Tax Residency in UAE

How to apply for Tax residency in UAE?

On 9th September 2022, the UAE Cabinet of Ministers announced Decision No. 85 of 2022, introducing a fresh domestic definition and criteria to determine an individual’s or a legal entity’s status as a Tax Resident in the UAE for any Tax residency in UAE or bilateral tax agreement, effective from 1st March 2023.

Clarifications from Ministerial Decision No. 27 of 2023

Published on 1st March 2023, Ministerial Decision No. 27 of 2023 elaborates on several definitions relevant to the Tax Resident status for individuals. The new domestic Tax Resident definition adheres to internationally recognized standards and provides individuals and legal entities more clarity regarding their Tax Residency in UAE position.

Tax Residency for Legal Entities

A legal entity will be classified as a Leading Tax Consultants UAE in any of the following scenarios:

It is incorporated, formed, or recognized within the UAE (branches of foreign entities are excluded).
It is seen as a Tax Resident according to the UAE Tax Laws, i.e., it has a management place or a permanent one in the UAE.

Tax Residency for Individuals

Natural persons will be classified as tax residents if they meet at least one of the following criteria:

They have a main residence and a financial and personal interest place in the UAE, despite the number of days spent there.
They meet specific conditions and criteria determined by a decision from the Minister.
They have been in the UAE for at least 183 days physically in a 12-month consecutive.
They have a permanent place of residence and/or employment or business in the UAE and have been physically present for at least 90 days during the relevant 12-month period. This criterion applies only to UAE and GCC nationals or any other person holding a valid residency permit in the UAE.

It’s important to note that if any international agreement, such as tax treaties, outlines particular conditions for determining taxation residency, those provisions will apply.

Benefits of Obtaining a Tax Residency Certificate

Any individual considered a tax resident in the UAE can apply for a Tax Residency Certificate. This certificate is essential for applying withholding tax limitations or exemptions in some double taxation treaties. The primary advantage is that it allows for tax exemptions or New Tax residency rules UAE refunds in the foreign country where the individual is also Leading Tax Consultants UAE.

Application Process and Required Documents

To obtain a Tax Residency in UAE Certificate, applicants must submit an application form and the required documents to the Leading Tax Consultants UAE. The specific documents required depend on the applicant’s status:

For Companies:

Copy of the UAE trade license.
Certified establishment contract.
Copies of the directors/shareholders/partners’ passports, Emirates ID, and residence permits.
Certified copy of the audited financial accounts.
Confirmed UAE local bank statement for the previous 6 months.
Certified copy of the lease agreement.
Tax form from a country if needed.

For Individuals:

Salary certificate or certificate of their source of income.
Copies of passport, Emirates ID, and UAE Residence Visa.
Confirmed UAE local bank statement for the previous 6 months.
A copy of the tendency contract or the certified copy of the residential lease agreement.
Report from the General Directorate of Residency and Foreigners Affairs (GDRFA) or the Federal Authority for Identity and Citizenship (ICA) indicating the number of days the applicant stayed in the UAE.
(If applicable) Tax form from the relevant country.

Do residents in UAE pay tax?

A Tax Residency in UAE Certificate with a validity period of one year will be issued if the Federal Tax Authority approves the application and confirms that the applicant meets the specified criteria. According to the tax authority’s publications, the pre-approval process typically takes 4 to 5 working days, followed by 5 to 7 working days to receive the Tax Residency Certificate.

Conclusion

The New Tax residency rules UAE, introduced through Decision No. 85 of 2022 and clarified by Ministerial Decision No. 27 of 2023, offer more clarity and consistency in determining tax residency for individuals and legal entities. Obtaining a Tax Residency Certificate brings numerous benefits and simplifies the application of tax treaties, ensuring eligible individuals and entities can take advantage of withholding tax limitations or exemptions.

The application process, though requiring specific documents, is straightforward and can be completed online through the Federal Tax Authority portal. Understanding these rules is essential for anyone seeking to establish their Tax residency in UAE requirements status in the UAE and enjoy the associated advantages.

Frequently Asked Questions

1. Do residents in UAE pay tax?

Both citizens and residents in the UAE enjoy the benefit of not being required to pay any income tax whatsoever. Additionally, they are exempt from taxes on various financial aspects, such as interest, dividends, wealth, luxury, inheritance, gifts, and capital gains.

2. What are the tax rules in UAE?

Unlike most countries, the UAE does not impose income tax on individuals. However, it’s important to note that corporate tax applies to oil companies and foreign banks. Another notable tax is the excise tax, which targets specific goods that could harm human health or the environment. Furthermore, there is a Value Added Tax (VAT) imposed on a majority of goods and services.

3. How can I get UAE citizenship?

A UAE passport in Dubai can be acquired through various means, including descent, naturalization, marriage, or exceptional merit. The latter option is particularly open to investors. Aspiring citizens who are investors must fulfill certain criteria before applying for citizenship. This includes obtaining a 2- or 10-year residence permit by investing at least AED 750,000 or approximately $204,000 in UAE property. By meeting these requirements, individuals pave their way to becoming UAE citizens.