Under the UAE Corporate Tax Law, a resident person refers to any individual or entity that meets the residency criteria stipulated therein. This article provides an in-depth analysis of Article 3 of the UAE Corporate Tax Law, which outlines the requirements for residency, with a particular focus on the parent company and its subsidiaries. Article 3 further expands on this definition by including the following:
Natural Persons
One shall be considered a resident for tax purposes if he/she:
- UAE resident, satisfies the residence criteria under Federal Law No. (29) of 2021 on Immigration and Residence Law.
- UAE resident or has a real headquarters or address for commercial or economic interests or other benefits
Legal persons-Entities
Shall be eligible to be considered a resident if any of the entities or persons among the following qualifications if:
- Incorporated and registered under the laws of UAE.
- It was well operated and within the jurisdiction of UAE.
Conditions for Resident Persons by Parent Company
A parent company forms and administers tax groups. To become classed as a resident person, a parent company must have;
- It be formed under the UAE law, and must be deemed to be resident under the requirements of Article 3.
- Its management and control should be held mainly in the State.
These conditions will help a parent company aggregate its tax return, therefore providing one of the means of corporate tax compliance for the entire tax group.
Residency Requirements for Subsidiaries
Subsidiaries are required to satisfy the residency requirements. Specifically, it has to:
- Be a legal person and incorporated or registered in the UAE
- The business operations and its investment in finance need to be aligned with its parent for consolidation of the tax report effortlessly.
However, such subsidiaries lacking the residency attributes cannot be included in the tax group of the parent as their taxes will be liable to other jurisdictions.
Effects of Residency in Another Country
Tax residence for tax purposes has the following implications:
- Double Tax Residence
Business entities and corporates running businesses across various jurisdictions are taxed unknowingly for more than one tax obligation. Deliberate planning may be called for as a result of the various overlaps of tax implications commonly known as double taxation.
UAE Corporate Tax Law: What Business Owners Need to Know
- Tax grouping is based on residency, and this is outlined in Article 3 of the Corporate Tax Law.
- The parent and subsidiary must both meet the residency requirements for it to qualify to be a tax group.
- Residency in another country makes compliance complex, hence the need to plan ahead with tax.
Importance of Determining Tax Residency for Tax Groups
Tax residency defines the shape, responsibilities, and benefits of tax groups. Thus, effectively determining residency and ensuring compliance can assist businesses in realizing benefits from central tax reporting, streamlining compliance, and optimizing tax liabilities.
Seek the Expert Services of Premier Tax Consultants
The concept of a resident person, as defined under the UAE Corporate Tax is essential to determine the establishment and maintenance of tax groups. Article 3 clearly outlines the criteria for determining residency, thereby enabling businesses to meet their tax obligations while benefiting from group taxation. Contact us today, and we shall be happy to assist you in accurately determining your tax status and ensuring compliance with corporate tax regulations.
