For the purposes of the Participation Exemption, a foreign company that is resident in a nation with a corporate income tax regime similar to the UAE Corporate Tax regime and that has a headline statutory rate of 9% or higher would typically be thought to have met the “subject to tax” test.

A foreign juridical person will also be deemed to have passed the subject to tax test if they can show that their effective tax rate is at least 9% on their income or profits.

When a foreign company demonstrates that it is subject to tax at an effective tax rate of 9% or higher on accounting profits calculated in accordance with the basis provided, even though the foreign company is based in a nation that does not tax business profits exclusively but rather on another basis (such as the company’s income, equity, or net worth, or a combination of the above), the foreign company will still be considered to meet the “subject to tax” test. The same would hold true for a foreign business that isn’t taxed in its home country but runs via a permanent establishment in a third nation that does.