A Guide to the New UAE Law for Determining Tax Residency
The criteria for determining tax residency in the UAE is set to change with the issuance of the Cabinet Decision No. 85 of 2022. Even though issued on September 2nd 2022, the Decision will become effective from March 1st 2023. Tax consultants and or tax agents in Dubai advise you to understand each provision of the new law.
The new Decision effectively provides us with guidelines on determining the tax residency for both natural persons and legal persons. The Decision also outlines the requirements and conditions for identifying a Person as a Tax Resident in the UAE. Let’s have a look at the major provisions of the new law for determining tax residency in the UAE:
Article 3: Juridical Person
A juridical person will be treated as a tax resident in the UAE if the person meets either of the following conditions:
- The Person was incorporated, formed or recognised in accordance with the legislation in force in the UAE, and that does not include the branch that is registered by a foreign juridical person in the UAE.
- The Person is treated as a Tax Resident in accordance with the Tax Law in force in the UAE
Article 4: Natural Person
A Natural Person that meets any of the following requirements will be treated as a tax resident in the UAE:
- If the Person’s usual or primary place of residence and the centre of his financial and personal interests are in the UAE, or if he meets the conditions and criteria determined by a decision from the UAE Ministry of Finance
- If the person has been physically present in the UAE for a period of 183 days or more, within the relevant 12 consecutive months
- If the person has been physically present in the UAE for a period of 90 days or more, within the relevant 12 consecutive months, and the person is a UAE national, holds a valid Residence Permit in the UAE or holds the nationality of any member state of the Gulf Cooperation Council (GCC), and either the person has a Permanent Place of Residence in the UAE or carries on an employment or Business in the UAE
Article 5: Tax Residency Certificate in the UAE
A Person treated as a Tax Resident in the UAE as per Articles 3 & 4 of the Decision may apply to the Federal Tax Authority (FTA) for the issuance of a Tax Residency Certificate. The application must be submitted as per the form and manner specified by the FTA. If the FTA is satisfied that the applicant meets the requirements set out in Articles 3 or 4 of the Decision and that the application was submitted in line with the FTA’s rules, the FTA may approve the request and issue the UAE Tax Residency Certificate. Consult with the FTA-registered tax agents in the UAE to apply for the tax residency certificate.
Article 6: International Agreements
If the person is subject to any International Agreement that sets out conditions for determining tax residency, the provisions of that agreement will supersede the provisions of this Legislation, for the purposes of the international agreement only. The UAE Ministry of Finance will issue a decision specifying the form and manner of issuing certificates for determining tax residency for the purposes of the International Agreement.
Article 7 – Competencies of and Cooperation with the Authority
The FTA has the power to request all information, data, and documents of any Person from all government entities of the State. All the government entities of the State are required to fully cooperate with the FTA for the effective implementation of the Decision. The government entities, in this regard, are required to provide the FTA with all information, data, and documents relating to any Person as requested by the Authority.
Article 8 – Executive Decisions
The Ministry of Finance in due time will release the decisions that are necessary to determine the conditions, controls and criteria for implementing any of the provisions of this Decision. Moreover, the FTA may issue any clarification and directive for implementing any of the provisions of this Decision. Tax consultants in Dubai can keep you updated about the issuance of any implementing regulation or public clarifications.
Consult with FTA-approved Tax Agents in Dubai, UAE
The Cabinet Decision to determine the UAE Tax Residency is a critical move by the government to align the country’s tax regime with global standards. The issuance of the Decision can also be seen as the government set the stage for the release of the highly anticipated UAE Corporate Tax Law. Legal and natural persons who are concerned about Tax Residency can consult with the best Tax agents in Dubai such as Jitendra Chartered Accountants (JCA).
JCA is one of the leading tax consultants in Dubai with more than 20 years of experience. We can help you to clear all your doubts regarding tax residency in the UAE. JCA’s FTA-registered tax agents in the UAE can also assist you with obtaining a tax residency certificate. Call us today for a consultation on the new UAE tax residency rules.