UAE Corporate Tax: Place of effective management deciphers tax residency for global companies

In a move to ensure a fair and transparent corporate tax regime, the UAE has laid down comprehensive guidelines for determining the tax residency of entities, be they local or foreign.

At the heart of this taxation framework lies the crucial concept of place of effective management (PoEM), a globally recognised test that assesses where vital management and business decisions essential for a company’s operation are made, where it is effectively managed and controlled from. The companies incorporated outside the UAE can become deemed resident, if the company is effectively controlled and managed from the UAE. PoEM serves as the epicentre where pivotal decisions shaping the entity’s business operations are executed.

The determination of a juridical person’s PoEM in the UAE is contingent on the specific facts and circumstances of that entity and its activities. While the location where the highest level of management decisions is made is a key factor, other considerations, such as the residence of controlling shareholders, delegated decision-making powers, or the location of board members and executive management, may also come into play. Crucially, only one place of effective management and control is admissible at any given time. Notably, it is not mandatory for the board members (or equivalent) of a juridical person to be residents of the UAE for the PoEM to be considered within the UAE.

The wrtier is Partner, MICS.