On 2 September 2022, the UAE redefined the criteria of tax residency relevant for individual applicants to qualify for a Tax Residence Certification [‘TRC’]. Starting from March 2023, an individual is deemed a tax resident if meeting any of the following criteria:
What’s new?
Via its latest Decision, the FTA has formally clarified several strategic elements:
Day-counting – any day an individual physically spends inside the UAE counts for the 183/90 days threshold. This includes entry and exit dates. There is further no requirement for Day-counting to be consecutive.
Usual/Primary Place of Residence I Centre of Financial & Personal Interests
- Is deemed a Usual/Primary Place of Residence a place where the individual habitually or resides typically, i.e., where he spends most of his time when compared to any other jurisdiction as part of his settled routine in a more than transient way.
- Is deemed a Centre of Financial & Personal interest, a place where the individual’s personal and economic interests are the closest or of the greatest significance. The place of the individual’s occupation, familial and social relations, cultural or other activities, place of business, the place from which the property of the individual is administered, and any other relevant facts and circumstances should be taken into account in the determination of whether an individual person’s centre of financial and personal interests is in the State.
Permanent Place of Residence – a furnished house, apartment, or room available via rent or owned by the individual, who is made continuously available to the individual to reside. Though the individual need not own the place of residence, he/she must have a continuous right of occupation therein at all times with some certain degree of permanency and stability A stay of a short or occasional duration does not qualify.
Employment [job] – the individual will be considered to hold employment in the UAE if he/she has:
- has an employment contract with a UAE-based company for a promised remuneration OR
- is in a continuing relationship where all or substantially all of his income for his labour is derived from one party, whereby the income serves as a payment for work performed in the State
The employment can be limited or unlimited, full-time or part-time basis.
What does it mean?
It is evident that the UAE has considered tax residency requirements per the global parameters and has realigned its position to provide a pragmatic approach. The revision addresses several gaps that existed under the previous regulations and practices of the Federal Tax Authority (FTA).
The UAE has double taxation treaties and bilateral agreements with 123 countries. These references the UAE’s domestic laws, and are crucial in determining an individual’s tax residency status.
Eligible UAE residents can apply to the FTA to obtain Tax Residence Certificate, enabling them to further apply for tax relief, or claim benefits in a different jurisdiction under the applicable tax treaty.
Applicants meeting the 183+ or 90+ criteria and related objective conditions should be able to obtain a TRC with relative ease. Applications of those not meeting any of the day counting test, on the other hand, will be subject to discretionary interpretation by the FTA.
In this context, evidence via comprehensive dossier/supporting documents that the UAE is the applicant’s usual/principal place of residence AND centre of financial and personal interests will be key.
M/HQ is here to help
Whether you meet the day-counting requirement or not, team M/HQ is here to help in profile assessment, review/comment/advice on eligibility, and dossier preparation for TRC ahead of filing with authorities.