Fintedu: Team Editorial: Tax Residency in UAE

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The UAE tax law introduced a formal definition of tax residency, for individuals as well as for juridical persons, in Cabinet Decision No. 85 of 2022, which is effective from 1 March 2023. Subsequently, Ministerial Decision No. 27 of 2023 and 247 of 2023 were issued clarifying certain terms for determination of tax residency. In this write-up, we have presented the concept of tax residence in the UAE and highlighted the importance of procuring the Tax Residence Certificate (TRC).

When is a Juridical Person considered a Tax Resident in the UAE (the State)?

A juridical person is considered a Tax Resident in the UAE (the State) if:

1. It was incorporated, formed or recognized under the State’s legislation, but does not include a branch registered by a foreign juridical person in the State; or

2. It is considered a Tax Resident under the State’s Tax Law.

When is a Natural Person considered a Tax Resident in the State?

A natural person is considered a Tax Resident in the State where any of the following criteria are met:

Criteria	Explanation
Usual or Primary Place of Residence and Centre of Financial and Personal Interests in the State	Habitual or normal residence in the State. Spending most time in the State compared to other jurisdictions. Personal and economic interests closest in the State. Place of the natural person’s occupation, familial and social relations, cultural or other activities, place of business, place from which the property is administered.
Physical Presence in the State	Being physically present in the State for 183 days or more in a 12 consecutive month period. All days or parts of a day on which a natural person is physically present in the State are considered.
Special Circumstances for UAE and GCC Nationals	Being physically present for 90 days or more in a 12 consecutive month period. Being a UAE national, holding a valid Residence Permit, or having GCC nationality. Having a Permanent Place of Residence in the State, i.e., a furnished dwelling that must be continuously available to a natural person, allowing them the continuous right of occupation with a degree of permanency and stability, owned, rented or otherwise occupied. Being employed in the State if based on a contract with an employer incorporated in the State or if he has a continuous relationship where most of the income comes from one party for work done in the State. Employment can be full or part-time, limited or unlimited.

How can a taxpayer procure a TRC?

A person who is considered a Tax Resident in the State must make an application to the FTA for procuring a TRC in the prescribed form and manner. If FTA is satisfied, it may approve the application and issue the TRC. A TRC is valid for 1 year in the UAE.

Conclusion

Though there is no personal income tax in the UAE, the concept of tax residence is important for individuals who are tax residents in more than 1 country. The TRC issued by the FTA helps them to take benefit of the tax treaties executed by the UAE. Likewise, companies that are tax residents in the UAE can also take benefit of the UAE tax treaties, provided they have a valid TRC in the UAE.

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Disclaimer : The content on this website is provided for general informational purposes only. It is not intended as professional advice and should not be construed as such. The information is based on the knowledge and experience available at the time of writing and is subject to change.

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Team Editorial

In a world where laws are constantly evolving, staying informed is the key to financial peace of mind. Our editorial content aims to demystify the complexities of the tax landscape, providing you with valuable insights to ensure a smooth and stress-free experience.

Discover the latest changes in tax regulations, from updates on deductions and credits to shifts in filing deadlines. We break down complex tax concepts into digestible, easy-to-understand language.

From strategic planning to leveraging available incentives, our content equips you with the knowledge to optimize your tax position and keep more of your hard-earned money.

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Tax Residency in UAE

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