Federal Decree-Law No. 47 of 2022 is the principal legislation governing the Taxation of Corporations and Businesses in the UAE. It establishes the framework for corporate tax, specifying who is subject to taxation, exemptions, and specific compliance requirements for different types of entities. The law applies to most juridical persons incorporated or effectively managed and controlled in the UAE, as well as natural persons who conduct business activities in the UAE.
A juridical person that is a Resident Person shall submit a Tax Registration application for Corporate Tax, taking into consideration the date it was incorporated, or otherwise established or recognised under the applicable legislation in the UAE
Applicability to Offshore Companies
Offshore-registered companies can be subject to UAE Corporate Tax under Federal Decree Law No. 47 of 2022 if they are considered either “resident” or “non-resident” persons carrying on a business or deriving UAE-sourced income that falls within the law’s scope.
- The law makes a distinction between resident and non-resident persons:
- Resident Persons: Includes juridical persons that are incorporated in the UAE or effectively managed and controlled in the UAE. This can, in principle, include certain offshore companies, depending on their place of management or the location of their activities.
- Non-Resident Persons: Taxation applies to income attributable to a permanent establishment or nexus in the UAE.
- An offshore company incorporated in a UAE free zone or comparable jurisdiction can be considered a “resident person” if it is incorporated or managed and controlled in the UAE, subjecting it to corporate tax unless a specific exemption applies. An offshore company is a juridical person registered in the UAE as per Article 11(3)(a) of Federal Decree-Law No. 47 of 2022
- Exemptions are available for certain entities, such as qualifying investment funds, qualifying public benefit entities, and others, provided they meet the respective conditions set out in Articles 4, 10, and related provisions of Decree-Law No. 47 of 2022.
- There is no general exemption solely based on being an “offshore” company. The company’s activities, management structure, and whether it qualifies for a specific exemption will determine its tax treatment.
- Permanent Establishment & State-Sourced Income: Non-resident companies, including offshore entities, may be subject to UAE corporate tax if they have a permanent establishment in the UAE or earn state-sourced income (including specific income streams derived from UAE activities, assets, or service provisions).
Also Read – What Are the Costs Involved in Offshore Company Setup?
Key Points for Offshore Companies
- Offshore companies registered under UAE law may be subject to corporate tax if they:
- Are managed and controlled from the UAE;
- Earn income sourced from UAE activities beyond what the law considers preparatory or auxiliary;
- Do not qualify for any of the specific exemptions listed in the law.
- Must establish substance and other applicable conditions.
- No blanket exemption applies to offshore entities based solely on their offshore registration status. Each entity’s tax treatment must be analysed based on its actual operations, place of management, and compliance with the exemption criteria.
Conclusion
- Review your offshore company’s structure, management location, and UAE–sourced revenue.
- Determine whether your company falls under any exemptions outlined in the law.
- Compliance with Decree-Law No. 47 of 2022 will depend on individual circumstances; consultation with legal or tax professionals in the UAE is advisable for entity-specific queries.
The application of UAE corporate tax to offshore companies is subject to the general principles and exemptions outlined in Federal Decree-Law No. 47 of 2022, which governs the Taxation of Corporations and Businesses. In summary, offshore-registered companies are taxable under Federal Decree Law No. 47 of 2022 if they derive UAE-source income or are managed/controlled from the UAE, unless qualifying for one of the stated exemptions.
