A foreign company with no separate legal presence in the UAE maintains a dedicated office in Dubai, staffed by its own employees, from which it manages and fulfills UAE customer orders on an ongoing basis (not merely for preparatory or auxiliary activities). Under Article 14 of Federal Decree-Law No. 47 of 2022, does this foreign company have a Permanent Establishment in the UAE?
- Yes, because it has a fixed or permanent place in the UAE through which its business is wholly or partly conducted, which constitutes a Permanent Establishment under Article 14's fixed place of business test, since the office's activities go beyond preparatory or auxiliary functions
- No, because a foreign company can only have a UAE Permanent Establishment if it incorporates a separate UAE legal entity such as a branch registered with the relevant licensing authority
- No, because Permanent Establishment status under Article 14 requires the foreign company to hold at least a 51% stake in a UAE-resident company
- Yes, but only because the office employees are UAE nationals; a foreign company staffing the same office entirely with expatriate employees would not create a Permanent Establishment
Why A? And why not the others?
Correct answer: A. Yes, because it has a fixed or permanent place in the UAE through which its business is wholly or partly conducted, which constitutes a Permanent Establishment under Article 14's fixed place of business test, since the office's activities go beyond preparatory or auxiliary functions
Article 14 of Federal Decree-Law No. 47 of 2022 provides that a non-resident person has a Permanent Establishment in the UAE if it has a fixed or permanent place in the UAE through which its business, or part of it, is conducted, subject to a carve-out for activities that are solely preparatory or auxiliary in nature. Because the Dubai office here is staffed by the company's own employees and used to manage and fulfill customer orders on an ongoing basis, its activities go beyond preparatory or auxiliary functions, so the fixed place of business test is met and a Permanent Establishment exists even without any separate UAE legal entity. The option requiring incorporation of a separate UAE branch is wrong because Article 14's fixed place of business test is a factual, activity-based test that can be satisfied by an office alone, independent of whether a separate legal entity is registered. The option requiring a 51% stake in a UAE-resident company is wrong because that describes an ownership or control test relevant to concepts like Tax Groups, not the Permanent Establishment test, which looks at where and how the foreign company's own business activities are carried out. The option conditioning Permanent Establishment status on the nationality of the office's staff is wrong because Article 14 turns on the nature and permanence of the place of business and the activities conducted there, not on the nationality of the employees who staff it.
Source: UAE Federal Decree-Law No. 47 of 2022, Article 14 (Permanent Establishment -- fixed place of business test)