What’s new?
The UAE has redefined the criteria of tax residency relevant for an individual applicant to qualify for a Tax Residence Certificate (TRC). Going forward will be deemed a tax resident an individual meeting any of the following criteria:
- He/she has been physically present in the State for 183+ days during the relevant 12-month period.
- He/she has been physically present in the State for 90+ days during the relevant 12-month period and holds a valid residence permit in the country [or nationality of any GCC State], and he/she, in the State
- a permanent place of residence* or
- a job or Business**
- His/her usual or principal place of residence and center of his/her financial and personal interests are in the country – per conditions and criteria specified by the decision of the Minister.
*Available to the natural person at all times.
**Any activity conducted regularly, on an ongoing and independent basis, such as industrial, commercial, agricultural, professional, vocational, service or excavation activities or anything related to the use of tangible or intangible properties.
Applicable from?
Cabinet Decision 85 of 2022 is effective from 01 March 2023.Why it matters?
From the revised criteria, it is evident that the UAE has considered tax residency requirements globally and has realigned its position to provide a pragmatic approach.
The revision addresses several gaps that existed under the previous regulations and practices of the Federal Tax Authority (FTA).- Per UAE Immigration laws an individual resident must return to the UAE twice within 365 days to keep the visa status active.
- Whereas
- to obtain a TRC the FTA demanded a stay for 180 days on UAE sovereign territory.
- There was no room for further explanations – e.g. a person demonstrating a financial/ personal ‘nexus’ with the UAE.
The changes will have a profound effect:- Encourage locally based entrepreneurs to both take advantage of a long-term visa scheme for themselves and their family, and make use of the UAE’s domestic fiduciary offering and foundations in particular – thereby protecting value-generating locally based assets [businesses (often SME), real estate, portfolios]
- Increase the attractiveness of the UAE for inbound immigration of targeted people, cementing the country’s safe haven status
- Boost the use of the UAE’s family business ecosystem, in turn leading to locally based providers to increase their footpath and new services providers to enter the market.
TRC 101
A TRC is an official document issued by the FTA evidencing the applicant’s formal status as a UAE resident in respect to a particular Double Taxation Avoidance Agreement (“DTTs”) between the UAE and a specific foreign jurisdiction. Issued for a period of one year for one specific tax treaty, it is the core element in support of an application to seek the benefits of a DTT.
The UAE’s network of agreements extends worldwide.
- 63.07% of the world’s countries – 123 DTA agreements
- 44.6% of the world’s countries – 87 BIT Agreements
Taxes covered by the DTT are:
- Income and corporate taxes;
- Withholding tax on dividends, royalties, and interests;
- Air transport and the shipping revenues;
- Incomes from immovable properties or property alienation; and
- Revenues derived from personal services.
These benefits come on top of the UAE’s key features of zero corporate income, personal income, succession, property, and capital gain taxes.
