Obtain Your Tax Residency Certificate in the UAE

Tax Residency Certificate⸺On September 9, 2022, the United Arab Emirates (UAE) Cabinet of Ministers [took action] by issuing Decision No. 85 of 2022, which establishes the criteria for determining when a legal or natural person will be considered a tax resident of the UAE. The new definition and criteria will take effect on March 1, 2023, and will apply to all UAE tax laws and bilateral tax agreements. 

The decision introduces a comprehensive definition of tax residency in the UAE. Considering factors like place of residence, economic interests, personal interests, and nationality. This aligns with international standards and facilitates the UAE’s ability to enter tax treaties with other countries.

What is a Tax Residency Certificate (TRC)?

The Federal Tax Authority (FTA) of the United Arab Emirates (UAE) issues Tax Residency Certificates (TRCs) to individuals and entities who meet the criteria for tax residency in the UAE. The Tax Residency Certificate (TRC) proves that an individual or entity is a tax resident of the UAE. Therefore, they can claim benefits under double taxation avoidance agreements (DTAs) with other countries. This means that they may be able to avoid or reduce double taxation on their income, which can save them a significant amount of money.

Obtaining A Tax Residency Certificate 

Obtaining a tax residency certificate may vary based on the specific agreements and tax laws between the UAE and individual countries. Therefore, it is advisable to consult with tax professionals or relevant authorities in the UAE to understand the exact criteria and process for obtaining a tax residency certificate. However, standard criteria and documents needed are as follows:

Documents for Natural Persons:

• a copy of Passport and Emirates ID

• valid residence permit

• a certified copy of the residential lease agreement/tenancy contract

• bank statement for six months (6) of the required year

• salary certificate/income certificate

• tax forms (if any) from the country where the certificate needs to be submitted

Documents for Legal Persons:

• a copy of the trade license and directors/shareholders’ attachment

• name of authorized signatory for the application, passport copy, Emirates ID, and Permits of residence (Residence Visa Copy)

• a copy of Articles of Association and Memorandum of Association

• a certified copy of the audited financial accounts

• bank statement for six months of the required year

Other additional requirements may be requested from the Federal Tax Authority, (FTA) portal depending on the specific circumstances of the application.

Timeframe, Processes, and Fees

The processing time for a TRC is typically 90 days. The application process for a TRC in the UAE is available online through the Federal Tax Authority (FTA) website. On the FTA website, individuals can find further information on the eligibility criteria, application process, and fees for a TRC.

The Tax Residency Certificate (TRC) is valid for one year, starting from the financial year selected by the individual or company. If a person lives in the UAE after a year, the individual must renew their TRC. Learn more about the renewal and resubmission process to ensure that you do it correctly.

Double Taxation Avoidance Agreements

In light of this, a DTA is an agreement between two countries that aims to prevent double taxation of income. As a result, if you are a resident of one country and earn income in another, you will not have to pay taxes on that income in both countries. This beneficial outcome is achieved through the implementation of Double Taxation Avoidance Agreements (DTAs) between the two nations.

Moreover, DTAs typically contain a number of provisions that allow you to claim benefits of having a TRC, such as:

Tax credits: A tax credit is a deduction that you can claim against your tax liability in your home country. This means that if you have already paid taxes on your income in the other country, possible to claim credit for those taxes against tax liability in your home country.

Exemptions: A tax exemption is a type of relief that allows you to exclude certain types of income from your tax liability. This means that you will not have to pay taxes on that income in either country. It can help claim benefits under double taxation avoidance agreements (DTAs) with other countries.

To claim benefits under DTA, an individual will need to have a TRC. Generally, to claim benefits under DTAs, you must prove that you are a resident of your home country.

Conclusion

In conclusion, a tax residency certificate (TRC) is an important document for individuals who live or work in the UAE. It assist natural persons to avoid double taxation, access DTAs, and prove their residency status.

A TRC is essential for individuals who have income from both the UAE and another country. This is because it can help them to avoid being taxed twice on the same income. DTAs are agreements between countries that reduce or eliminate double taxation. Additionally, this means that if such resident in the UAE has an income from another country that has a DTA with the UAE, it is possible claim a reduced tax rate or exemption from tax on that income.

If such individual is unsure whether obtaining a TRC is required, consult with a tax advisor. A tax advisor can help determine your tax residency status and whether it’s appropriate to apply for a TRC.

References

MoF Issues New Ministerial Decision to Streamline Tax Residency Certificates
UAE issues additional guidance on determination of tax residency for individuals
New UAE tax residency criteria