You Can Have a Permanent Establishment in Someone Else's Office

Foreign businesses working in the UAE usually picture a permanent establishment as a leased office with a nameplate. The FTA's Non-Resident Persons guide sets out something wider: a set of factual tests where ownership, exclusivity and even legal right can all be irrelevant, and where a project spread across several sites counts as one.

The fixed place test: four factors, all required

Article 14(1)(a) treats a Non-Resident Person as having a Permanent Establishment where it has a fixed or permanent place in the UAE through which its business, or any part of it, is conducted. The guide breaks that into factors that typically all have to be satisfied.

1. A place of business — a facility such as an office, work location or premises, and in certain instances machinery or equipment, used to carry on business in the UAE on a regular or recurrent basis.
2. Permanence — established at a distinct place with a degree of continuity, assessed case by case.
3. At the disposal of the Non-Resident Person — the right or effective power to use the place.
4. Core income-generating activities performed there, rather than preparatory or auxiliary ones.

Note also that machinery or equipment can itself be the place of business. There is no requirement for people to be stationed anywhere.

Three things that do not matter, and one that surprises people

The guide lists factors it describes as immaterial — they should not influence the evaluation at all.

• Ownership. Rented premises can constitute a Permanent Establishment.
• Formal legal right. It is not required where the Non-Resident Person has effective control over the location.
• Exclusivity. A Permanent Establishment can exist in a location belonging to another person, or used by several persons for their own business.

The disposal question is where advisers spend most of their time. Mere presence at a location does not by itself put it at the taxpayer's disposal. The guide works through a two-year consulting contract where employees attend a client's premises with temporary access cards, desks and meeting rooms available only for the contracted services — and asks whether, in substance, those restrictions leave the company any effective control. That is a facts question, and the answer moves with how the access actually works rather than how it is described.

Fixed does not mean immobile, and one project can span many sites

Two of the guide's examples correct common assumptions. In the first, a foreign company runs a floating restaurant attached to a hot air balloon and supported by a crane, making it mobile. That is still a fixed place Permanent Establishment. A place of business does not have to stay in one geographical spot.

In the second, a contractor assembles parts of a substantial offshore platform at various UAE locations and moves them elsewhere in the UAE for final assembly. The guide treats that as a single project, with each location part of a cohesive whole, so the project as a whole can be a Permanent Establishment. It notes that construction and installation work often requires different segments in different locations, or continuous relocation as the project progresses.

For anyone running a UAE project across multiple sites, that combination matters: the sites are aggregated, and so is the time.

The preparatory or auxiliary carve-out, and its limits

Article 14(3) carves out a fixed or permanent place used only for certain things.

1. Storing, displaying or delivering goods or merchandise belonging to that person.
2. Keeping a stock of goods or merchandise belonging to that person for the sole purpose of processing by another person.
3. Purchasing goods or merchandise, or collecting information, for the Non-Resident Person.
4. Conducting any other activity of a preparatory or auxiliary nature.
5. Any combination of the above, provided the overall activity is of a preparatory or auxiliary nature.

The guide describes auxiliary activities as those that aid or support the core business function without being an essential and significant part of the enterprise's activity — secondary to the main functions that realise profits.

Agency permanent establishment: no premises required at all

Even without any fixed place of business, a non-resident can have an agency Permanent Establishment under Articles 14(5) and 14(6), unless the agent is legally or economically independent of the principal. The person acting can be a natural or juridical person, and can be resident or non-resident themselves.

It arises where that person, on a regular basis, concludes contracts in the UAE on behalf of the non-resident — or negotiates contracts in the UAE that the non-resident then concludes without any material modification to their terms.

The conclusion or negotiation must be habitual: repeated, not isolated. And the guide asks for the commercial realities of the arrangement rather than its labels, noting that mere interaction between a person and the non-resident's UAE customers is not by itself enough.

Where a permanent establishment does exist, the next question is what profit belongs to it — a separate exercise with its own two-step analysis.

A permanent establishment is also one of the routes by which a non-resident's income becomes UAE sourced, and the source rules operate on their own terms alongside these tests.

Free zone entities face the question from the other direction, because a domestic or foreign permanent establishment carries specific consequences for Qualifying Free Zone Person status.

What to check

1. Add up UAE presence across the year — more than 6 months in aggregate, even if broken, typically indicates permanence.
2. Aggregate sites belonging to one project rather than testing each location separately.
3. Ask whether the place is at your disposal in substance, not whether you hold a lease.
4. Remember that equipment and machinery can themselves be the place of business.
5. Test whether activities are core income-generating or genuinely auxiliary — and apply the assets-and-employees and standalone-viability tests.
6. Check any UAE person concluding or negotiating contracts on your behalf, and how often.
7. Do not rely on contracts being signed in the agent's own name; commissionaire arrangements are expressly caught.
8. Where an agent is claimed to be independent, be able to show that independence legally and economically.

The Non-Resident Persons Corporate Tax Guide (CTGNRP1) is guidance rather than legislation; the operative provision is Article 14 of the Corporate Tax Law, and an applicable Double Taxation Agreement may set a different threshold. Confirm the position for your own facts before relying on it.