State Sourced Income received by Non-Resident Persons from sources in the UAE as per Article 13 and 12(3)(b) of corporate tax UAE. Non-Resident Persons are individuals or entities that are not classified as Resident Persons for taxation purposes.
Classification of State Sourced Income for Non-Resident Persons in UAE
State Sourced Income can be classified into three main categories, depending on the source and the recipient of the income:
- Non-Resident Persons Income from Resident Persons: The payer of the income must be a Resident Person who is liable for Corporate Tax under Article 11(3) of the Corporate Law.
- Income received by Non-Resident Persons from other Non-Resident Persons: This category covers any income that is paid by a Non-Resident Person to another Non-Resident Person, as long as the income is related to a business or activity conducted in the UAE through a Permanent Establishment.
- Income derived from activities, assets, capital, rights, or services within the UAE: This category covers any income that is generated from the use or exploitation of activities, assets, capital, rights, or services that are located or performed in the UAE.
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State Sourced Income from Sale of Goods
The source of income derived from the sale of goods hinges on the location where ownership of the goods transfers upon sale. This criterion serves as the primary determinant for establishing the source of income in such transactions.
State Sourced Income from Providing Services in UAE
Income generated from service provision is attributed to the UAE if the services are rendered within the country’s borders or if the ultimate recipient of the services economically benefits from them within the UAE.
State Sourced Income from Executing Contracts
For income stemming from contract execution, the UAE serves as the source if the contractual obligations are fulfilled within its territory or if the ultimate recipient or beneficiary of the contract is situated within the UAE.
State Sourced Income from Tangible Property
Income from the sale or utilization of tangible property is also a state source subject to UAE location. This includes revenue generated from property rentals or stakes in such properties.
State Sourced Income from Capital Rights and Shares
In the case of income from selling shares or other capital rights in a juridical person, the UAE is deemed as the source if the said juridical person is incorporated or resident within the UAE for Corporate Tax purposes.
State Sourced Income from Intangible Property and Royalties
The income derived from intellectual or intangible property, including trademarks and patents is considered the UAE source without consideration of the residence status and location of the receiver or payer.
Interest and Insurance Income as State Sourced Income
If a UAE-based company lends money to a foreign company, and the loan is secured by an asset in the UAE, the interest income is sourced to the UAE and is taxable.
Corporate Tax Provisions Governing State Sourced Income UAE
The taxation of State Sourced Income is governed by key provisions of the Corporate Tax Law including withholding tax provisions, corporate tax obligations for non-residents, and Federal Tax Authority enforcement provisions.
Examples of State Sourced Income Under UAE Corporate Tax
To help understand the concept and application of State Sourced Income, examples include dividends paid to foreign shareholders, consultancy services provided to UAE clients, sale of goods through a UAE permanent establishment, and royalties paid for intellectual property used in the UAE.
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Consult Tax Consultants in UAE for Corporate Tax Compliance
State Sourced Income is a complex and evolving topic, and businesses are advised to seek professional advice from tax consultants UAE before engaging in any transactions that may involve State Sourced Income. You may also review Corporate Tax in Dubai, Permanent Establishment in UAE, or contact us for professional assistance.
