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The United Arab Emirates (UAE) recently issued a new guideline on determining tax residency. The guideline provides clarity on the criteria for determining an individual’s tax residency status in the UAE for the purpose of taxation. In this blog, we will provide an overview of the new guidelines and discuss their implications.
The UAE is a popular destination for businesses due to its tax-free environment. However, in recent years, the UAE has introduced various tax measures, including value-added tax (VAT) and corporate tax, to diversify its revenue sources. As a result, the UAE is now taking measures to ensure that individuals who earn income in the country pay their fair share of taxes.
The UAE’s Federal Tax Authority (FTA) issued the new guideline on determining tax residency on 22 February 2023. The guideline provides clarity on the criteria for determining an individual’s tax residency status in the UAE.
Recent Details For Tax Residency
The additional details regarding the conditions in determining tax residency are as follows:
- Those whose principle place of residence and the center of financial is in the UAE must meet these requirements.
- The principle place of the resident must be in UAE, the personal interests and center of financial interest must be in UAE to become a tax resident.
- Individuals have to show an entry and exit report from the Federal Authority of Identity and Citizenship or a local competent Government entity for the confirmation of number of days spent in the UAE. This condition is for those who have spent more than 90 days or over 12-months.
- The new Ministerial Decisions also states that all says in which individual is physically present in the country will be counted as UAE days. It is important for you to consider all the
Application Process For Tax Residency Certificate (TRC)
Individuals can submit their tax residency certificate application online on the FTA portal. When individuals apply for a Tax Residency Certificate for domestic tax purposes, individuals will need to select one option relating to the condition and upload the required documents.
For each TRC application, the fee is AED50 for submission plus these fee structures:
- AED500 for all tax registrants
- AED 1,000 for non-tax registrant individuals
The Center Of Financial And Personal Interests
These are the several factors to take into account while determining the natural person’s center of financial and personal interest.
- The place of the natural person’s occupation
- Cultural or other activities
- Place of business
- Familial and social relations
- The place from which the property of the natural person is administered.
- Any other relevant facts and circumstances
The new guideline on determining tax residency in the UAE has significant implications for expatriates who live and work in the country. Expatriates who are considered tax residents in the UAE will be subject to tax on their worldwide income, including income earned outside the country. This means that expatriates who have not been paying taxes in their home country may need to start paying taxes in the UAE.
The UAE’s new guideline on determining tax residency provides clarity on the criteria for determining an individual’s tax residency status in the country. Expatriates who live and work in the UAE should review their tax residency status in light of the new guidelines to ensure that they are complying with the country’s tax laws.
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