UAE Corporate Tax Law (CT) – the Conditions under which the Presence of a Natural Person in the UAE will not Create a Permanent Establishment for a Non-Resident Person

By Shahram Safai and Mevan Bandara

The UAE Minister of Finance by Ministerial Decision No.83/2023 dated 10 April 2023 has set out the conditions under which the presence of a natural person in the UAE would not create a Permanent Establishment for a Non-Resident Person.

 

For the sake of context, Article 12 of CT provides that a Non-Resident Person is subject to Corporate Tax on Taxable Income in certain circumstances, which include, the Taxable Income attributable to the Permanent Establishment of the Non-Resident Person in the UAE.

 

While Article 14 (1) and (2) of the CT deals with circumstances under which a Non-Resident Person is considered to have a Permanent Establishment in the UAE. Article 14 (3) of the CT sets out the circumstances a fixed or permanent place of a Non-Resident Person in the UAE will not be considered as a Permanent Establishment.

 

Article 14 (7)(a) of the CT also provides that for the purpose of Article 14(3), the Minister may prescribe the conditions under which the mere presence of a natural person in the UAE does not create a Permanent Establishment for a Non-Resident Person where the presence of such natural person in the UAE is due to a ‘temporary and exceptional situation’. The conditions are set out in Ministerial Decision No. 83 of 2023 which states that, a ‘temporary and exceptional situation’ is where all of the following conditions are met:

 

a) The presence of the natural person in the UAE is due to exceptional circumstances of a public or private nature;

 

b) The exceptional circumstances cannot reasonably be predicted by the natural person of the Non-Resident Person;

 

c) The natural person did not express any intention to remain in the UAE when the exceptional circumstances end;

 

d) The Non-Resident Person did not have a Permanent Establishment in the UAE before the occurrence of the exceptional circumstances; and

 

e) The Non- Resident Person did not consider that the natural person is creating a Permanent Establishment or deriving income in the UAE as per the tax legislation applicable in other jurisdictions.

 

The Ministerial Decision states that ‘an exceptional circumstance’ is a situation or an event beyond the natural person’s control, which occurred while such person was already in the UAE, which he could not reasonably predict or prevent and which prevented him from leaving the UAE as originally planned.

 

The Ministerial Decision continues to provide further guidance on what ‘exceptional circumstances of a public nature’ and ‘exceptional circumstances of a private nature’ are:

 

Exceptional circumstances of public nature include: (a) adoption of public health measures by the competent authorities in the UAE or in the jurisdiction of the original workplace or by the World Health Organization; (b) imposition of travel restrictions by the competent authorities in the UAE or in the jurisdiction of the original workplace; (c) imposition of legal sanctions on the natural person preventing them from leaving the UAE; (d) acts of war or occurrence of terrorist attacks; (e) occurrence of natural disasters or force majeure beyond reasonable control.

 

Exceptional circumstances of a private nature include occurrence of an emergency health condition affecting the natural person or their relatives up to the fourth degree, including by way of adoption or guardianship. ■