Let’s talk about how your branch’s profits are taxed. Your branch’s taxable income is generally the profit generated from its UAE operations. This includes sales, services, and any other income derived within the country.

Calculating taxable income involves subtracting allowable expenses from your branch’s revenue. You can deduct costs directly related to generating income, such as salaries, rent, and operational expenses. Ensure you maintain proper documentation for all deductions.

Transfer pricing is a crucial aspect. If your branch engages in transactions with its parent company or related entities, the transactions must be at arm’s length.

This means the prices should reflect what independent parties would agree to in similar circumstances. The FTA scrutinizes transfer pricing to prevent profit shifting.

Transactions with the parent company, such as service fees or royalty payments, are also subject to corporate tax. These transactions must be commercially justifiable and properly documented. The FTA may challenge transactions that appear to be designed to reduce your tax liability.

If you second staff from the parent company to your UAE branch, their salaries and benefits are considered part of your branch’s expenses. You can deduct these costs, provided they are reasonable and properly documented.

However, you must ensure that the seconded staff’s tax residency is correctly determined to avoid double taxation issues.

How are branch profits taxed in the UAE? They are taxed as part of the foreign company’s income, with considerations for transfer pricing and parent company transactions.