The UAE Federal Tax Authority (‘FTA’) has released the Corporate Tax Guide on the Taxation of Foreign Source Income.
This provides general guidance to taxpayers on the taxation of Foreign Source Income in accordance with the Corporate Tax Law provisions, covering:
- Definition and examples of Foreign Source Income.
- Taxable Persons that are subject to tax on Foreign Source Income.
- Timing of taxation of Foreign Source Income.
- Determination of the Taxable Income and Exempt Income in respect of Foreign Source Income.
- Definition of the concept of Foreign Tax Credit and comments on the applicability of such relief.
The CT Guide also provides several examples of the following:
- Different scenarios of taxation for 'Natural Persons’ and ‘Permanent Establishments’.
- Foreign Source Income derived from related party transactions.
- The calculation of Foreign Source Income.
- Different scenarios of calculation and utilization of a Foreign Tax Credit.
These examples facilitate the understanding of certain issues where there has been some uncertainty with regards to the interpretation of the Corporate Tax Law. The provided examples should be subject to the impact of the relevant Double Tax Agreement, if any.
The Guide is not legally binding; it is a source of guidance for better understanding of the provisions of the Corporate Tax Law.
KPMG has a dedicated Corporate Tax team that will be delighted to help you assess the impact of Corporate Tax in your operations and activities.