The government of the United Arab Emirates (UAE) brought Cabinet Resolution No. (85) of 2022 on determining tax residence in the UAE into force on 1 March.
Issued in September 2022, the Resolution sets out the rules to determine when a legal or natural person will be considered a tax resident of the UAE, as well as associated administrative matters such as formalities for the issuance of Tax Residency Certificates (TRCs).
Under the Resolution, a legal person will be considered as a UAE tax resident if the entity is either:
- Established, formed or recognised in the UAE, excluding branches registered by a foreign entity.
- Considered a tax resident under the tax law of the UAE. A company established outside the UAE may still be treated as a UAE tax resident if it is effectively managed and controlled in the UAE.
A natural person will be considered as a UAE tax resident if one of the following conditions is met:
- The individual’s usual or principal place of residence is in the UAE, and the centre of their financial and personal interests are in the UAE, or other conditions and criteria provided by the UAE Ministry of Finance (MoF).
- The individual has been physically present in the UAE for a period of 183 days or more in a consecutive 12-month period.
- The individual has been physically present in the UAE for a period of 90 days or more over a consecutive 12-month period and is a UAE citizen, UAE resident or GCC national who either has a permanent place of residence in the UAE or carries out a job or business in the UAE.
Where an international agreement, such as a tax treaty, specifies certain conditions for determining tax residency, the Resolution provides that the international agreement will continue to apply.
If a legal or natural person is considered a tax resident under the definitions, they can apply to the Federal Tax Authority (FTA) to obtain a TRC, which is often a formal requirement for UAE residents wishing to claim benefits under a tax treaty or other forms of tax relief.
The definition of UAE tax residency may be subject to further review with the implementation of the UAE’s new corporate tax (CT) legislation, which will become applicable either on 1 July 2023 or on 1 January 2024, depending on the financial year followed by the business. CT is to be applied across all the emirates.