In line with the tax regimes of most countries, the Corporate Tax Law taxes income on both a residence and source basis. The applicable basis of taxation depends on the classification of the Taxable Person.
Also, it can be said that law has followed the worldwide taxation for the resident juridical person and territorial taxation for resident natural persons. Income which are taxable to different type of Taxable person is presented in the below chart.
The key point to note from the about chart is that a resident legal or juridical person ie. a company incorporated in UAE or a company incorporated outside UAE but managed and controlled in UAE has to pay taxes on its whole worldwide income irrespective of the fact whether he conducted the business activities in the UAE or not. On the other hand side the Resident Natural Person is only liable to pay the taxation on the business or business activities which are conducted or performed in the UAE only.
The core reason for the same is that for the purpose of taxation, administrative residency or tax residency is not a criteria for a natural person to be treated as resident natural person. Any natural person if he or she is conducting business or business activity in UAE will be considered to be Resident Natural Person. So, a person who is resident of any other country but performing few business activities in UAE, has to be pay taxes on that limited business profits only.
Further, a non - resident person whether a natural person or a legal person has to bear taxes on its worldwide income derives from its Permanent Establishment or Nexus in the UAE. Hence whole income generated from that PE or UAE Nexus whether inside the UAE or Outside the UAE will be taxed. Moreover, if a non-resident person generates UAE sourced income without any PE in the UAE, then too it has to pay taxes on such income.
