A foreign company becomes taxable in the UAE when it has a permanent establishment here, and there are only two main ways that happens. Article 14(1) of Federal Decree-Law No. 47 of 2022 catches a fixed or permanent place through which the business is conducted, and separately catches any person who “has and habitually exercises an authority to conduct a Business or Business Activity in the State” on the foreign company’s behalf.

Neither test asks whether you have a license, an office lease or a company registration. Both ask what actually happens on the ground, which is why a foreign business can acquire a UAE tax presence without ever intending to set one up.

This guide covers what counts as a fixed place, when a person becomes a dependent agent, the activities that are expressly excluded, the six-month construction rule, and the position of an employee working here for an overseas employer. If you are asking the opposite question, about a UAE company earning abroad, see how a UAE company is taxed on foreign income.

Test One: A Fixed or Permanent Place

Article 14(1)(a) creates a permanent establishment where a non-resident “has a fixed or permanent place in the State through which the Business of the Non-Resident Person, or any part thereof, is conducted.” Article 14(2) then lists nine examples, and the first is the one people miss: “a place of management where management and commercial decisions that are necessary for the conduct of the Business are, in substance, made.”

That opening item is a substance test, not a formality. Where the real decisions are taken in the UAE, the place they are taken in is a fixed place, whatever the constitutional documents say about where the company is managed.

The rest of Article 14(2) is more familiar: a branch, an office, a factory, a workshop, land and buildings, an installation for exploring natural resources, and a mine, oil or gas well or quarry including vessels and structures used for extraction.

The Six-Month Construction Rule

Article 14(2)(i) treats a building site, a construction project, or a place of assembly or installation, or supervisory activities connected with one, as a fixed place, “but only if such site, project or activities, whether separately or together with other sites, projects or activities, last more than (6) six months.”

The words “together with other sites, projects or activities” carry the weight. The clause also brings in connected activities conducted at the site or project by one or more related parties of the non-resident, so splitting a long project between affiliated entities does not reset the clock.

Test Two: The Dependent Agent

Article 14(1)(b) creates a permanent establishment where a person “has and habitually exercises an authority to conduct a Business or Business Activity in the State” for the non-resident. Article 14(5) defines that in two ways: the person habitually concludes contracts on the non-resident’s behalf, or habitually negotiates contracts that the non-resident then concludes “without the need for material modification.”

The second limb is the one that catches ordinary commercial arrangements. A UAE-based salesperson who negotiates everything and sends the final version abroad for signature is inside the rule, because the signature abroad is a formality rather than a negotiation.

No formal power of attorney is required. The test is what the person habitually does, not what authority the paperwork grants them.

The Independent Agent Carve-Out, and Its Limit

Article 14(6) switches the agent test off where the person conducts business in the UAE “as an independent agent and acts for the Non-Resident Person in the ordinary course of that Business or Business Activity.” A genuine distributor, broker or commission agent running their own business is not a permanent establishment of every principal they serve.

Two conditions cancel that carve-out. It does not apply where the person “acts exclusively or almost exclusively on behalf of the Non-Resident Person,” and it does not apply where the person “cannot be considered legally or economically independent” from them.

Exclusivity is therefore the risk factor. An agent with one principal and no other clients is unlikely to be independent for this purpose, however the agreement is titled.

What Is Expressly Excluded

Article 14(3) removes five categories from the definition where a fixed place is used solely for them. These are the preparatory and auxiliary activities, and they are narrower than they look.

Excluded use Where the exclusion breaks down
Storing, displaying or delivering the company’s own goods If selling or contracting also happens there
Keeping stock solely for processing by another person If the stock is also sold from the location
Purchasing goods or collecting information If the office also negotiates or concludes sales
Any other activity of a preparatory or auxiliary nature If the activity is part of the core business
A combination of the above Only where the overall activity remains preparatory or auxiliary

The word “solely” governs every row. A warehouse used only to store and deliver is excluded, and the same warehouse becomes a permanent establishment the moment sales are concluded from it.

The Anti-Fragmentation Rule

Article 14(4) stops a group from slicing a business into individually harmless pieces. The exclusions in Article 14(3) do not apply where the same non-resident or its related party carries on business at the same place or at another place in the UAE, and two conditions are both met.

Those conditions are that the other place constitutes a permanent establishment of the non-resident or its related party, and that the overall activity resulting from the combination “is not of a preparatory or auxiliary nature and together would form a cohesive Business operation, had the activities not been fragmented.”

In practice this defeats the structure where one entity holds the warehouse, another the display office and a third the sales function. The law looks at what the pieces add up to.

Working From the UAE for a Foreign Employer

Article 14(7) gives the Minister power to prescribe when the mere presence of a natural person in the UAE does not create a permanent establishment for a non-resident. It covers two situations: presence that is “a consequence of a temporary and exceptional situation,” and presence of an employee where the activities conducted here “are not part of the core income-generating activities” of the non-resident or its related parties and the non-resident “does not derive State Sourced Income.”

Read the employee limb carefully, because both conditions must hold. An employee doing back-office or support work for an overseas employer with no UAE revenue is a very different case from a salesperson generating UAE customers.

This is the provision behind the most common question from remote workers, and the answer usually turns on what the person actually does rather than on how long they stay. Where the work is core revenue-generating activity, or the employer has UAE-sourced income, the protection in Article 14(7)(b) is not available on its own terms.

The Detail We Could Not Retrieve

Article 14(7) delegates the conditions to a Ministerial Decision, and that decision is where the operational tests, including any day counts, actually live. The text of that decision was not retrievable from the Ministry of Finance or the Federal Tax Authority while writing, so no threshold is asserted here.

Treat the framework above as the statutory position and check the current Ministerial Decision with the FTA before relying on it. This matters most for anyone counting days, because the day count is precisely the part Article 14 itself does not contain.

If your question is about your own residence rather than your employer’s exposure, that is a separate test set out in the UAE tax residency certificate guide, and the personal tax position in what a tax-free UAE salary is actually worth.

What Happens Once a Permanent Establishment Exists

The consequence is registration and filing, not a penalty. The non-resident becomes a taxable person in respect of the income attributable to the permanent establishment, and has to register for corporate tax and file returns on that income.

Only the attributable income is caught. The permanent establishment is taxed on what it earns, not on the foreign company’s global profit, which is the practical difference between having a UAE presence and being a UAE company.

The registration mechanics are the same as for any other taxable person, and the EmaraTax route and its deadlines are set out in corporate tax registration on EmaraTax, with the filing calendar in the return deadlines and penalties.

Related Party Status Follows Automatically

Article 35(1)(d) treats a person and its permanent establishment or foreign permanent establishment as related parties. Dealings between the head office and the UAE permanent establishment therefore have to meet the arm’s length standard in Article 34, even though no third party is involved.

That is a real compliance burden rather than a theoretical one. Management charges, cost allocations and internal financing between head office and branch all sit inside the transfer pricing rules, which are covered for smaller groups in transfer pricing for UAE SMEs.

Branch or Subsidiary

A foreign company with a real UAE presence usually has a choice between registering a branch and incorporating a subsidiary. The tax analysis differs in one structural way that is worth understanding before the licensing decision is made.

A branch is the foreign company operating here, so it is a permanent establishment and is taxed on attributable income while remaining part of the same legal person. A subsidiary is a separate UAE company taxed in its own right, and its profits reach the parent as a dividend.

The licensing and ownership consequences usually dominate the decision rather than the tax ones, and the practical comparison sits in the practical guide to business setup in Dubai.

The Third Route: Nexus by Cabinet Decision

Article 14(1)(c) creates a permanent establishment where the non-resident “has any other form of nexus in the State as specified in a decision issued by the Cabinet at the suggestion of the Minister.” This is an open category rather than a defined one.

It matters because it means the two familiar tests are not exhaustive. Anyone assessing exposure on the basis of Article 14(1)(a) and (b) alone should check whether a Cabinet decision has added a nexus that applies to their situation.

Frequently Asked Questions

What creates a permanent establishment in the UAE?

Either a fixed or permanent place through which the foreign company’s business is conducted, or a person who habitually exercises authority to conduct business here on its behalf. Article 14(1) sets out both, and adds a third open category for any other nexus specified by Cabinet decision.

Does an office in the UAE always create a permanent establishment?

Not if it is used solely for the excluded activities. Article 14(3) removes storage, display and delivery of the company’s own goods, stock kept solely for processing by another, purchasing or information gathering, and other preparatory or auxiliary activity, but the word “solely” governs each of them.

Can an employee create a permanent establishment for a foreign employer?

Yes, where the employee habitually concludes contracts on the employer’s behalf or habitually negotiates contracts the employer then concludes without material modification. Article 14(7)(b) provides for conditions under which an employee’s mere presence does not create one, but only where the activities are not core income-generating and the employer derives no state-sourced income.

How long can a construction project run before it becomes a permanent establishment?

Six months. Article 14(2)(i) catches a building site, construction project, place of assembly or installation, or connected supervisory activities, only where they last more than six months, counted together with other sites and projects and including connected activities of related parties.

Is a distributor or agent a permanent establishment of the supplier?

Not if genuinely independent. Article 14(6) excludes a person acting as an independent agent in the ordinary course of their own business, but the exclusion falls away where the person acts exclusively or almost exclusively for that principal, or is not legally or economically independent of them.

Does a warehouse in the UAE create a permanent establishment?

Not where it is used solely for storing, displaying or delivering the company’s own goods. It does once contracts are concluded from it, and Article 14(4)’s anti-fragmentation rule can also bring it back in where a related party runs a complementary activity elsewhere in the UAE.

What is taxed once a permanent establishment exists?

The income attributable to the permanent establishment, not the foreign company’s worldwide profit. The non-resident becomes a taxable person in respect of that income and has to register and file on it.

Do transfer pricing rules apply between head office and a UAE branch?

Yes. Article 35(1)(d) treats a person and its permanent establishment as related parties, so internal dealings such as management charges, cost allocations and funding have to meet the arm’s length standard in Article 34.

Is a branch or a subsidiary better for a foreign company?

They are taxed differently rather than one being better. A branch is the foreign company operating here and is taxed as a permanent establishment on attributable income, while a subsidiary is a separate UAE taxable person whose profits reach the parent as a dividend.

How many days can I work from the UAE before my employer is taxable here?

Article 14 itself sets no day count. The conditions under which a natural person’s presence does not create a permanent establishment are delegated by Article 14(7) to a Ministerial Decision, so any threshold has to be read from that decision rather than from the decree-law.

Official Sources

Information current as of August 2026. Verify with official authorities before proceeding.

This guide is for informational purposes only and is not tax advice. UAE regulations and rates are subject to change. Always verify current requirements with the Federal Tax Authority or a qualified tax adviser before proceeding with any filing or arrangement.