The United Arab Emirates (UAE) has recently redefined the criteria for individuals seeking Tax Residence Certification (TRC) effective March 2023, aiming to simplify the process and broaden the eligibility criteria for TRC applicants. Under the new rules, an individual can be considered a tax resident of the UAE if they meet the criteria. In this blog, we will explore the implications of this change and what it means for individuals looking to obtain TRC in the UAE.

In obtaining tax residency in the UAE, you can leverage a significant advantage that exempts you from double taxation. This is made possible through Double Taxation Avoidance (DTA). An individual can apply for a Tax Residency Certificate (TRC) through the Federal Tax Authority (FTA). By obtaining a TRC, UAE tax residents can avoid being taxed on the same income in both their home country and the UAE, providing a significant financial benefit.

To benefit from a DTA, a person generally requires providing a TRC to prove that the person is a resident of another country and subject to tax in that country. The TRC is a certificate issued for eligible government entities, companies, and individuals to take advantage of agreements of double taxation avoidance on income to which the UAE is a signatory.

HOW DO YOU DETERMINE IF YOU ARE ELIGIBLE TO APPLY FOR TAX RESIDENCY CERTIFICATE (TRC) OR NOT?

The eligibility criteria, documents and information requirements, and application and certificate fees differ for natural and legal persons, tax registrants, and non-tax registrants. In the latest legislation, the FTA has implemented Certain Provisions of Cabinet Decision No. 85 of 2022 on the Determination of Tax Residency. As per the legislation, we can determine the applicant’s usual or primary place of residence in the UAE when applying for tax residency.

An individual will be considered a UAE Tax Resident if a natural person:

• spends most of his time in UAE compared to any other jurisdiction as part of his settled routine in a way that is more than transient. 
• center of financial and personal interests is in the State if the State is the jurisdiction where the natural person’s personal and economic interests are the closest or of the greatest significance to the natural person. 
• occupation, familial and social relations, cultural or other activities, place of business, and place from which the property of the natural person is administered in the state.

Calculation of the period stayed in UAE:

• All days or parts of a day on which a natural person is physically present in the State count towards the total number of days he is present in the State during a relevant consecutive (12) twelve-month period.
• The days on which the natural person has been physically present in the State do not need to be consecutive in determining whether the (183) one hundred and eighty-three day or (90) ninety-day period has been met during the relevant consecutive (12) twelve-month period.

Exceptional circumstances:

An exceptional circumstance is an event or situation beyond the natural person’s control, occurring while he is already in the State, which he could not reasonably have predicted or prevented, and which prevents him from leaving the State as originally planned.

Permanent Place of Residence:

• A Permanent Place of Residence is a furnished house, apartment, room, or any other form of dwelling, made continuously available to the natural person.
• The Permanent Place of Residence shall be considered as being available to the natural person where the natural person has the continuous right of occupation therein at all times and on a regular basis with some degree of permanency and stability and not just occasionally or for a stay of short duration.

Employment

>> A natural person shall be considered as carrying on employment in the State in either of the following two cases.

• If he is a party to a contract with an employer, which is incorporated or otherwise formed or recognized in the State, under which the natural person undertakes to offer a service to the employer under their administration or supervision for a promised remuneration paid by the employer in the State.
• If he is in a continuing relationship where all or substantially all his income for his labour is derived from one party whereby the income received by him constitutes remuneration for his labour performed in the State.

>> The nature of the employment can be limited or unlimited and the work may be carried out on a full-time or part-time basis.

>> A voluntary role for which the natural person does not enter a contract does not constitute employment.

To assist you with obtaining a Tax Residency Certificate, where we will thoroughly assess your profile, and provide professional advice and expert assistance on how we can proceed to get TRC (Tax Residency Certificate) to save you from double taxation and take benefits of further possible tax reliefs.

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