Corporate Tax

UAE Corporate Tax for Branches of Foreign Companies

2025-10-06 · 5 min read · By Aureus Worldwide

A foreign company that operates in the UAE through a branch does not escape Corporate Tax simply because the branch is not a separate legal entity. Where the branch amounts to a taxable presence, the profits attributable to it are subject to UAE Corporate Tax. This guide explains how branches and permanent establishments are taxed, what counts as attributable profit, and the registration and filing duties that follow.

Branch, subsidiary or permanent establishment?

It helps to be clear on the terms:

A branch of a foreign company generally creates a permanent establishment (PE) in the UAE, and it is the PE concept that triggers the charge to Corporate Tax.

What is a permanent establishment?

Broadly, a foreign person has a permanent establishment in the UAE where it has:

• A fixed place of business through which the business is wholly or partly carried on, such as an office, branch, factory or workshop, or
• A dependent agent who habitually exercises authority to conclude contracts in the UAE on the foreign person's behalf

Certain preparatory or auxiliary activities are generally excluded from creating a PE. The precise definition has detail and exceptions, so confirm whether your activities create a PE with the FTA or an adviser.

Taxing profits attributable to the branch

Where a PE exists, the UAE taxes the profits attributable to it, not the foreign company's worldwide profits. Attributable profits are broadly those the branch would have earned if it were a separate and independent enterprise dealing at arm's length with the rest of the company. That means:

• Income genuinely connected to the UAE activity is brought into account
• A fair share of expenses is allocated to the branch
• Dealings between the branch and head office are tested on an arm's length basis

This attribution exercise is central, and it borrows heavily from transfer pricing principles.

The rate and the threshold

The taxable income attributable to the branch is subject to the standard rates: 0% up to AED 375,000 and 9% above it. Anti-fragmentation and related-party rules can affect how the threshold applies where a foreign group has more than one UAE presence, so do not assume each branch gets a fresh AED 375,000 band without checking. The mechanics of the standard regime are covered in our UAE Corporate Tax guide.

Registration and filing for branches

A branch that creates a taxable presence must comply with the same core obligations as other taxpayers:

1. Register for Corporate Tax with the FTA in the appropriate manner
2. Keep accounting records that support the branch's attributable profit
3. Prepare financial information for the branch, often supported by the company's accounts
4. File a Corporate Tax return for the relevant period
5. Pay any tax due by the deadline

Our registration guide walks through the FTA process and the information typically required.

Allocating head-office costs

One of the trickiest parts of branch taxation is deciding how much of the foreign company's costs belong to the UAE branch. Head-office management, shared services and financing costs may all be partly attributable to the branch, but the allocation must be reasonable and supportable. Over-allocating costs to reduce UAE profit invites challenge; under-allocating can mean overpaying tax. A clear, documented allocation methodology, applied consistently, is the best protection.

The branch is taxed as if it were a separate, independent business. Think of every dealing with head office as if it were a transaction between two unconnected companies, and price and document it accordingly.

Foreign tax credits and double taxation

Because the same profits may also be taxed in the company's home country, double taxation can arise. UAE Corporate Tax and the UAE's network of double tax treaties contain mechanisms, such as foreign tax credits or treaty relief, to mitigate this. The availability and amount of relief depend on the specific treaty and the facts, so a foreign company with a UAE branch should map its overall position across both jurisdictions and confirm the treatment with the FTA and its home-country advisers.

Practical record-keeping

To support a branch's Corporate Tax position, keep:

• Accounts identifying the branch's income and expenses
• Documentation of the basis for attributing profit to the branch
• Support for any head-office cost allocations
• Transfer pricing analysis for dealings with head office and related parties
• Evidence relevant to any treaty or foreign tax credit claim

Maintaining these alongside ongoing accounting makes the annual computation far smoother and more defensible, and a statutory audit of the branch accounts adds further weight to the attributable-profit position.

A note on changeable detail

PE thresholds, attribution rules and treaty positions involve detail that the FTA administers and that interacts with international tax norms. Treat this guide as the framework and confirm the specifics, particularly whether your activities create a PE and how profit should be attributed, with the FTA or a qualified adviser.

How Aureus Worldwide helps

Aureus Worldwide helps foreign companies determine whether their UAE activities create a permanent establishment, attribute profit to the branch on a defensible basis, and meet the registration and Corporate Tax filing obligations that follow. We keep the supporting accounting records and direct you to confirm changeable specifics with the FTA. To assess your branch's tax position, contact us.

Talk to our chartered accountants →