Effective 1 June 2023, under the new federal corporate tax regime, UAE sourced income that is not attributable to a permanent establishment of the non-resident in the UAE forms a part of the tax base for non-resident entities. However, payments made by resident companies to non-residents are subject to withholding tax at a 0% rate unless the income is attributable to a branch or a permanent establishment located in the UAE. Further, as per the new regime, any other rate may apply as specified in a decision to be issued by the Cabinet.

An income is considered UAE sourced income if it is:

• Derived from a resident person;
• Derived from a non-resident person in connection with, and attributable to, a permanent establishment of that non-resident person in the UAE; or
• Otherwise accrued in or derived from activities performed, assets located, capital invested, rights used, or services performed or benefitted from in the UAE.

UAE sourced income includes, but is not limited to, the following:

• Income from the sale of goods in the UAE. The general source rule is that the income from the sale of goods is deemed to be sourced in the UAE if the sale and resulting transfer of title takes place in the UAE;
• Income from the provision of services that are rendered or utilized in the UAE or when the ultimate recipient or beneficiary of the service is located in the UAE. The ultimate recipient or beneficiary is the person who economically utilizes the service in the UAE;
• Income from a contract insofar as it has been wholly or partly performed in the UAE or when the ultimate recipient or beneficiary of the contract is located in the UAE. The ultimate recipient or beneficiary is the person who economically gains or for whom the services are performed under the contract in the UAE;
• Income from the use or sale of movable or immovable property located in the UAE. For example, rental income from property located in the UAE (or from an interest in such property) is generally deemed to be sourced in the UAE;
• Income from the disposal of shares or other rights in the capital of a person incorporated or resident in the UAE;
• Income from the use or right to use in the UAE, or the grant of permission to use in the UAE, any intellectual or intangible property, including patents, trademarks, trade brands, copyrights, and goodwill;
• Interest income meeting any one of the following conditions:
  • the loan is secured by movable or immovable property located in the UAE, i.e., the collateral of the loan is located in the UAE; or
  • the borrower is a resident person; or
  • the borrower is a government entity; and

• Insurance or reinsurance premiums meeting any one of the following conditions:
  • the insured asset is located in the UAE; or
  • the insured person is a resident person; or
  • the insured activity is conducted in the UAE.