Resolves dual location by reference to an applicable tax treaty or the prescribed tie-breaker rules where no usable treaty outcome exists.
What should you do now?Retain the treaty outcome or reason for using tie-breakers, the Covered Taxes paid comparison, and the standalone substance computation if needed, recording whether the entity is the Ultimate Parent Entity.
What does the official Article provide?
The official source is Arabic. This English commentary is explanatory and is not presented as an official translation.
Resolves dual location by reference to an applicable tax treaty or the prescribed tie-breaker rules where no usable treaty outcome exists.
This is a verified summary rather than a verbatim reproduction. Consult the official Arabic text, the Law and later decisions before making a final determination.
What does the Article mean in plain language?
If an entity is located in two jurisdictions, start with the treaty in force: where it determines residence for treaty purposes, the entity is located solely there. Do not select the lower-tax location, and do not rely on effective management without reading the treaty.
Apply the Regulations’ sequence where no treaty exists, required competent-authority agreement has not been reached, or the treaty denies relief because the entity is resident in both states. First, use the jurisdiction where the entity paid more Covered Taxes for the year, excluding taxes paid under a Controlled Foreign Company Tax Regime. Second, if both amounts are equal or zero, use the jurisdiction with the higher Substance-based Income Exclusion, computed for this entity alone.
Third, if that exclusion is also equal or zero, the entity is stateless. The exception is an Ultimate Parent Entity, which is then located in its jurisdiction of creation. The steps are sequential: do not compare substance before resolving the tax test, or substitute the group’s substance for the standalone calculation under Article 46 and Law Article 10.
Dual-resident entities, permanent establishments and groups with a location change during the year.
Retain the treaty outcome or reason for using tie-breakers, the Covered Taxes paid comparison, and the standalone substance computation if needed, recording whether the entity is the Ultimate Parent Entity.
How can the rule appear in practice?
No applicable treaty exists and Covered Taxes paid are equal. The entity’s standalone substance exclusion is 80 in the first jurisdiction and 50 in the second, in the same currency: the first prevails. If substance is also equal, apply the stateless rule and the Ultimate Parent Entity exception.
This illustration is not an NBR case or a binding outcome for a particular fact pattern.Immediately choosing effective management or headcount, or treating the entity as stateless before completing the tax-then-substance sequence.
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Before relying on the result
Is this Article enough on its own?
Usually not. Read it with the connected Law Article, definitions, any effective election and current NBR guidance, especially for an amount or deadline.
Does NBR guidance replace the Regulations?
No. Guidance explains application and supports procedures and examples, but current legislation and decisions prevail in case of inconsistency.