21 November, 2023

How to Obtain Tax Residency Certificate (TRC) in UAE

tax residency certificate

Overview of the UAE Tax System

The United Arab Emirates (UAE) is a constitutional federation of seven Emirates, with Abu Dhabi as its capital. Arabic is the official language, but English is widely spoken and used in business. Historically, the UAE has been a low-tax jurisdiction, with no personal income tax. However, a new federal corporate tax system was implemented in June 2023, with a standard rate of 9%. The Federal Tax Authority (FTA) is responsible for collecting federal corporate taxes and conducting audits. The tax system aims to incorporate best practices globally and minimize the compliance burden on businesses

Definition of Tax Residency in the UAE

Tax residency in the UAE is determined by the domestic rules of the country. A natural person will be considered a UAE tax resident if the individual meets any of the following conditions: (i) has a permanent place of residence in the UAE, (ii) carries on an employment or a business in the UAE, or (iii) has been physically present in the UAE for a period of 183 days or more during a consecutive 12-month period. The new tax residency criteria were introduced in March 2023 to align with internationally recognized standards and to facilitate the application of tax treaties

Comparing Tax Residency to Citizenship

Tax residency and citizenship are distinct concepts, especially in the context of the United Arab Emirates (UAE). Tax residency in the UAE is determined by domestic rules, where an individual is considered a tax resident if they meet specific conditions, such as having a permanent place of residence, carrying on employment or business, or being physically present for a certain period. This status is crucial for applying for Double Tax Treaties (DTTs) and does not necessarily imply citizenship. On the other hand, citizenship is a legal status granted by a state to its nationals and is separate from tax residency. Understanding these distinctions is essential for individuals and businesses navigating the UAE’s tax system

Who is eligible for a tax residency certificate in the UAE?

  • Individuals: To be eligible for a tax residency certificate in the UAE, individuals must meet the following criteria
  1. Be physically present in the UAE for a minimum of 183 days within a 12-month consecutive period.
  2. Have a valid UAE residence visa.
  3. Have a permanent place of residence in the UAE.
  4. Provide the necessary documentation, including a lease agreement or title deed, utility bills, and bank statements
  • Companies: Companies that are registered in the UAE and have a valid trade license are eligible for a tax residency certificate. They must provide the necessary documentation, including a lease agreement or title deed, utility bills, and bank statements

 

Tax Residency Certificate in Dubai 

A Tax Residency Certificate (TRC) is an official document issued by the UAE Ministry of Finance that confirms an individual’s or a company’s tax residency in the UAE. The TRC is especially advantageous for individuals or companies whose countries do not have a double tax avoidance treaty with the UAE, such as the United States. The TRC serves as official confirmation of the tax residency of a person or legal entity in the UAE and is required to claim tax treaty benefits under DTAs entered into by the UAE. The TRC has a limited lifespan of one year and must be renewed yearly, adhering to the required submission and renewal process

Steps for an individual to get a Tax Residency Certificate in Dubai

1. Create an Account: Register for a Tax Certificate account with the Federal Tax Authority (FTA) 

2. Log in to the Portal: Once registered, log in to the FTA portal and click on the “Create Tax Residency Certificate” 

3. Submit Application Form: Fill out the TRC application form and upload the necessary documents in PDF or JPEG format

4. Provide Required Documents: For individual TRC applications, the following documents are typically required: Passport copy

5. Payment: After submitting the application, make the required payment online57.

6. Await Approval: The application will undergo a pre-approval process, which usually takes 4-5 days to complete

7. Receive TRC: Upon approval, the Tax Residency Certificate will be issued within 5-7 working days and delivered to the user’s registered email.

Required Documents for Tax Residency Certificate in Dubai, UAE

To obtain a Tax Residency Certificate (TRC) in Dubai, UAE, individuals need to provide specific documents. Here are the required documents for an individual to obtain a Tax Residency Certificate:

1. Identity Proof:

  • Copies of passport
  • UAE residence visa
  • Emirates ID

2. Financial Documents:

  • Latest salary certificate
  • Copy of tenancy contract or residential lease agreement
  • Last six months’ bank statements
  • A report on the number of days the individual has stayed in the UAE from the General Directorate of Residency and Foreign Affairs

The specific requirements may vary based on individual circumstances and the type of residency. It’s important to ensure that all necessary documents are provided to facilitate the application process

 

Cost of Tax Residency Certificate in Dubai, UAE

The cost of obtaining a Tax Residency Certificate (TRC) in Dubai, UAE, varies depending on whether the applicant is a tax registrant or a non-tax registrant. The fees are as follows:

  • AED 500 for all tax registrants (individuals and companies)
  • AED 1,000 for non-tax registrant natural persons (individuals)
  • AED 1,750 for non-tax registrant legal persons (companies)

In addition to these fees, there may be other charges involved for review and submission, depending on how the application is made

Benefits of obtaining a UAE Tax Residency Certificate?

The Tax Residency Certificate (TRC) in the UAE offers several benefits for individuals and companies. Here are the key advantages of obtaining a UAE Tax Residency Certificate:

Access to Double Tax Avoidance Agreements (DTAAs): The TRC enables applicants to take advantage of DTAAs on income signed by the UAE, allowing them to avoid double taxation on their income earned in foreign countries

  • Proof of Tax Residency: The TRC serves as official confirmation of an individual’s or a company’s tax residency in the UAE, which is essential for claiming tax treaty benefits under DTAAs
  • Facilitates Business Activities: For companies, the TRC is crucial for asserting tax residence and gaining benefits from double taxation avoidance treaties, thereby supporting international business operations
  • Exchange of Tax Information: Holding a TRC ensures automatic protection for the exchange of tax information, which is beneficial for individuals and businesses engaged in global transactions
  • Legal Compliance: The TRC helps individuals and companies demonstrate compliance with tax regulations and avoid unexpected legal consequences

 

FAQ : Tax Residency

How many days do you have to live in Dubai to be tax resident?

To be considered a tax resident in Dubai, an individual must be physically present in the UAE for a minimum of 183 days within a 12-month consecutive period. The days do not need to be consecutive, and exceptional circumstances may be considered by the authorities

How can I move my tax residency to Dubai?

To move tax residency to Dubai, individuals must meet specific criteria and follow a structured process. They need to establish a company in the UAE, obtain a residency visa, and Emirates ID based on the company’s sponsorship. After six months, individuals can apply for a tax residency certificate by providing a lease agreement for UAE accommodation. Additionally, all new and existing businesses must register in the UAE

What is proof of tax residency in UAE?

The proof of tax residency in the UAE requires specific documentation, including a title deed, certified tenancy contract (EJARI), or other long-term rental contract, along with utility bills as evidence of a permanent place of residence

Do I need to pay tax if I earn from Dubai?

The United Arab Emirates does not tax any income of any kind. By obtaining UAE Tax Residency, individuals benefit from this advantage. However, a corporate tax rate of 9% was introduced starting in 2023

Do foreigners pay tax in UAE?

Yes, the United Arab Emirates (UAE) does not impose personal income tax on individuals, including foreigners residing in the country. This absence of personal income tax is a significant benefit for individuals working and earning income in the UAE

What is the validity of tax residency certificate in UAE?

The Tax Residency Certificate (TRC) in the UAE is valid for one year from the date of issue. After the expiration of the certificate, individuals or companies must renew their TRC by submitting a new application and providing the necessary documentation. The renewal process is similar to the initial application process, and the fees are the same as the initial application fees. It’s important to note that the TRC is only applicable to individuals and companies that meet the criteria for tax residency in the UAE

 

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