In short
Article 13 treats income as UAE sourced if it comes from a Resident Person, is attributable to a non-resident's UAE permanent establishment, or otherwise arises from activities, assets, capital, rights or services connected to the UAE. It then lists specific cases without limitation — goods sold here, share disposals in a Resident Person, interest where the borrower is resident, and more.
For a UAE resident company the source of income barely matters — residents are taxed on worldwide profits either way. For a foreign business earning from the UAE it is the whole question. Whether income is "State Sourced Income" decides whether the UAE has any claim to tax it at all, and the answer sits in Article 13 of Federal Decree-Law No. 47 of 2022.
Article 13 works in two parts. The first sets a general test in three limbs. The second gives a specific list of cases — and says the list applies without limitation, which means it illustrates the rule rather than fencing it in. Reading only the second part, as many summaries do, gives a narrower picture than the law actually draws.
The three limbs of the general test
Under Article 13(1), income is State Sourced Income in any of three instances:
- Where it is derived from a Resident Person. The identity of the payer is enough — if a UAE resident pays it, it is generally UAE sourced.
- Where it is derived from a Non-Resident Person and the income has been paid or accrued in connection with, and is attributable to, a permanent establishment of that non-resident in the UAE. Here the payer is foreign, but the UAE presence generating the payment brings it into source.
- Where it is otherwise accrued in or derived from activities performed, assets located, capital invested, rights used, or services performed or benefitted from in the UAE.
The third limb is the broad one, and the phrase to notice is "or benefitted from". Services do not have to be performed in the UAE to be UAE sourced — it can be enough that the benefit of them is enjoyed here. An overseas advisory firm working entirely from its home office on a UAE restructuring is squarely within the wording.
The specific list in Article 13(2)
Subject to conditions and limitations the Minister may set, State Sourced Income includes, without limitation, the following:
| Category | When it is UAE sourced |
|---|---|
| Goods | Income from the sale of goods in the UAE |
| Services | Income from services rendered, utilised or benefitted from in the UAE |
| Contracts | Income from a contract insofar as it has been wholly or partly performed or benefitted from in the UAE |
| Property | Income from movable or immovable property in the UAE |
| Share disposals | Income from the disposal of shares or capital of a Resident Person |
| Intellectual property | Income from the use, right to use, or grant of permission to use any intellectual or intangible property in the UAE |
| Interest | Where the loan is secured by movable or immovable property in the UAE, or the borrower is a Resident Person, or the borrower is a Government Entity |
| Insurance premiums | Where the insured asset is in the UAE, or the insured person is a Resident Person, or the insured activity is conducted in the UAE |
Two entries worth pausing on
The disposal of shares or capital of a Resident Person is on that list, and it is routinely left out of summaries of the source rules. A non-resident selling shares in a UAE company is deriving State Sourced Income by statute. Whether tax is actually payable then depends on the rest of the regime and on any applicable treaty — but the source question is already answered, and answered against the seller.
The interest and insurance entries are drafted as alternatives, not cumulative conditions. Any one of the three tests is enough. A loan to a UAE resident borrower produces UAE sourced interest even where the lender is offshore, the loan agreement is governed by foreign law, and the money never touches the UAE. Security over UAE property does the same thing on its own, whoever the borrower is.
Source and permanent establishment are different questions
The two are easy to conflate and operate independently. A non-resident can have State Sourced Income with no permanent establishment in the UAE at all. Equally, where a permanent establishment does exist under Article 14, income attributable to it is dealt with through that route. The practical consequence is that you have three separate questions to work through, in order: is there a permanent establishment, is the income UAE sourced, and does any exemption or treaty relief apply.
Related guideWithholding Tax Credit Under Article 46: Overview & Practical ImplicationsWhat happens once income is UAE sourced
State Sourced Income of a non-resident without a permanent establishment is the category the Withholding Tax provisions in Article 45 are built for. The rate is currently 0%, so no tax is presently deducted and no withholding return arises from it — but the mechanism is in the law and the classification still matters, because a positive rate would apply to exactly this population.
A tax treaty can change the answer. Where the UAE has a double taxation agreement with the recipient's country, the treaty allocates taxing rights and may reduce or remove the UAE's claim over business profits, interest, royalties or gains. The domestic source rules are the starting point, not the conclusion, and both have to be read before a final position is taken.
Related guideThe UK–UAE Double Tax Treaty: What Changed Once the UAE Started Taxing ProfitsWhat to check in practice
- The residence status of the payer — limb one turns on it alone.
- Whether any payment is being made by, or attributable to, a UAE branch or other permanent establishment of a foreign group company.
- Where assets sit, where activities are physically carried out, and — for services — where the benefit is actually enjoyed rather than where the invoice is raised.
- Intra-group financing, IP licensing and management service arrangements, where source rules bite hardest and are most often assumed away.
- Any planned disposal of shares in a UAE company by a non-resident shareholder.
- The applicable treaty, before concluding that domestic law settles the matter.
One theme runs through all of it: the rules follow economic connection rather than paperwork. Routing a payment through another jurisdiction, or drafting a contract offshore, does not change where the activity happened, where the asset sits, or who enjoyed the benefit. Substance is what the wording tracks.
Article 13 is short, but it reaches further than its length suggests. The three limbs cover most situations on their own, the itemised list adds cases that are easy to overlook, and the "without limitation" wording means the absence of an entry proves nothing. For cross-border structures, working the source question properly — before the treaty analysis, not after it — is what makes the rest of the position defensible.
Key takeaways
- Source matters most for non-residents. A Resident Person is taxed on worldwide income anyway, so Article 13 is the gateway question for foreign businesses earning from the UAE.
- Article 13(1) sets three limbs: income derived from a Resident Person, income attributable to a non-resident's UAE permanent establishment, and income otherwise arising from activities, assets, capital, rights or services connected to the UAE.
- Article 13(2) adds a specific list — and says it applies "without limitation", so it illustrates the rule rather than confining it.
- That list includes the disposal of shares or capital of a Resident Person, which most summaries of the source rules leave out entirely.
- Interest is UAE sourced if the loan is secured on UAE property, the borrower is a Resident Person, or the borrower is a Government Entity — any one of the three is enough.
- Source and permanent establishment are separate questions, and a treaty can override the domestic answer. All three need checking before you conclude.