Do all foreign companies in the UAE pay corporate tax?

Only companies with a PE and business income over AED 375,000 must pay 9% corporate tax.

How do companies calculate taxable income for a PE?

Companies add all UAE business income, subtract expenses, and pay 9% tax on profits above AED 375,000.

What documents must companies keep for tax deductions?

Companies must keep invoices, receipts, and records for all expenses they claim as deductions.

Why should foreign companies use a tax consultant in the UAE?

A tax consultant helps you understand the law, register properly, claim all deductions, and avoid penalties.

Corporate Tax for Foreign Companies with PE UAE

Corporate Tax for Foreign Companies That Have Permanent Establishments in the UAE

The United Arab Emirates (UAE) has become a popular business hub in the world. Many foreign companies set up operations in this region because of its friendly environment and good opportunities. But, with all these benefits, there are also some rules and taxes you need to know about. If a foreign company has a permanent establishment (PE) in the UAE, the company must follow the UAE’s corporate tax law. In this article, let’s explore how corporate tax works for foreign companies with PEs in the UAE.

What is a “Permanent Establishment” (PE) in the UAE?

A permanent establishment (PE) is a business place in the UAE where a foreign company carries out its business. This includes places like:

Offices or branches located in the UAE
Warehouses, factories, or construction sites used by the company
Installations or structures for exploring or extracting natural resources (mines, oil fields, quarries)

If a foreign company has a PE, the company must register for corporate tax in the UAE. The law says a PE does not include places used only for:

Storing, displaying, or delivering merchandise
Keeping goods for processing by another business
Purchasing goods or collecting information
Doing support or extra activities for the main business

Main Provisions for Permanent Establishments in UAE Corporate Tax Law

Foreign companies must know these important points:

A foreign person owns a PE in the UAE if the company controls a permanent location for business there.
If a UAE resident person can operate a business for a foreign company, that company may have a PE.
Other forms of business links may count as a PE, as listed by Cabinet Decisions.

Foreign companies with PEs must follow UAE tax rules and register with the Federal Tax Authority (FTA).

Calculation of Corporate Tax for Foreign Companies

Foreign companies with a PE in the UAE must pay 9% corporate tax on annual taxable income over AED 375,000. This income includes money from selling goods, providing services, renting properties, or any business in the UAE.

To calculate corporate tax:

Add all income earned by the PE in the UAE.
Subtract eligible expenses (like salaries, rent, or business costs).
If the net profit is more than AED 375,000, pay 9% tax on the extra amount.

Companies must register for corporate tax and submit tax returns to the FTA within 120 days of the financial year’s end.

Deductible Expenses and Documentation

Companies can reduce their tax bills by claiming eligible expenses. Deductible expenses include:

Donations made for social purposes
Salaries and employee benefits
Office rent, equipment, or operational costs
Tax credits from foreign taxes

Proper documents, like invoices and receipts, should support every expense claimed. Keeping records is very important for future audits.

Important Considerations for Foreign Companies

Foreign companies should remember:

The PE rule applies only if the company earns income through business operations in the UAE.
Activities for just storing or displaying goods, or extra support, may not create a PE.
If a foreign company earns only investment income (not business profits), it may not have to register for corporate tax.
Companies must check each business activity to see if they must pay tax.