The United Arab Emirates has clarified that any non-resident legal entity is deemed to be connected to the United Arab Emirates if it derives income from immovable property situated in the United Arab Emirates.
The taxable income attributable to the immovable property includes income derived from the right in rem, sale, disposal, assignment, direct use, leasing, including subletting, and any other form of exploitation.
The decision also introduces an anti-fragmentation rule, which provides that if a non-resident person artificially transfers or otherwise disposes of his right in rem in immovable property in the United Arab Emirates to another person, and such transfer or disposal is not for a valid commercial or other non-fiscal reason that reflects economic reality, this would be considered an arrangement to obtain a corporate tax advantage under the general anti-avoidance rules.
Immovable property means any of the following:
- any area of land over which rights or interests or services may be created;
- any building, structure or engineering work permanently affixed to the land or to the seabed; and
- any fixture or equipment which forms a permanent part of the land or which is permanently attached to the building, structure or engineering work or which is attached to the seabed.
Cabinet Decision No. 56 of 2023 determining the nexus of a non-resident person in the United Arab Emirates for the purpose of corporate tax was published on the official website on 1 June 2023.