UAE Tax Residency – How is it determined and what are the recent changes?
Determining tax residency can be a complex matter, and it is crucial to avoid common misconceptions, such as assuming that setting up a company in a jurisdiction with 0% corporation and personal income tax automatically exempts you from tax obligations. In order to provide you with a general understanding of this topic, we will highlight some key considerations. However, please note that each case is unique, and we encourage you to seek a free consultation for personalised advice.
Tax residency is primarily determined by two factors: your nationality and the number of days you spend in a particular country. Other factors that may be taken into account include your primary place of residence, where you work, and your financial interests.
What are the recent amendments to the UAE Tax Residency Regime?
Starting from March 2023, the United Arab Emirates (UAE) Federal Tax Authority (FTA) has introduced a revised tax residency criteria for individuals seeking a Tax Residence Certification (TRC). Here are the key changes:
Day-counting: Any day an individual physically spends in the UAE counts towards the 183/90 days threshold, including entry and exit dates. The days do not need to be consecutive.
Usual/Primary Place of Residence and Centre of Financial & Personal Interests: The UAE considers a place as the usual/primary place of residence if the individual habitually resides there and spends most of their time compared to any other jurisdiction. The centre of financial and personal interests is determined by factors such as the individual’s occupation, familial and social relations, cultural activities, business location, property administration, and other relevant circumstances.
Permanent Place of Residence: The individual must have continuous right of occupation in a furnished house, apartment, or room that is either rented or owned. Short or occasional stays do not qualify.
Employment: An individual is considered to hold employment in the UAE if they have an employment contract with a UAE-based company or if the majority of their income is derived from work performed in the UAE.
These revisions align the UAE’s tax residency requirements with global standards and provide a more pragmatic approach. The changes address previous gaps in regulations and practices of the Federal Tax Authority (FTA).
The UAE has double taxation treaties and bilateral agreements with 123 countries, which refer to the UAE’s domestic laws and play a crucial role in determining an individual’s tax residency status.
Eligible UAE residents can apply to the FTA for a Tax Residence Certificate, which allows them to claim tax relief or benefits in another jurisdiction under the applicable tax treaty.
Applicants who meet the criteria of 183+ or 90+ days and related objective conditions should be able to obtain a TRC easily. However, for those who do not meet the day-counting test, the FTA can make discretionary interpretations.
In such cases, providing comprehensive supporting documents that demonstrate the UAE as the applicant’s usual/principal place of residence and centre of financial and personal interests will be crucial.
How can Rosemont Partners help?
Rosemont Partners is regularly assisting individuals and businesses with obtaining a Tax Residency Certificate (TRC) through our expertise and knowledge of the UAE’s tax residency regulations. If you need support with document preparation, self-assessment, or guidance, reach out to us for more information.