• Auditing
• 2023-06-26
• Risians Accounting

What is State Sourced Income on Corporate?

Foreign investors often look to the UAE for opportunities to amass wealth. It's not hard to see why, considering the country's reputation as an economic powerhouse and its low tax rates. Yet, the UAE has just implemented a new Corporate Tax structure that affects all enterprises operating in the nation. Learn all you need to know about the UAE Corporation Tax on state sourced income with this helpful resource. A company's earnings in a given emirate are considered state-sourced income.

What is corporate tax exactly?

Companies and firms in the United Arab Emirates are subject to a tax on their earnings known as the Corporation Tax. On December 9, 2022, the United Arab Emirates enacted Federal Decree-Law No. (47) of 2022 regarding the taxation of corporations and businesses. During accounting periods beginning on or after June 1, 2023, this law henceforth, referred to as the "Corporate Tax Law" will be in effect.

Implementing a Business Tax will aid the United Arab Emirates in achieving its long-term objectives and propelling the country forward. UAE has signed a large number of double tax treaties, and investors can rest assured that the country's Corporate Tax structure is competitive and up to international standards.

The Federal Corporation Tax, often known as a "Corporate Tax," in the UAE is established by and is enforced in accordance with the terms of the Corporate Tax Law. It incorporates widely acknowledged principles and is based on international best practices.

Who must pay UAE Corporate Tax?

Anyone operating a business inside or outside the UAE through a PE in the UAE is required to pay Corporate Tax in accordance with the Corporate Tax Law. One either resides in the UAE or does not.

Any company that is incorporated or registered in the UAE or one of its emirates, or that has its principal place of business in the UAE, is considered to be a resident person. A non-resident is anybody who does not have permanent residence in the country.

A permanent establishment (PE) is a physical location from which a person conducts business in the United Arab Emirates. Any location from which raw materials are extracted from the earth is included here. This includes but is not limited to branches, offices, factories, workshops, mines, oil and gas wells. In addition, a PE includes:-

Location where an individual, on average, employs other people to perform work for them for more than 183 days a year;

A person who is authorized to sign contracts on behalf of another and does so on a regular basis;

One who owns at least ten percent of a UAE-based company;

One who performs complementary business duties for another individual who holds a valid UAE PE.

How do you define revenue from the state sourced income?

When a company operates in the United Arab Emirates, it earns money from the government of that emirate. Earnings in the emirate might come from a variety of sources, such as selling or providing a service, renting out real estate, or something else entirely.

The corporate tax law specifically addresses UAE-sourced income in Article 13. This money is distributed among three categories:-

A resident individual; a non-resident individual having a PE in the UAE; activities, assets, capital, or services performed within the UAE.

In addition, the Minister's restrictions and conditions do not alter the following as instances of state-sourced revenue in the UAE (as stated in Article 13):-

- Sales of commodities; sales of services performed, received, or profited from within the United Arab Emirates;

- Gains from contracts carried out in whole or in part in the United Arab Emirates or from their benefits;

- Earnings from the sale of stocks or other assets owned by a resident Earnings from the rental or lease of personal property

- Earnings from the exploitation of, or license for the exploitation of, intellectual or intangible property;

- Distributions of earnings such as interest, royalties, dividends, and dividend equivalents;

- Premiums collected as a source of funding;

- Money made from transportation-related endeavors;

- Earnings from any form of gaming;

- Money from somewhere else the government choose to count it.

An audit firm in the UAE, such as Risiansaccounting, company may help you quickly and painlessly settle your company's tax obligations.

Finally, if you are an expat living in Dubai, UAE and are interested in learning more about state-sourced income, you have come to the right place.