UAE: The new determination of tax residency

published on 14 April 2023 | reading time approx. 2 minutes

On 2 September 2022, the Federal Tax Authority (FTA) issued the Cabinet Decision No. 85 of 2022, outlining the new guidelines for determining tax residency for both legal entities and individuals, which came into effect on 1 March 2023.

Legal entities

A legal entity will be classified as a tax resident in any of the following cases:

It is incorporated, formed or recognised within the UAE (branches of foreign entities are excluded).
It is considered as a Tax Resident in accordance with the Tax Laws of the UAE (place of management or permanent establishment in the UAE).

Individuals

Natural persons will be classified as a tax resident if they meet at least one of the following criteria:

Their primary place of residence and center of financial and personal interests are in the UAE (irrespective of the number of days spent in the UAE).
They meet conditions and criteria determined by a decision from the Minister.
They have been physically present in the UAE for a minimum of 183 days within a 12-month consecutive period.
They have a permanent place of residence and/or employment alternatively business in the UAE and have been physically present for a minimum of 90 days during the relevant 12-month consecutive period. This only applies to UAE and GCC nationals or any other person holding a valid residency permit in the UAE.

It is important to note that if any international agreement (e.g. tax treaties) sets out certain conditions for determining the tax residency, the provisions of said agreement shall apply.

Any person who is considered a tax resident in the State can apply for a Tax Residency Certificate. This certificate serves to apply withholding tax limitations or exemptions set out in some double taxation treaties. The main benefit is getting tax exemptions or tax refunds in the foreign country in which the person is also considered as a tax resident.

Required Documents

To do so, an application form along with the required documents must be submitted to the Federal Tax Authority portal. The following documents are required to be submitted to the Authority, depending on the status of the applicant.

For companies:

copy of the UAE trade license
certified establishment contract
copies of the directors/shareholders/partners passport, Emirates ID and permits of residence
certified copy of the audited financial accounts
confirmed UAE local bank statement from the previous 6 months
certified copy of the lease agreement
tax form from the relevant country, if applicable

For individuals:

certificate of the source of income or salary certificate
copies of passport, Emirates ID and UAE Residence Visa
confirmed UAE local bank statement from the previous 6 months
certified copy of the residential lease agreement or a copy of the tenancy contract
report from the GDRFA or ICA mentioning the number of days applicant stayed in the UAE
(if applicable) Tax form from the relevant country

Once the Authority approves the application and confirms that the person meets the set-out criteria, a Tax Residency Certificate with a validity period of one year will be issued. According to the publications of the tax authority it will take 4 to 5 working days to receive the pre-approval and 5 to 7 working days afterwards to receive the Tax Residency Certificate.