The UAE Tax Residency as
per Article 11 Clause 3(b) of the Federal Corporate Tax (“CT”) Law includes the
concept of Place of Effective Control and Management (“PoEM”) for foreign
persons directed and managed from the UAE.
PoEM is an
internationally acceptable test to determine whether a company incorporated in
a foreign jurisdiction can be considered as a tax resident in another country.
As such, PoEM is the place where the key management and commercial decisions -
that are necessary for the conduct of the entity’s business - are made
Elimination of tax avoidance of companies incorporated
outside the UAE but controlled and managed from the UAE.
Introduction of the concept of residency for corporates in
line with the internationally accepted principles
Key Factors to determine PoEM
1) Place of Board of
Directors (BoD) Meeting
2) Place of Senior
Management and Key Management Personnel’s (KMP’s)
3) Shareholder Influence
1) Place of Incorporation
and the governing laws.
2) Operational Management/
operational commercial decisions
3) Place where accounting
records are kept
How is POEM distinct from Permanent Establishment
A foreign person with PE in the UAE will be subject to tax only on the income attributable to
such PE. Whereas in case of POEM, the worldwide income of the foreign person
will be taxable in the UAE.
Impact on Foreign Entity
· Worldwide income liable
for tax in the UAE
· Compliance with Transfer
Pricing (“TP”) Rules and documentation
· Filling of CT Return and
· Issue of Double Taxation
and Tax Credit
· Time period to determine
the existence of POEM.
· Independent examination
for each person as POEM is fact and circumstances specific
· Dual tax residency
· Double taxation of
income and foreign tax credit.
How can Crowe
· Perform qualitative
analysis of relevant facts and circumstances and assess the potential impact of
the CT law from the tax residency perspective.
· Provide recommendations
and viable solutions to mitigate the risk of POEM taking cognizance of the
General Anti Abuse Rules (“GAAR”) in the UAE CT Law.
· Ongoing review of the
standard procedures, governance and internal system policies to ensure tax
Advising and assistance in maintaining appropriate
documents for tax purposes.