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Cabinet Decision No. 56 of 2023 on Determination of a Non-Resident Person’s Nexus in the State for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses

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Summary:

This decision, issued by the Cabinet, provides clarity on the criteria for determining a non-resident person’s connection to the state regarding the taxation of corporations and businesses. It outlines definitions and rules related to immovable property and taxable income. The decision also addresses artificial transfer of property rights and the requirement for non-resident persons to register for corporate tax.

Key Provisions:

  1. Definitions: The decision adopts the definitions stated in Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Additional definitions include “immovable property” referring to land, buildings, structures, or equipment permanently attached to the land or seabed.
  2. Nexus in the State: Non-resident persons are considered to have a nexus in the state if they earn income from any immovable property within the state. This nexus is relevant for determining tax liability.
  3. Taxable Income and Immovable Property: The decision clarifies that taxable income related to immovable property includes income derived from various activities such as rights in rem, sales, disposal, assignment, direct use, letting, subletting, and other forms of property exploitation.
  4. Artificial Transfer of Rights: If a non-resident person artificially transfers or disposes of their property rights in the state without a valid commercial or non-fiscal reason reflecting economic reality, it may be considered an arrangement aimed at obtaining a corporate tax advantage.
  5. Requirement to Register: Non-resident persons who have a nexus in the state, as defined in Article (2), are obliged to register with the relevant authority according to the provisions of Article (51) of the Corporate Tax Law.

This decision provides a clear framework for determining the tax obligations of non-resident persons in relation to their income from immovable property within the state. It aims to prevent tax avoidance and ensure a fair and transparent tax system for corporations and businesses.

Link to the original decision is here.

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