Key takeaways
- A permanent establishment (PE) in the UAE is a place of business or other form of presence in the UAE of a Non-Resident Person, and a foreign company that has one becomes a Taxable Person for UAE corporate tax (Federal Decree-Law No. 47 of 2022, Articles 1, 11 and 14).
- A foreign company can create a UAE PE in three ways: a fixed or permanent place in the UAE, a person who habitually exercises authority to conduct its business in the UAE, or another nexus set by Cabinet decision.
- A building site, construction or installation project creates a UAE PE only if it lasts more than 6 months; for other fixed places, the FTA treats more than 6 months in a 12-month period as a typical sign of permanence.
- A foreign company whose UAE PE began on or after 1 March 2024 must register for corporate tax within 6 months of the PE existing, and the penalty for late registration is AED 10,000 (as of November 2026).
- A double tax treaty can override the domestic PE tests under Article 66, so a foreign company should check the treaty between the UAE and its home country before concluding it has, or hasn't, a UAE PE.
What is a permanent establishment under UAE corporate tax?
A permanent establishment is the legal test for when a foreign company's presence in the UAE is substantial enough to be taxed here. Article 1 of Federal Decree-Law No. 47 of 2022 defines it as a place of business or other form of presence in the UAE of a Non-Resident Person, and Article 14 sets out the instances.
Under Article 11(4), a Non-Resident Person with a PE is a Taxable Person, so it must register, file a return and pay corporate tax on income attributable to that PE. Corporate tax applies to financial years starting on or after 1 June 2023 (MoF). The rate is 9% on taxable income above AED 375,000 (Article 3; Cabinet Decision No. 116 of 2022, checked November 2026).
| PE trigger | What the test looks at | Key threshold | Legal basis |
|---|---|---|---|
| Fixed or permanent place | Place used regularly, right to use it, core business done there | More than 6 months in 12 months is a typical indicator | Article 14(1)(a) |
| Building site or project | Construction, assembly or installation | More than 6 months | Article 14(2) |
| Agent with authority | Person habitually concludes, or negotiates, contracts for the foreign company | Habitual, not one-off | Article 14(1)(b), 14(5) |
| Other nexus | As specified by Cabinet decision | Set by the decision | Article 14(1)(c) |
What counts as a fixed place of business in the UAE?
A fixed place of business is a UAE location the foreign company has the right or effective power to use, where it conducts all or part of its core business. The FTA guide (October 2023) applies four tests: a place of business, permanence, disposal, and a business activity that isn't merely preparatory.
Article 14(2) lists examples: a place of management, a branch, an office (which can include a hotel room or home office depending on the facts), a factory, a workshop, land and buildings, extraction sites, and building or installation projects. Rented premises can qualify, and exclusive use isn't required. The FTA guide says more than 6 months in a 12-month period, even if not continuous, typically indicates permanence, but it assesses each case on its facts.
When does a person acting for a foreign company create a UAE PE?
A UAE-based person creates an agency PE when it habitually concludes contracts for the foreign company, or habitually negotiates contracts that the foreign company then signs without material change (Article 14(5)). A UAE subsidiary's staff can qualify.
An independent agent acting in the ordinary course of its own business doesn't create a PE (Article 14(6)). Independence fails if the agent acts exclusively or almost exclusively for the foreign company, or depends on it legally or economically. Marketing alone doesn't count: in the FTA guide's example, representatives who promote medicines to doctors, with no contracts concluded, create no PE. A distributor that buys goods on its own account and resells them doesn't act for the supplier.
Which activities don't create a PE?
Using a UAE place solely for preparatory or auxiliary activity doesn't create a PE (Article 14(3)). That covers storing, displaying or delivering the company's own goods, keeping stock only for processing by someone else, and buying goods or collecting information for the company.
Two limits apply. First, activity done for third parties isn't "solely" for the foreign company, so it can fall outside the exception. Second, Article 14(4) removes the protection where a foreign company or a Related Party runs a cohesive business across the same or other UAE places; the operations are tested together.
Can one employee working in the UAE create a PE?
One employee can create a PE by habitually negotiating or concluding contracts for the foreign company, or by working from a place the company effectively controls. Presence alone doesn't, and Article 14(7) carves out two situations.
The first is an unpredictable, temporary and exceptional situation beyond the person's control that arose while they were already in the UAE. Ministerial Decision No. 83 of 2023 requires all five of its conditions to be met, including that the circumstances couldn't reasonably have been predicted and that the company had no UAE PE beforehand. It sets no day count. The second, described in the FTA guide, covers an employee who doesn't carry out the company's core income-generating activities where the company earns no State Sourced Income.
Say a Singapore software company has one salesperson working from a Dubai flat. If the company pays the rent and requires the person to work there, it may have disposal of the space; if the employee chose Dubai at their own cost, the FTA guide's example points the other way.
When must a foreign company register for corporate tax, and what happens if it doesn't?
A Non-Resident Person with a UAE PE must register once the PE exists. The deadline depends on when the PE began, and a late application carries an AED 10,000 penalty.
| Situation | Registration deadline | Source |
|---|---|---|
| PE existing before 1 March 2024 | Within 9 months of the PE existing | FTA, timeframes decision |
| PE established on or after 1 March 2024 | Within 6 months of the PE existing | FTA, timeframes decision |
| Nexus established on or after 1 March 2024 | Within 3 months of establishing the nexus | FTA, timeframes decision |
| Late registration | Administrative penalty of AED 10,000 | MoF, effective 1 March 2024 |
Accurate as of November 2026. A natural person with a PE must register only where turnover attributable to the PE exceeds AED 1,000,000 in a Gregorian calendar year (Cabinet Decision No. 49 of 2023, per the FTA guide).
After registration, the return and payment fall due within 9 months of the end of the Tax Period (Articles 48 and 53), and records must be kept for 7 years (Article 56). If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company.
6 months: the registration window for a Non-Resident Person whose UAE permanent establishment began on or after 1 March 2024; late registration carries an AED 10,000 penalty. Source: FTA announcement on corporate tax registration timeframes and the Ministry of Finance penalty notice, checked 03 November 2026.
How do double tax treaties change the PE test?
A double tax treaty in force overrides the domestic PE test where the two conflict (Article 66), and treaty thresholds can be longer. The FTA guide's illustrations show a treaty requiring a construction project to last more than 9 months, against 6 months under UAE domestic law, and an employee presence to exceed 9 months.
Those figures come from the guide's examples, not from every treaty, so don't assume them: read the PE article of the specific treaty between the UAE and the company's home country.
What most guides don't tell you
- A UAE subsidiary doesn't automatically shield the parent. In the FTA guide's example, employees of a UAE subsidiary who negotiate contracts that the foreign parent accepts without modification create an agency PE for the parent. That the employees can't change the terms makes no difference.
- Splitting contracts doesn't reset the clock. Time on connected projects, including those run by Related Parties, is added together for the 6-month site test, and subcontractor time counts toward the general contractor where it controls the site.
- The registration clock starts when the PE exists, not when you notice it. The FTA timeframe runs from the existence of the PE, so a company that works out in month 8 that it has had a PE since month 1 may already be late. Keep a dated record of when UAE operations began.
- A home office is a facts question. The FTA guide's example finds no PE where the employer bore none of the costs, had no legal access right, and merely allowed home working.
Which deadlines apply to your company?
A foreign company's registration deadline depends on when its PE began. The free UAE compliance calendar lists your company's tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
Frequently asked questions
Does UAE corporate tax apply to foreign companies with a UAE branch? Yes, in general. The FTA guide treats a UAE branch of a foreign company as a possible permanent establishment, and a Non-Resident Person with a permanent establishment is a Taxable Person under Article 11(4) of Federal Decree-Law No. 47 of 2022. Branch profits are taxed on an arm's length basis.
Can working from Dubai for a foreign employer create a permanent establishment? It can, but only if the facts fit Article 14. A home office counts only where the employer has effective use of it, and an employee who negotiates or concludes contracts habitually for the foreign company can create an agency permanent establishment. Get advice on your specific facts before relying on either result.
Does the UAE have withholding tax? The FTA guide says State Sourced Income of a Non-Resident Person that is not attributable to a permanent establishment may be subject to withholding tax, currently at 0%. Check the Ministry of Finance for any change to that rate.
About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn
Sources
- Federal Decree-Law No. 47 of 2022 and its amendments (Ministry of Finance, January 2026 consolidated text)
- FTA Corporate Tax Guide for Non-Resident Persons (CTGNRP1, October 2023)
- Ministerial Decision No. 83 of 2023, natural person presence and permanent establishment (Ministry of Finance)
- Cabinet Decision No. 116 of 2022 on annual Taxable Income subject to corporate tax (Ministry of Finance)
- FTA: new decision on specified timeframes for corporate tax registration
- Ministry of Finance: AED 10,000 penalty for late corporate tax registration
- Ministry of Finance: Corporate Tax in the UAE
Last checked: 03 November 2026
This is general information, not tax or legal advice for your specific situation.