Permanent Establishment (PE)

What is a Permanent Establishment?

A Permanent Establishment (PE) is a concept in tax law that determines when a foreign business has sufficient presence in the UAE to be subject to UAE taxation. If a non-resident entity has a PE in the UAE, it becomes liable for UAE Corporate Tax on income attributable to that PE.

Types of Permanent Establishment

Fixed Place PE

Physical location where business is conducted

• Office or branch
• Factory or workshop
• Warehouse
• Construction site (>6 months)
• Mine, oil/gas well, quarry

Agency PE

Dependent agent acting on behalf of foreign entity

• Authority to conclude contracts
• Habitually exercises that authority
• Acts on behalf of the enterprise
• Not an independent agent

Service PE

Provision of services through employees

• Services provided in UAE
• Through employees or personnel
• Exceeds specified time threshold
• Consultancy, technical services

Digital PE

Nexus created through digital presence (emerging concept)

• Significant digital presence
• Online platforms and services
• UAE user base
• Subject to future regulations

Tax Implications of Having a PE

Corporate Tax Liability: Subject to 9% Corporate Tax on UAE-sourced income attributable to the PE
VAT Registration: May trigger VAT registration requirement if supplies exceed threshold
Filing Obligations: Must file Corporate Tax returns and maintain UAE records
Transfer Pricing: Transactions between head office and PE must be at arm's length

What Does NOT Create a PE

• Storage, display, or delivery of goods only
• Purchasing goods or collecting information
• Preparatory or auxiliary activities
• Independent agents acting in ordinary course of business
• Maintaining a fixed place solely for advertising or market research
• Short-term business trips below threshold

PE vs UAE Subsidiary

Feature	PE	Subsidiary
Legal Entity	Extension of foreign company	Separate legal entity
Liability	Parent liable	Limited liability
Tax Rate	9% on PE income	9% on all income
Profits	PE profits only	All subsidiary profits

Determining PE Status

Key factors in determining if a PE exists:

1 Physical presence and location in UAE
2 Duration and permanence of activities
3 Nature of business activities conducted
4 Degree of dependence of agents
5 Provisions of applicable tax treaties

PE Registration Requirements

Non-resident entities with a PE in the UAE must register for Corporate Tax with the FTA and obtain a Tax Registration Number (TRN) within specified timeframes.