The United Arab Emirates (the UAE) has had no domestic legal definition of tax residency for legal or natural persons to date.
The UAE government has issued on 2 September 2022 the Cabinet Resolution No. (85) of 2022, thus establishing for the first time a legal definition of a UAE tax resident. It will come into force on 1 March 2023.
Tax residence of individuals (natural persons)
An individual will be regarded 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 center of their financial and personal interests are in the UAE or other conditions and criteria provided in a specific decision (to be) issued by the UAE Ministry of Finance.
- 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 (i) has a permanent place of residence in the UAE or (ii) carries out a job or business in the UAE.
Tax residence of corporate entities (legal persons)
A corporate entity should be considered as a UAE tax resident where one of the following two conditions is met:
- The entity is established, formed, or recognized in the UAE, excluding a UAE branch registered by a foreign entity.
- The entity is considered a tax resident under the (applicable) tax law of the UAE.
The UAE corporate tax (CT) legislation has not yet been enacted to determine the requirements under the second point above. However, based on the public consultation document of the UAE Ministry of Finance from 28 April 2022, a company established outside the UAE may be treated as a UAE tax resident if it is effectively managed and controlled in the UAE.
Application of international agreements
Where an international agreement, such as a tax treaty, specifies certain conditions for determining tax residency, such international agreement shall continue to apply and takes precedence over domestic law.
Therefore, when assessing tax residence for the purposes of applying an international agreement (including a double tax treaty), UAE persons would need to refer to the specific criteria set forth in the international agreement itself.
Administration
A person considered a tax resident under the above definitions may apply to the Financial Tax Authority (FTA) to obtain a UAE Tax Residency Certificate, a formal document often required for UAE residents to claim benefits under the relevant tax treaty or other forms of tax relief (outside the UAE).
Unsure about whether you are the UAE tax resident or not? Do you want to know more about the UAE tax residency? Drop us an email (office@alphaprimedwc.ae) or give us a call (+971 58 515 2374) at any time.
