Certain types of businesses or organizations are exempt from Corporate Tax given their importance and contribution to the social fabric and economy of the UAE. These are known as Exempt Persons and include:

In addition to not being subject to Corporate Tax, Government Entities, Government Controlled Entities that are specified in a Cabinet Decision, Extractive Businesses and Non-Extractive Natural Resource Businesses may also be exempted from any registration, filing and other compliance obligations imposed by the Corporate Tax Law, unless they engage in an activity which is within the charge of Corporate Tax.

How is a Taxable Person subject to Corporate Tax?

In line with the tax regimes of most countries, the Corporate Tax Law taxes income on both a residence and source basis. The applicable basis of taxation depends on the classification of the Taxable Person.

●A “Resident Person” is taxed on income derived from both domestic and foreign sources (i.e. a residence basis). 
●A “Non-Resident Person” will be taxed only on income derived from sources within the UAE (i.e. a source basis). 

Residence for Corporate Tax purposes is not determined by where a person resides or is domiciled but instead by specific factors that are set out in the Corporate Tax Law.  If a Person does not satisfy the conditions for being either a Resident or a Non-Resident person then they will not be a Taxable Person and will not therefore be subject to Corporate Tax. 

Who is a Resident Person?

Companies and other juridical persons that are incorporated or otherwise formed or recognised under the laws of the UAE will automatically be considered a Resident Person for Corporate Tax purposes. This covers juridical persons incorporated in the UAE under either mainland legislation or applicable Free Zone regulations, and would also include juridical persons created by a specific statute (e.g. by a special decree). 
Foreign companies and other juridical persons may also be treated as Resident Persons for Corporate Tax purposes where they are effectively managed and controlled in the UAE. This shall be determined with regard to the specific circumstances of the entity and its activities, with a determining factor being where key management and commercial decisions are in substance made. 
Natural persons will be subject to Corporate Tax as a “Resident Person” on income from both domestic and foreign sources, but only insofar as such income is derived from a Business or Business Activity conducted by the natural person in the UAE. Any other income earned by a natural person would not be within the scope of Corporate Tax.

Who is a Non-Resident Person?

Non-Resident Persons are juridical persons who are not Resident Persons and:
●have a Permanent Establishment in the UAE; or
●derive State Sourced Income.
Non-Resident Persons will be subject to Corporate Tax on Taxable Income that is attributable to their Permanent Establishment (which is explained under Section 8).
Certain UAE sourced income of a Non-Resident Person that is not attributable to a Permanent Establishment in the UAE will be subject to Withholding Tax at the rate of 0%.

What is a Permanent Establishment? 

The concept of Permanent Establishment is an important principle of international tax law used in corporate tax regimes across the world. The main purpose of the Permanent Establishment concept in the UAE Corporate Tax Law is to determine if and when a foreign person has established sufficient presence in the UAE to warrant the business profits of that foreign person to be subject to Corporate Tax.
The definition of Permanent Establishment in the Corporate Tax Law has been designed on the basis of the definition provided in Article 5 of the OECD Model Tax Convention on Income and Capital and the position adopted by the UAE under the Multilateral Instrument to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. This allows foreign persons to use the relevant Commentary of Article 5 of the OECD Model Tax Convention when assessing whether they have a Permanent Establishment or not in the UAE. This assessment should consider the provisions of any bilateral tax agreement between the country of residence of the Non-Resident Person and the UAE.  

For more information, please follow the below link

https://tax.gov.ae/en/taxes/corporate.tax/corporate.tax.topics/exempt.and.taxable.persons.aspx