Decision No (83) of 2023

Brief

The UAE has released Ministerial Decision No. 83 of 2023, which outlines the criteria determining when a non-resident’s presence in the country does not establish a permanent establishment for tax purposes, as per Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. KCG has shared below the transcript issued by the Ministry of Finance, UAE. The Decision was published on 10 April 2023 and is effective from 25 April 2023.

Conditions of a Temporary and Exceptional Presence in the State

The Decision specifies that a non-resident person’s presence in the UAE will only be considered temporary and exceptional if the following conditions are all met:

• The presence of the natural person in the UAE is a consequence of exceptional circumstances of a public or private nature;
• The exceptional circumstances cannot reasonably be predicted by the natural person or the Non-Resident Person;
• The natural person did not express any intention to remain in the State when the exceptional circumstances end;
• The Non-Resident Person does not have a Permanent Establishment (PE) in the UAE before the occurrence of the exceptional circumstances; and
• The Non-Resident Person did not consider that the natural person is creating a PE or deriving income in the UAE as per the tax legislation applicable in other jurisdictions.

Exceptional Circumstance

Furthermore, the Decision states that an “exceptional circumstance” is defined as a situation or event that meets one or more of the following conditions:

• Beyond a natural person’s control;
• Which occurred while he was already in the UAE;
• Which he could not reasonably predict or prevent; and
• Which prevented him from leaving the UAE as originally planned.

Examples of exceptional circumstances of a public nature, which are not limited to the following, include:

Adoption of public health measures by competent authorities in the UAE or in the jurisdiction of the original workplace, or by the World Health Organisation (WHO);

• Imposition of travel restrictions by the competent authorities in the UAE or in the jurisdiction of the original workplace;
• Imposition of legal sanctions on the natural person preventing him from leaving the UAE’s territory;
• Acts of war or occurrence of terrorist attacks;
• Occurrence of natural disasters or force majeure beyond reasonable control; and
• Any other circumstances similar to those provided for above, as prescribed by the Federal Tax
  Authority (FTA).

Examples of exceptional circumstances of a private nature, which are not limited to the following, include:

• Occurrence of an emergency health condition affecting the natural person or their relatives up to the fourth degree, including by way of adoption or guardianship; and
• Any other circumstances similar to the above as prescribed by the FTA.

Key Takeaways

• The recent Ministerial Decision in the UAE has provided clarity for taxable persons regarding the preparation and maintenance of audited financial statements to comply with the CT Law.
• Businesses need to ensure their records align with Generally Accepted Accounting Principles to be able to present audited financial statements.
• The Decision has clarified how Non-Residents should interpret “exceptional circumstance” for the creation of a UAE Permanent Establishment for a natural person.
• However, further guidance is required for natural persons who are tax residents in the UAE.

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