What’s new? – Tax Residency Certificate: Eligibility and Benefits
The UAE is known for its attractive tax framework, offering one of the lowest tax rates globally. However, to fully leverage the advantages of the tax system and avoid double taxation, individuals and companies need to obtain a Tax Residency Certificate (TRC).
A TRC is the key condition to be able to claim benefits under a double taxation avoidance agreements (‘DTAA’) signed between the UAE and another country.
The criteria to qualify for a TRC have recently been redefined. Based on the new regulations, there are now two types of TRCs:
- Tax treaty Tax Residence Certificate
- Domestic Tax Residence Certificate
Who is eligible to apply for a Tax Residency Certificate?
Eligibility criteria for obtaining a Tax Residency Certificate differs between individuals to companies and whether a Domestic or a Tax Treaty TRC is required.
Individuals
To be eligible for a Tax Treaty TRC, the following requirements must be met:
- Individual to hold a valid UAE residence visa.
- A copy of the Emirates ID is required to verify the individual’s identity.
- A certified copy of the residential lease agreement or tenancy contract, to establish proof of residence.
- Bank Statements: bank stamped statements for the previous six months.
- Income Proof: e.g. salary certificate or income certificate
- Entry and Exit Report: issued by the Federal Authority of Identity and Citizenship or a local competent government entity, confirming in-country in excess of 183 days.
Domestic TRCs are subject to more flexible day-counting criteria:
- Entry and Exit Report: issued by the Federal Authority of Identity and Citizenship or a local competent government entity, confirming
- in-country day-counting in excess of 183 days. OR
- in-country day-counting in excess of 90 days during the relevant 12-month period, holds a valid UAE residence visa (or is a GCC State national), has either i) a permanent place of residence OR an employment or Business in the UAE
- in-country day-counting below 90 days, in which case one needs to evidence i) usual or principal place of residence AND centre of financial and personal interested in the country.
Companies
Companies that have been established in the UAE for at least 12-months are eligible to apply for a Tax Treaty TRC. the following requirements must be met:
- Valid Trade License.
- Certified copy of establishment contract is required.
- Shareholders and Manager Information: e.g. passports, Emirates IDs, and residence visas.
- Audited Financial Statements of past 12 months period.
- Bank Statements: bank stamped statements for the previous six months.
- A certified copy of the lease agreement or tenancy contract, to establish local substance.
- Tax Forms (if applicable) from the country where the certificate needs to be submitted.
Companies that have been established in the UAE for at least 12-months can also apply for a Domestic TRC if they meet the below simplified criteria:
- Valid Trade License
- Shareholders and Manager Information: e.g. passports, Emirates IDs, and residence visas.
How long is a Tax Residency Certificate valid for?
A UAE TRC is valid for one year from the date of issuance.
What are a TRC’s main benefits?
Obtaining a Tax Residency Certificate in the UAE provides several benefits for both individuals and companies:
- Double Taxation Avoidance: Having a Tax Residency Certificate enables individuals and companies to access the benefits outlined in the double taxation avoidance agreements signed between the UAE another, treat-connected country, thereby avoiding being taxed twice on the same income.
- Import-Export Benefits: It helps in availing tax exemptions and benefits related to import-export processes.
- Legal Recognition: The certificate serves as legal recognition of an individual or company’s tax residency status in the UAE.
Conclusion
A Tax Residency Certificate is a crucial document for individuals and companies in the UAE to benefit from the double taxation avoidance agreements or for general banking and compliance purposes. By obtaining these certificates, individuals and companies can avoid double taxation, enjoy import-export benefits, and gain legal recognition of their tax residency status in the UAE.
The application process involves preparation and submission of a suite of supporting documents, and the certificate is typically valid for one year, requiring annual renewal if benefits are to be claimed recurrently. Overall, the Tax Residency Certificate plays a significant role in facilitating international business and ensuring tax compliance for individuals and companies in the UAE.
See the latest factsheet: UAE Tax Residency Criteria
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