Corporate tax for UAE branch of foreign company operations: what is taxed and how

Article 11 makes a non-resident person a taxable person if it has a permanent establishment in the UAE. Article 14 defines a permanent establishment as a fixed or permanent place in the UAE through which the foreign business is conducted, or a person who habitually concludes contracts in the UAE on its behalf.

A licensed branch with an office, staff and local customers clearly meets that test. So, in some cases, can a foreign company without a branch licence whose UAE sales agent habitually signs contracts for it.

Under FTA Decision No. 3 of 2024, a non-resident with a permanent establishment that came into existence on or after 1 March 2024 must apply for registration within six months. One with a permanent establishment before that date had nine months from its existence.

Separately, a foreign-incorporated company that is effectively managed and controlled in the UAE is treated as resident, and must register within three months of the end of its financial year. Founders who run a foreign holding company from Dubai should check this carefully.

The branch is taxed on income attributable to its UAE permanent establishment, at the normal rates: 0% up to AED 375,000 and 9% above. To find that income, the branch is treated as if it were a separate business, dealing with head office on arm's length terms.

Example: the Dubai branch of a Singapore engineering firm invoices UAE clients AED 6.5 million. Local costs are AED 4.4 million. Head office charges AED 900,000 for design work done in Singapore. If the design charge is at arm's length, branch taxable income is AED 1.2 million and tax is 9% of AED 825,000, which is AED 74,250.

Head office allocations are where branch computations most often go wrong. A blanket 'management fee' of 10% of branch revenue with no description of services is hard to support. Charges should reflect services actually provided to the branch, at a price an independent party would pay.

Keep a written agreement or policy, time records or cost bases, and invoices. The same discipline that applies between related companies applies between a branch and its head office.

• Describe each service head office provides to the branch
• Price it on cost plus a reasonable margin or a market rate
• Invoice regularly, not as a single year-end journal
• Keep evidence the service was actually delivered

Article 45 sets the UAE withholding tax rate on state-sourced income of non-residents at 0%, so remitting branch profit to head office carries no UAE withholding. Head office's own country may tax it and may give credit for UAE tax paid.

For the audit requirement, only revenue from the UAE permanent establishment counts towards the AED 50 million threshold in Ministerial Decision No. 84 of 2025. The return is due nine months after the end of the branch's tax period, which usually follows the parent's financial year.

A branch needs its own ledger in AED, even if head office reports in SGD or GBP. HelloBooks keeps the branch books in AED with multi-currency transactions and FX gains and losses tracked, and a head office current account for every charge and remittance. The AI agent posts head office invoices to that account and flags any without supporting documents.

Ask 'how much has head office charged us this year, by service?' and you get a schedule your tax agent can test for arm's length pricing. Filing on EmaraTax stays with the branch's finance lead or agent. Groups that need branch reporting mapped to the parent's chart of accounts can request it at hello@hellobooks.ai.