The New UAE Tax Residency Rules for Individuals
The New UAE Tax Residency Rules for Individuals
The Tax Procedures Guide TPGTR1 (the “Guide”) on Tax Residents and Tax Residency Certificate (“TRC”) was published by the Federal Tax Authority (FTA) on October 18, 2024.
According to Article 11(3) of the UAE Corporate Tax Law (the “CTL”), the Guide describes the requirements for identifying whether a person or legal entity is a Resident Person, a Tax Resident under UAE domestic law, or a Tax Resident under Double Taxation Agreements (“DTAs”), as specified by Articles 3 and 4 of Cabinet Decision No. 85 of 2022.
UAE tax residency regulations
Residents covered by the CTL
According to the Guide, natural persons will be considered resident persons for CTL purposes regardless of their domicile or place of residence if they engage in business or a business activity (as defined in the Guide) in the United Arab Emirates and generate more than AED 1,000,000 in revenue annually from such a business or business activity.
Residents are subject to taxes under UAE domestic legislation
According to UAE domestic law , natural individuals are tax residents if:
1. During the relevant 12 consecutive months, they spent 183 days or more in the United Arab Emirates;
2. During the relevant 12 consecutive months, they spent 90 days or more in the United Arab Emirates, and
3. possess a UAE resident permit or are citizens of the UAE or the Gulf Cooperation Council; and
4. work or do business in the United Arab Emirates, or have a Permanent Place of Residence (as defined by Article 5 of Ministerial Decision No. 27 of 2023); or
5. The UAE served as both their primary or typical location of residence and the focal point of their personal and financial interests.
Days spent in the UAE under “exceptional circumstances” may be excluded, but any day or part day that a person was in the UAE, no matter how short, shall be included as a full day for the purposes of determining the applicable day count.
A number of helpful examples are provided in the Guide to help determine the aforementioned tests.
Double Taxation Agreements for Tax Residents
If a natural person satisfies the requirements outlined in the relevant DTA, they will be regarded as a UAE tax resident for DTA purposes. According to the Guide, in order to be eligible for a DTA, a person must typically meet the following residence requirements: be liable for taxes, possess the necessary citizenship or nationality, be physically present in the country in question, or be a resident or domicile there.
The Guide also makes it clear that the standards outlined in Cabinet Decision No. 85 of 2022 should be applied to determine tax residence if the DTA refers to being a resident under UAE law.
The steps involved in getting a TRC
The FTA issues TRCs, which serve as proof that an individual is a tax resident in the United Arab Emirates. When depending on a DTA and for other reasons, they can be acquired.
Only the current or prior tax period may be the subject of a TRC request. Since the FTA is unable to attest to an individual’s continued status as a Tax Resident in the United Arab Emirates, it cannot be granted for a future term. This is in line with what is often done internationally in other jurisdictions. The Gregorian calendar year is a tax period for natural persons, whereas the entity’s fiscal year is a tax period for juridical persons.
As soon as the requirements for becoming a Tax Resident are met, the FTA will begin processing TRC petitions for natural persons.
The Guide describes how to submit an application for a TRC
By completing the necessary fields and providing the necessary documentation, a natural person can apply for a TRC using the EmaraTax portal.
- AED 50 must be paid as an application fee at the time of submission.
- The FTA has the authority to accept or reject the application and may ask for more information.
- The applicant must pay the required processing fees, which range from AED 500 to AED 1,750, within 30 working days of the FTA approving the application.
- The TRC will be accessible for download online after processing. For an additional AED 250, a printed certificate may be requested.