As a corporate service provider, many of our clients own foreign companies but actually live in Dubai. If this sounds like you, keep reading as we have another important update from the FTA regarding Place of Effective Management and Control (PoEM) in the UAE.
What is PoEM?
Simply put, the Place of Effective Management and Control (PoEM) is the place where key management and commercial decisions of a company are made. This concept was introduced to prevent tax avoidance by companies that are incorporated abroad but are managed in the UAE. It is aligned with international tax standards to ensure fairness and transparency in taxation.
How is PoEM Determined?
Several factors are considered when assessing whether a company’s PoEM is located in the UAE:
- Board of Directors Meetings – Are strategic decisions being made within the UAE?
- Senior Management Location – Do key executives reside and operate from the UAE?
- Shareholder Influence – To what extent do shareholders control the management?
Secondary Considerations:
- The place of incorporation and governing laws
- The location of operational decision-making
- Where accounting records are maintained
Why Does This Matter?
If your company’s PoEM is determined to be in the UAE, it may be subject to corporate tax on its global income, rather than just UAE-sourced income (as is the case with a Permanent Establishment). This means additional compliance requirements, including:
- Transfer Pricing Regulations
- Corporate Tax Return Filings and Payments
- Double Taxation Risks and Foreign Tax Credit Considerations
The Importance of Accurate PoEM Assessment
Determining your company’s PoEM is a case-specific process, and an incorrect classification can lead to dual tax residency conflicts and double taxation risks. At Hensley&Cook, we can help you:
- Evaluate your company’s PoEM status and identify potential risks.
- Develop tax strategies to ensure compliance and optimise your tax position.
- Assist with the necessary documentation to align with UAE Corporate Tax regulations.
Contact Us for an Assessment
If you believe your business may be impacted by PoEM regulations, we encourage you to reach out to our team for an assessment. Our experts are here to guide you through these complex regulations and ensure your business remains fully compliant.
Stay informed and ensure your business is on the right track!
