE is issued, which aims to determine the conditions for imposing taxes on foreign companies.
Table of contents.
The aim of the foreign companies tax.
This decision determines the cases of the presence of a temporary or exceptional person in the country, which must be met so that the presence of a natural person in the country is not considered a reason for foreign non-resident companies to become permanent establishments in the country for corporate tax purposes. This decision also aims to reduce the risk of tax evasion, in accordance with international standards.
Temporary (foreign companies) and exceptional presence conditions.
The presence of a natural person in the state is considered a temporary and exceptional result, if all the conditions are met:
- A natural person’s presence in the country must be a result of exceptional circumstances of a general or specific nature.
- A natural person or non-domiciled person (foreign companies) cannot reasonably anticipate exceptional circumstances.
- The natural person has not expressed a desire to stay in the country after the exceptional circumstances have ended.
- The non-domiciled person does not have a permanent establishment in the country prior to the occurrence of exceptional circumstances.
- The non-domiciled person does not consider the natural person as creating a permanent establishment or generating income in the country according to the tax legislation applicable in other countries.
The exceptional circumstances.
The exceptional circumstances mean a situation or event that happens unexpectedly and beyond the control of the natural person, preventing them from leaving the country reasonably, even though they originally intended to leave. These circumstances include, without limitation, any unexpected situation that may occur to the person while being in the country, such as:
In respect of exceptional general circumstances:
• Taking health measures related to public health determined by the competent authorities in the country, the original place of work or the World Health Organization.
• Imposing travel restrictions by the competent authorities in the country or the original place of work.
• Imposing legal sanctions on the natural person preventing them from leaving the country’s territory.
• Acts of war or terrorist incidents.
• Occurrence of natural disasters or irresistible force beyond reasonable control.
• Any other similar circumstances determined by the authority.
In respect of exceptional general circumstances:
• Taking health measures related to public health determined by the competent authorities in the country, the original place of work or the World Health Organization.
• Imposing travel restrictions by the competent authorities in the country or the original place of work.
• Imposing legal sanctions on the natural person preventing them from leaving the country’s territory.
• Acts of war or terrorist incidents.
• Occurrence of natural disasters or irresistible force beyond reasonable control.
• Any other similar circumstances determined by the authority.
In respect of exceptional circumstances of a particular nature:
• The occurrence of an emergency health situation affecting the natural person or their relatives up to fourth degree, including adoption or guardianship.
• Any other similar circumstances determined by the authority.
Ministerial Resolution No. (82) of 2023 aims to improve the business environment and enhance transparency in the economic sector in the UAE. It is part of a series of regulatory decisions related to the tax imposed on domestic and foreign companies which aim to strengthen the tax system in the country, improve the financial performance of companies, and make the business environment more attractive to foreign investments and foreign companies.
This decision requires individuals subject to tax and whose revenues exceed AED 50 million, in addition to qualified individuals operating in the free zone, to prepare audited financial statements and retain them. This is part of the UAE government’s efforts to enhance accountability and transparency in business, ensure compliance with tax legislation in the country, and reduce the risk of tax evasion. By implementing this decision, the UAE government can improve the monitoring of business activities in the country and ensure fair tax returns, supporting the development of the national economy and enhancing the financial sustainability of the country.
In an effort to improve transparency and regulation in business operations and to ensure compliance with tax legislation in the country, the UAE government has implemented a decision to achieve these goals by setting clear and specific conditions on cases where the presence of a natural person in the country does not render non-resident foreign companies a permanent establishment in the country for corporate tax purposes. All Cabinet decisions and ministerial resolutions related to corporate tax can be accessed through the Ministry of Finance website at www.mof.gov.ae.
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