The UAE has issued a Cabinet Decision on the tax residency of Companies and individuals in the UAE. This legislation will take effect from March 1, 2023.
UAE is set to introduce Corporate Tax soon. The cabinet decision provides clarity on the residential / domicile status of Corporates and Individuals in the country.
In this article, I would like to cover:
what you need to know about the tax residency certificate
who need to have it and for what purpose
how to apply and obtain the tax domicile certificate
First, what is the TRC?
The Tax Residency Certificate is an official document. The document is issued for companies or individuals who are eligible. Government entities are also eligible to get the Certificate.
Why do you need a Tax Residency Certificate?
Following are some of the reasons why you as an entity or individual need a TRC.
To prove that the applicant is a resident of UAE
To take advantage of Double taxation agreements or treaties between two countries
To ease the process of cross-border trade and investment flows
To encourage the development goals of UAE
For economic diversification
To avoid paying taxes in the two countries for the same income
How an entity or a company can get tax residency certificate?
A Company will be considered tax resident in the UAE under the following conditions:
The Company was established, formed, and recognized as per the UAE legislations. This includes companies formed in the free zones and financial free zones.
Offshore companies are not eligible to obtain TRC.
A Branch of a foreign company is not considered as a Legal person/Company in the UAE for tax residency purposes. So, branch of a foreign company is not eligible to get the TRC.
How an individual can get tax residency certificate?
An individual is considered a tax residence in the UAE if any one of the following conditions are met:
If the individual’s primary place of residence and his financial and personal interests are in the UAE; or
If the individual is physically present for a period of 183 days or more during the relevant 12-month period in the UAE
If the individual is
A UAE national or a GCC national or any other national holding UAE residence permit and a tanancy contract in his name, and
Has a permanent place of residence in the UAE or doing a job or business in the UAE and
Is physically present for 90 days or more during a period of 12 months in the UAE.
The individual meets any other conditions and criteria specified by a decision of the Ministry of Finance
How to get the Tax Residency Certificate or Tax Citizen’s Certificate?
Submit an application to the Certificate issuing Authority
Such application should be submitted in accordance with the form and method prescribed by the Authority
If satisfied with the application and the documentation, the Authority may approve the application and issue a Tax Residency Certificate in UAE
What are the impacts of International Agreements?
In cases where UAE has signed an international agreement with any other country or Agencies
Any special provisions or conditions specified in such agreement will be considered by the Certificate issuing agency in UAE. And provisions of such agreement will be applied.
In what form the TRCs will be issued in UAE
The form of issuing tax domicile certificates (whether printed or in digital form) will be prescribed by the Authority
What is the Authority’s Power under this decision?
The certificate issuing Authority has the power to request the applicant or any other government agencies in UAE
Any information,
Data or documents
or any other details
What documents are required to determine tax residency?
Copies of the following documents are required for tax residency certificate application:
For a Company
Trade License
Certified copy of Memorandum and Articles of Association, if applicable
Proof of Authorization (Power of Attorney to General Manager)
Copy of audited financial accounts
6 months bank statement issued by a local bank for the financial year related to the request
For an Individual
Passport
Valid UAE Residence permit
Emirates ID
Certified copy of residential lease agreement
Source of income/salary certificate
6 months bank statement issued by a local bank for the financial year related to the request
Entry and Exit report from Federal Authority of Identity; and
