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Permanent establishment

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

When does a foreign company have a UAE permanent establishment?

When it does business through a fixed or permanent place in the UAE, or a dependent agent habitually concludes or negotiates contracts for it there.

Per Federal Decree-Law No. 47 of 2022, Article 14, Permanent Establishment

A non-resident has a Permanent Establishment in the UAE where it has a fixed or permanent place in the UAE through which it wholly or partly conducts business and the activity there is not within an exclusion, or where a dependent agent in the UAE habitually concludes or negotiates contracts on its behalf.

A Permanent Establishment is a connecting factor that brings the income attributable to it into the UAE Corporate Tax charge (see the non-resident basis-of-taxation rule). The fixed-place and dependent-agent routes are independent: an exclusion on one does not defeat the other.

What creates a Permanent Establishment

A fixed place of business

A fixed or permanent place in the UAE through which the non-resident wholly or partly conducts business, such as:

  • A place of management
  • A branch
  • An office
  • A factory
  • A building site, where it lasts beyond the qualifying duration

A dependent agent

  • A person who habitually concludes contracts on the non-resident's behalf
  • A person who habitually negotiates contracts the non-resident concludes without material modification

Not a Permanent Establishment

  • Activity that is only preparatory or auxiliary — for example storing or delivering goods, or collecting information (subject to the anti-fragmentation rule)
  • A natural person's presence that is temporary and exceptional
  • Non-core activity by an employee where the non-resident has no UAE-sourced income
  • An independent agent acting in the ordinary course of business

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

    Fixed place of business

    A fixed or permanent place in the UAE through which the non-resident wholly or partly conducts business — a place of management, branch, office, factory, or building site of the qualifying duration — is a Permanent Establishment unless its activity is within an exclusion.

  3. 3

    Fixed-place exclusion

    The fixed place is not a Permanent Establishment where its activity is only preparatory or auxiliary (subject to the anti-fragmentation rule), where a natural person's presence is temporary and exceptional, or where an employee conducts non-core activity and the non-resident has no UAE-sourced income. Folded into a single determination here.

  4. 4

    Dependent agent

    A person in the UAE who habitually concludes contracts for the non-resident, or habitually negotiates contracts the non-resident concludes without material modification, is a Permanent Establishment — unless an independent agent acting in the ordinary course of business. Independence is folded into this determination. Tested independently of the fixed-place route.

  5. 5

    Connecting factors

    With neither a qualifying fixed place nor a dependent agent, there is no Permanent Establishment as computed.

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.

Factory in the UAE

A foreign manufacturer operates a factory in the UAE through which it makes and sells goods.

Computed

A Permanent Establishment as computed: the non-resident has a fixed place in the UAE through which it conducts business, and its activity is not within an exclusion, based on the determinations you supplied.

Decided by the fixed place of business

Warehouse for storage only

A foreign company's only UAE facility is a warehouse used purely to store its goods for delivery — a preparatory or auxiliary activity.

Computed

No Permanent Establishment as computed: the fixed place in the UAE falls within an exclusion and there is no dependent agent, based on the determinations you supplied.

Decided by the fixed-place exclusion

Agent who signs contracts

A foreign company has no premises in the UAE, but a UAE-based agent who works almost exclusively for it habitually concludes contracts on its behalf.

Computed

A Permanent Establishment as computed: a dependent agent in the UAE habitually concludes or negotiates contracts for the non-resident, based on the determination you supplied.

Decided by the dependent agent

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

2 inputs still need your determination:

  • Does the non-resident have a fixed or permanent place in the UAE through which it wholly or partly conducts business — a place of management, branch, office, factory, workshop, real property, or a building site, construction or installation project lasting more than six months (Article 14(2))?
  • Does a person in the UAE habitually conclude contracts on behalf of the non-resident, or habitually negotiate contracts the non-resident concludes without material modification, and is that person not an independent agent acting in the ordinary course of business?

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