UAE Tax Residency Certificate: Why You Need it and How to Get One

The UAE is famed for its highly competitive tax environment. Although this favorable setup remains, recent changes have slightly altered who is eligible to benefit from it. The UAE Tax Residency Certificate confirms this eligibility.

In September 2022, the Prime Minister of the UAE, His Excellency Mohammed bin Rashid Al-Maktoum, issued a Cabinet Resolution, which redefined the country’s tax residence criteria. The rule took effect on March 1, 2023. An understanding of the UAE’s Tax Residency Certificate is crucial to managing your eligibility for tax treaties and tax liabilities across countries.

As the trusted business setup advisors in the UAE, we have extensive experience guiding entrepreneurs and investors through the UAE’s evolving tax and compliance landscape. In this article, we’ll look at what the tax residency update means for current residents and those looking to relocate to this part of the world.

 

New UAE tax residency criteria – What are they?

The new Cabinet Resolution outlines the terms by which a person is considered a tax resident of the UAE. It also outlines the formalities of achieving and offering proof of such status, such as the Tax Residency Certificate (TRC).

The Resolution covers how the changes will impact individuals and corporate or legal entities. The overall aim is to offer much greater clarity about the UAE tax regime for entrepreneurs, employers, residents, and others.

Individuals and entities wishing to demonstrate UAE tax residence can apply to the Federal Tax Authority (FTA) for a Tax Residency Certificate. Once the FTA is satisfied that the applicant meets the new criteria, they will issue the document, which can be used when claiming benefits and reliefs under international tax treaties.

What were the UAE tax residency criteria before?

Prior to the latest Resolution, there was no domestic legal definition of tax residency in the UAE. Instead, such eligibility was based on income tax treaties between the UAE and its partner jurisdictions.

Where individuals (natural persons) and corporate entities (legal persons) could prove themselves resident in the UAE, they were able to apply for a TRC. Acceptable proof included a UAE lease agreement, known as an Ejari, a minimum residence period of 180 days per year (for individuals), audited accounts and one year of establishment for legal persons/corporate entities.

What do the new UAE Tax Resident criteria mean for individuals?

The UAE’s latest Cabinet Resolution brings the country’s tax residence system closer to internationally recognized best practices. Under the new rules, an individual or natural person is defined as a tax resident if:

• The individual’s usual or primary residence is in the UAE, and their main financial and personal interests are in the UAE.
• The individual has been physically present in the UAE for at least 183 days consecutively within the past 12 months.
• The individual has been physically present in the UAE for at least 90 consecutive days over the past 12 months and is a UAE citizen, UAE resident or GCC national who has a permanent UAE residence or works/runs a business in the UAE.

The new UAE tax resident criteria do not mean that any person will be liable to pay personal income tax in the UAE. The UAE income tax rate still stands at 0%.

Rather, the Resolution serves to make it easier to demonstrate a tax residency position in regard to bilateral tax agreements and treaties that the UAE has in place with other jurisdictions.

If you are satisfied that you meet the new criteria and wish to apply for a TRC, here’s how to get a UAE Tax Residency Certificate: 

1. First, you need to create an account on the EmaraTax portal.
2. Choose “Other Service” and click “Tax Residency Certificate”
3. Choose the applicant type (e.g., individual, company)
4. Fill out the relevant fields and upload supporting documents.
5. Pay the full application fee and submit.
6. Once your application is approved and you have made your payment, you can download the certificate. The certificate will also be sent to your registered email.

What does this new definition mean for juridical persons?

A juridical or legal person is the term used for a corporate entity in the UAE. Under the new criteria, a juridical person is any entity in the UAE or a foreign jurisdiction recognized as having a wholly separate legal identity from its founders, owners and directors.

Common examples of juridical persons include limited liability companies, foundations and joint stock companies.

Following the resolution, such entities are now considered to be UAE tax residents when:

They are established or recognized in the UAE – this excludes UAE branch companies registered by a foreign company. 

They are considered tax residents as per the UAE tax law.

As yet, there has been little clarification over how a business can explicitly meet the second definition. However, there are many cases where a company established outside the UAE can still be tax resident if managed and/or controlled from within the country.

How Worldwide Formations can help

The UAE has a long-standing reputation for creating a supportive and welcoming environment for entrepreneurs and businesses worldwide. However, like any other jurisdiction, its tax and business processes are much better navigated with an expert eye.

That’s why when establishing or relocating a business in the UAE, it pays to work with Worldwide Formations.

Our expert team is vastly experienced in the process of setting up legal consultancies in Dubai, UAE. The local knowledge of our consultants will help you navigate the complexities of the system with skill and speed to ensure you are compliant and operational as soon as possible.

For more information and a personalized quote, please contact Worldwide Formations.