A few decades ago, UAE was completely reliant on oil revenue but, its transformation into a country that attracts investment from across the world is an inspiration and unimaginable. The Emirates of Dubai and Abu Dhabi, in particular, have become the centre of international finance, embracing the latest technology innovations. The UAE has also developed many attractive tourist attractions with renowned landmarks and high-class hotels.
Many factors contribute to the nation’s overall development. The favourable tax environment in the UAE is one of the major incentives that is attracting businesses. Many companies which base themselves in the UAE are exempt from income tax. Also, in order to avoid the imposition of taxes in two countries on the same taxpayer, they have established double taxation agreements with numerous trade partners. It encourages the free flow of trade and investment from other countries and protects the member countries from double taxation on the exchange of goods and services.
The companies or individuals are advised to apply for a Tax Domicile Certificate (TDC), also known as a Tax Residency Certificate (TRC), to get the benefits from the double taxation agreement in the UAE.
What is a Tax Residency Certificate?
A Tax Residency Certificate is an official document that used to be issued by the UAE Ministry of Finance (MoF) till 11 November 2020. But, according to the resolution taken by the cabinet on 14 November 2020, it shall be issued by the Federal Tax Authorities (FTA) on an application made by the resident (individual or incorporated entity) of UAE.
A Tax Residency Certificate in the UAE is beneficial:
- For Double Tax Avoidance Agreements (DTAA)
- To prove that you’re a tax resident of the UAE, and
- It’s a means of registration with the authorities
Eligibility criteria to get a Tax Domicile Certificate
Any company operating on the mainland or in a free zone in the country for at least a year is eligible to apply for a Tax Residency Certificate. Offshore companies may apply for a tax exemption certificate as they don’t have a physical presence in the UAE and are ineligible for TRC.
The Tax Residency Certificate is also available for individuals who have resided in the UAE for at least 180 days and wish to establish tax residency in the country. It mainly benefits those individuals whose native countries do not have a double taxation agreement with the UAE. The individuals who wish to apply must have a valid resident visa for more than 180 days.
Requirements to obtain the Tax Residency Certificate
- Passport copy and valid resident visa copy of at least 180 days
- Emirates ID copy
- Attested personal UAE bank statement of 6 months
- Proof of income in UAE – Ex., employment agreement, salary certificate
- Report from the General Directorate of Residency and Foreign Affairs (GDRFA), showing evidence of all entries from the UAE
- A copy of the certified tenancy contract, valid for at least 3-months before the application
- Valid UAE Trade License – Mainland DED or Freezone – the company must have been active for at least one year
- A copy of MOA (Memorandum of Association) for the company
- A copy of the Certificate of Incumbency for the company – Chamber of commerce certificate
- The Organizational chart structure of the company
- Certified commercial tenancy contract copy – valid for at least 3-months before application, physical office space is mandatory (virtual office space will not be sufficient)
- Passport, valid UAE resident visa copy and Emirates ID of the company directors
- Latest certified audited financial statement or UAE company bank statements from the last 6-months, attested by the bank authority
Benefits of obtaining a Tax Residency Certificate
The Tax Residency Certificate or Tax Domicile Certificate is an undisputed document proving that you’re a resident of the TRC issuing country. Since it is issued by the Statutory Authority, i.e., Federal Tax Authority in the UAE, it’s a reliable document to substantiate your residency.
For companies, the TRC provides freedom to justify the applicability of provisions of DTAAs. The provisions of DTAA also benefits companies in restructuring their business or transactions, or they can consider tax planning. Favourable conditions of Withholding Tax and Permanent Establishment provide ample opportunity for the businesses to plan tax-efficient structures.
Since the UAE government and the Statutory Authorities is on the verge of promoting their development goals, they have concluded 115 DTAA with most of its trade partners. Hence, if the applicant is confident with his/their residency status, there are abundant opportunities to get the maximum benefit from UAE tax residency.