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Investment manager exemption

Applies
FY2024 onwards
Reviewed
Rule
UAE-CT-IME-2024.1
By

Does a UAE investment manager create a PE for a foreign client?

No, if it is a regulated manager or broker acting independently, in its ordinary course and at arm's length, and not the client's agent for other UAE income.

Per Federal Decree-Law No. 47 of 2022, Article 15, Investment Manager Exemption

A UAE Investment Manager acting for a Non-Resident Person is treated as an independent agent under Article 14(6) — so its activity does not of itself create a Permanent Establishment for the Non-Resident — where it is engaged in the business of investment management or brokerage services, is subject to the regulatory oversight of the competent authority in the State, carries out the transactions in the ordinary course of its Business, acts in an independent capacity, transacts at arm's length for due compensation, and is not the Non-Resident's representative in the State for any other income or transaction subject to Corporate Tax in the same Tax Period.

Lets a Non-Resident use a regulated UAE manager or broker without the manager's authority to conclude contracts creating a Permanent Establishment. It applies automatically. Failing it does not create a Permanent Establishment by itself: Article 14 then applies in the ordinary way.

The conditions

Article 15(1) — all six must be met

  • (a) Engaged in the business of providing investment management or brokerage services
  • (b) Subject to the regulatory oversight of the competent authority in the State
  • (c) The transactions are carried out in the ordinary course of its Business
  • (d) Acts in relation to the transactions in an independent capacity
  • (e) Transacts with the Non-Resident at arm's length and receives due compensation
  • (f) Is not the Non-Resident's representative in the State for any other income or transaction subject to Corporate Tax in the same Tax Period
  • (g) Any further condition the Cabinet prescribes — none has been (CTGIFM1, 7.1)

Article 15(2) — the transactions

  • Commodities, real property, bonds, shares, derivatives or other securities
  • Buying or selling foreign currency, or placing funds at interest
  • Other transactions the manager may carry out for a Non-Resident under UAE law

If the conditions are not met — CTGIFM1, 7.2

The Non-Resident does not automatically have a Permanent Establishment. Article 14 is applied to the manager's activity in the ordinary way, including the independent-agent test in Article 14(6).

Order of testing

  1. 1

    Inputs requiring your determination

    Any input a person must decide and has not decided stops the computation. An undecided input is never read as a no.

  2. 2

    Each condition

    Every condition of Article 15(1)(a) to (f) must be met. The first that fails is reported by its paragraph; failing is not reported as a Permanent Establishment.

Examples

Illustrative scenarios — ours, not the authority’s — each computed live by this rule. Change any fact and the outcome is the rule’s, not a hand-written answer.

A regulated, independent manager

A DFSA-regulated asset manager in the DIFC runs a discretionary mandate for a foreign pension fund, for a market fee, and does nothing else for it in the UAE.

Computed

The Investment Manager Exemption applies as computed: all six conditions of Article 15(1) are met, so the Investment Manager is treated as an independent agent under Article 14(6) and its activity does not of itself create a Permanent Establishment for the Non-Resident Person. No further condition has been prescribed by the Cabinet under Article 15(1)(g), and no election or application is required. Based on the determinations you supplied.

Decided by the all six conditions of article 15(1)

Not acting independently

The same manager, but it acts only on the fund's detailed instructions and is economically dependent on it.

Computed

The Investment Manager Exemption does not apply as computed: Article 15(1)(d) — independent capacity is not met, based on the determination you supplied. That does not mean the Non-Resident Person has a Permanent Establishment: whether the manager's activity creates one is then decided under Article 14 in the ordinary way, including the independent-agent test in Article 14(6).

Decided by the article 15(1)(d) — independent capacity

Also the investor's representative for other UAE income

The manager also acts as the foreign investor's representative for rental income from a UAE property it owns — the sixth condition fails.

Computed

The Investment Manager Exemption does not apply as computed: Article 15(1)(f) — no other representation is not met, based on the determination you supplied. That does not mean the Non-Resident Person has a Permanent Establishment: whether the manager's activity creates one is then decided under Article 14 in the ordinary way, including the independent-agent test in Article 14(6).

Decided by the article 15(1)(f) — no other representation

Not regulated

An unregulated adviser placing trades for a foreign family office.

Computed

The Investment Manager Exemption does not apply as computed: Article 15(1)(b) — regulatory oversight is not met, based on the determination you supplied. That does not mean the Non-Resident Person has a Permanent Establishment: whether the manager's activity creates one is then decided under Article 14 in the ordinary way, including the independent-agent test in Article 14(6).

Decided by the article 15(1)(b) — regulatory oversight

Try it

Supply the facts and this rule computes the outcome in your browser, live. Leave a determination undecided and it blocks the result — it is never read as a no.

Not computed yet

6 inputs still need your determination:

  • Is the Investment Manager engaged in the business of providing investment management or brokerage services (Article 15(1)(a))?
  • Is it subject to the regulatory oversight of the competent authority in the State (Article 15(1)(b))?
  • Are the transactions — in commodities, real property, bonds, shares, derivatives or other securities, foreign currency or placements at interest — carried out in the ordinary course of its Business (Article 15(1)(c))?
  • Does it act in relation to the transactions in an independent capacity (Article 15(1)(d))?
  • Does it transact with the Non-Resident Person at arm's length and receive due compensation for its services (Article 15(1)(e))?
  • Is it NOT the Non-Resident Person's representative in the State for any other income or transaction subject to Corporate Tax in the same Tax Period (Article 15(1)(f))?

Computed in your browser from the figures you supply. Nothing is sent anywhere, and the result is a computation against a rule — reference, not tax advice.

Sources

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Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader