When a foreign company operates in the UAE through a branch, the foreign company is subject to UAE corporate tax on the income attributable to that branch, its permanent establishment, not on its worldwide income. The exception is a foreign company that is effectively managed and controlled in the UAE: it is a UAE resident and is taxed on its worldwide income. This distinction shapes compliance, reporting, and potential planning options for foreign businesses operating locally.
What is taxable: identifying the liable entity and income
Unless it is effectively managed and controlled in the UAE, a foreign company operating through a UAE branch is a non-resident person for corporate tax purposes, and the branch is typically its permanent establishment in the UAE. The company is taxed on the income attributable to that permanent establishment. By contrast, the foreign parent or head office, which is not resident in the UAE, is not taxed by the UAE on income from activities carried out outside the country.
This means only the income derived through the UAE branch, such as sales, services, or other business activities conducted locally, is subject to UAE corporate tax. The foreign company’s other global income, earned from activities outside the UAE, is not within the scope of UAE corporate tax.
How registration and filing obligations apply
A foreign company with a UAE branch must register for corporate tax with the Federal Tax Authority within six months of the branch, its permanent establishment, coming into existence. The specific deadlines and penalties for registration follow the general UAE corporate tax rules.
The taxable person is the foreign company itself: it registers, files the return and pays corporate tax on the income attributable to its UAE branch, in practice through the branch.
Tax rate and treatment of losses
The standard UAE corporate tax rates and thresholds are applied to the taxable profits of the UAE branch. For example, the current headline rate is 9 percent applied to taxable income above AED 375,000. Income up to AED 375,000 is subject to a 0 percent rate.
Only profits attributable to the branch’s UAE activities are included when calculating tax. Expenses incurred wholly and exclusively for the purpose of the UAE business can be deducted, provided they meet the general deductibility conditions set by the Federal Tax Authority.
Summary table: UAE tax position for a branch of a foreign company
Feature | UAE branch of foreign company |
|---|---|
Taxable income | Income attributable to the branch (its permanent establishment) |
Tax on worldwide income | No, unless the foreign company is effectively managed and controlled in the UAE |
Registration required | Yes |
Parent company taxed in UAE | Yes, on the income attributable to the branch |
Standard rates/thresholds | Yes (0% up to AED 375,000, 9% above) |
Filing and payment by | The foreign company, in respect of its branch |
Key points for foreign groups with UAE branches
- For corporate tax, the UAE branch is the foreign company's permanent establishment; the taxable person is the foreign company, as a non-resident person, not the branch.
- Only the income from UAE activities is within the tax scope. Other global operations are not affected.
- Corporate tax registration, returns and payments are the foreign company's obligations, in respect of its UAE branch.
- Tax rates and profit thresholds for the branch are aligned with those for other taxable businesses operating in the country.
- The branch’s profits are calculated based on income and expenses attributable to activities in the UAE.
Special rules can apply: a branch registered in a free zone can be a Qualifying Free Zone Person, and a non-resident cannot transfer tax losses or join a UAE tax group. The core obligation for any branch of a foreign company is to ensure it registers, works out the income attributable to it, and complies with local rules in full.
