S. Soundara Rajan
Chartered Accountant
Published on: Mar 26, 2026
Resident Person under UAE Corporate Tax Law – Meaning, Scope & Practical Implications
1. Background
Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments (“Corporate Tax Law”) was issued on 3 October 2022 and was published in the Official Gazette of the United Arab Emirates (“UAE”) on 10 October 2022.
The Corporate Tax Law provides the legislative basis for imposing a federal tax on corporations and Business profits (“Corporate Tax”) in the UAE.
The provisions of the Corporate Tax Law shall apply to Tax Periods commencing on or after 1 June 2023.
2. Resident Person vs Non-Resident Person under UAE Corporate Tax Law
A Taxable Person is a Person subject to UAE Corporate Tax. Such a Person is either a “Resident Person” or a “Non-Resident Person”. Furthermore, a Person is either a “juridical person” or a “natural person”. These classifications determine the scope of the Person’s Corporate Tax obligations.
(i) Resident Person
A juridical person that is a Resident Person is subject to Corporate Tax on its Taxable Income derived from inside and outside the UAE. This means that a juridical person that is a Resident Person is taxed on all income earned, irrespective of whether the income is sourced in the UAE or a foreign country.
A natural person that is a Resident Person is subject to Corporate Tax on his Taxable Income derived from in and outside the UAE, provided it relates to the Businesses or Business Activities conducted by the natural person in the UAE and the Turnover derived from such Businesses or Business Activities exceeds AED 1,000,000 within a Gregorian calendar year.
For both a juridical person and a natural person who is a Resident Person, the Corporate Tax Law exempts certain income earned outside of the UAE, and allows a credit for taxes paid in a foreign country on income that is also subject to Corporate Tax in the UAE.
(ii) Non-Resident Person
A Non-Resident Person, whether a juridical person or natural person, is generally subject to Corporate Tax on income sourced in the UAE, or attributable to a Permanent Establishment in the UAE.
A Non-Resident Person that is a juridical person may also be subject to Corporate Tax on income derived from a nexus in the UAE.
3. Resident Person that is a juridical person
A juridical person refers to a legal entity that is incorporated, established or recognised under the relevant legislation. It has a legal personality separate from its founders, owners and directors.
A juridical person is a Resident Person for Corporate Tax purposes if:
• it is incorporated or otherwise established or recognised under the applicable legislation of the UAE, irrespective of where its effective management and control is exercised, or
• it is incorporated or otherwise established or recognised under the applicable legislation outside the UAE but its effective management and control is exercised in the UAE.
3.1 Juridical person incorporated or formed in the UAE
A juridical person can be incorporated or established under different legal forms.
In the UAE, juridical persons include Limited Liability Companies (LLCs), Private Shareholding Companies (PSCs) with one single interest holder, Public or Private Joint Stock Companies (PJSCs), foundations or trusts that have been established under the UAE “mainland” legislation.
Civil companies incorporated or established in the UAE are also considered to be juridical persons.
Furthermore, companies that are labelled as “offshore companies”, which are incorporated in the UAE are also considered to be juridical persons.
According to Federal Law No. 5 of 1985, a juridical person has:
• a separate financial liability from any other person, and
• legal capacity within the limits laid down by law or establishing document, and
• the right to bring legal proceedings, and
• a separate place of residence.
However, whether a person is juridical will ultimately be assessed based on the establishment law of each entity.
A UAE branch of a UAE juridical person is seen as an extension of its head office and, therefore, not considered a separate juridical person from its head office.
Similarly, a UAE branch of a foreign juridical person is an extension of its parent or head office and is not considered a separate legal entity from the parent or head office.
A UAE branch of a foreign company cannot be considered a Resident Person in its own right. Instead, the foreign company with a UAE branch has a UAE Permanent Establishment, and is considered as a Non-Resident Person for Corporate Tax purposes.
3.2 Free Zones
Free Zones in the UAE have been set up to encourage investment and facilitate trade.
These Free Zones offer businesses highly efficient infrastructure and distinct services that facilitate smooth workflows.
If a juridical person is incorporated or formed in a Free Zone in the UAE, the juridical person is also a Resident Person for Corporate Tax purposes.
3.3 Exempt Persons
An Exempt Person for Corporate Tax purposes is not considered a Resident Person subject to Corporate Tax, unless that Person conducts a Business or Business Activity that is outside the scope of their exempted activity.
This only applies to Government Entities, Government Controlled Entities, Persons engaged in an Extractive Business, or a Non-Extractive Natural Resource Business.
In these instances, the Business or Business Activity of the Exempt Person that is not its exempted activity is treated as an independent Business that is subject to Corporate Tax.
3.4 Effective management and control
Determining residency for Corporate Tax purposes solely on the basis of place of incorporation does not always reflect the economic reality of where the business operates.
If a juridical person is not incorporated in the UAE but is effectively managed and controlled in the UAE, it is considered a Resident Person for Corporate Tax purposes. This is assessed for each particular case based on its specific facts and circumstances.
If a non-UAE incorporated company is effectively managed and controlled in the UAE, and therefore a Resident Person, it will be subject to Corporate Tax on its profits sourced from both the UAE and from abroad, in the same way as a company that is incorporated under the laws of the UAE.
The place of effective management and control is understood as the place where “key management and commercial decisions” that are necessary for the conduct of the juridical person’s business as a whole are, in substance, made.
The key management and commercial decisions that are necessary for the conduct of Business may include, but are not limited to, the following activities:
• setting the general policies, for example, investment policies and operational policies,
• determining the strategic direction of the company’s operations,
• deciding the type of transactions that the company can enter into, for example, mergers, acquisitions and purchase or sale of significant assets,
• appointing senior executives and granting them authority to manage or carry out the day-to-day operations of the company, or
• directly or indirectly overseeing the persons appointed to manage or carry out the day-to-day business of the company,
Broadly, effective management and control relates to where the strategic level of control (as opposed to day-to-day management) is conducted.
The following are not considered to be key management and commercial decisions, and, therefore, do not constitute effective management and control:
• formal finalisation or approval of decisions made by others,
• mere implementation of decisions made by others,
• day-to-day conduct and management of a company’s activities and operations, or
• legal and administration matters.
A juridical person can have multiple places of management, but only has one place of effective management and control at any one time. Therefore, if a juridical person’s key management and commercial decisions affecting its Business as a whole are made in multiple locations, the place of effective management and control will be the location where those decisions are regularly and predominantly made.
3.5 Income from foreign sources received by a juridical Resident Person
Where a juridical person that is a Resident Person has a Foreign Permanent Establishment, the juridical person can make an election to exclude the income and expenditure derived by the Foreign Permanent Establishment in calculating its Taxable Income, if certain conditions are satisfied.
A Foreign Permanent Establishment refers to a fixed place of Business, such as an overseas branch, office or factory, or a dependent agent who habitually exercises an authority to conduct a Business or Business Activity on behalf of a Resident Person overseas.
In addition, certain income received from foreign companies is exempt from Corporate Tax if the Resident Person holds a Participating Interest in the foreign company. A Participating Interest is an interest in a juridical person that meets all the conditions of Article 23(2) of the Corporate Tax Law.
If the conditions for a Participating Interest are met, the following income will be exempt from Corporate Tax:
• Dividends and other distributions derived from a Participating Interest in a foreign juridical person that is not a Resident Person,
• gains or losses on the transfer, sale, or other disposition of the whole or part of the Participating Interest,
• foreign exchange gains or losses in relation to a Participating Interest, and
• impairment gains or losses in relation to a Participating Interest.
Furthermore, a Foreign Tax Credit may be available for tax paid in foreign jurisdictions on income that is also subject to UAE Corporate Tax. The available Foreign Tax Credit reduces the Corporate Tax Payable in the UAE by the value of foreign taxes paid on the relevant income, up to the UAE Corporate Tax liability. This relief is unilateral and does not take into consideration any double taxation relief available under an applicable DTA or any other reciprocal relief from a foreign taxing jurisdiction.
4. Resident Person that is a natural person
(i) Natural persons will be treated as a Resident Person for Corporate Tax purposes only if they conduct Business or Business Activity in the UAE and the Turnover from such Business or Business Activity exceeds AED 1 million in a Gregorian calendar year.
Ii) Natural persons can engage in a Business or Business Activity via, for example, a sole proprietorship. A sole proprietorship is a trading business owned and operated by a natural person, where the proprietor is not separate from the business. For Corporate Tax purposes, a sole proprietorship is treated as being one and the same as the natural person or natural persons owning them. This is because of the direct relationship and control of the natural person over the business and their unlimited liability for the business’ debts and other obligations.
(iii) Natural persons will only be subject to Corporate Tax on the Taxable Income of their Business or Business Activity in the UAE, irrespective of where a natural person is domiciled or ordinarily resides. Any income earned outside the UAE is not subject to Corporate Tax unless it is in relation to the Business or Business Activity conducted in the UAE.
(iv) Cabinet Decision No. 49 of 2023 specifies the conditions where a natural person is subject to Corporate Tax. It states that the following will not be considered Business or Business Activity and is, therefore, not be subject to Corporate Tax:
• Wage or salary, such as earnings from employment,
• Personal investment income, where a Licence is not required, and
• Real estate income, where a Licence is not required.