Tax Nexus

A tax nexus is a legal term that defines the connection between a business and a taxing jurisdiction, such as a state or country, which obligates the business to collect and remit taxes in that jurisdiction. This connection can be created through various factors like physical presence (offices, warehouses, employees), economic activity (revenue thresholds), or digital transactions (online sales). The definition and criteria for establishing a tax nexus vary by region and tax type — including sales tax, corporate income tax, and franchise tax. In the UAE, VAT rules also consider nexus principles to determine tax obligations for businesses operating or selling within the country.