Middle East Advisory Group

Many entrepreneurs living in the UAE run businesses through companies incorporated abroad. For years, this was common practice and carried little tax risk. But with the UAE Corporate Tax now in force, those same structures can easily fall within the UAE tax net through a concept called Place of Effective Management (POEM).

If your foreign company is effectively “run” from the UAE, you may already be considered a UAE tax resident, regardless of where the entity was registered.

1. The Risk in Simple Terms

Under UAE Corporate Tax Law, a foreign company becomes a UAE tax resident if it is effectively managed and controlled from the UAE. In other words, if strategic decisions are made in the UAE, the UAE may treat the company as resident.

This applies even when:

The company is legally incorporated abroad,
Board minutes are drafted offshore, and
The company has no physical presence in the UAE.

What matters is where the real, strategic decision-making happens.

2. Why foreign companies are at risk

Over the last decade, many entrepreneurs moved to Dubai or Abu Dhabi while keeping their operating, holding or investment companies abroad. Directors and shareholders often make key decisions from the UAE, approving budgets, signing off investments, engaging clients, negotiating contracts.

This was harmless when the UAE had no corporate tax. Today, those same patterns can inadvertently trigger UAE tax residency, exposing the foreign company to UAE tax on its worldwide income.

3. Practical Examples

A foreign company may be considered effectively managed in the UAE if:

The founder or key decision-maker lives in Dubai and approves strategy from here;
Board meetings “on paper” take place abroad but the real discussions happen in the UAE;
The operational leadership team is based in the UAE; or
The offshore company has little genuine substance in its country of incorporation.

In these cases, the FTA may conclude that the company’s “mind and management” is in the UAE.

4. Possible Consequences

If a foreign company is treated as UAE tax resident, it may face:

UAE Corporate Tax on worldwide income,
dual tax residency issues,
Disputes over which country has taxing rights, and
New filing, accounting and compliance obligations in the UAE.

For many founders, this can come as an unwelcome surprise.

5. What entrepreneurs should do to avoid POEM risk

If you live in the UAE and operate a foreign company, it is essential to review:

Where strategic decisions are truly made,
Whether offshore governance is genuine, and
Whether the company has real substance in its home jurisdiction.

A quick POEM review can save significant tax and compliance headaches later.

6. How Middle East Advisory Group can assist

We regularly help entrepreneurs:

Assess POEM exposure for foreign companies managed from the UAE,
Structure board processes and substance to mitigate risk,
Evaluate whether UAE tax residency is likely, and
Prepare for potential corporate tax registration.