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The UAE has introduced new tax residency regulations to modernize its tax system and align with international standards. Key developments include:
- Cabinet Decision No. 85/2022: Effective from March 1, 2023, this decision defines criteria for tax residency in the UAE.
- Ministerial Decision No. 247/2023: Outlines rules for obtaining a Tax Residency Certificate for international agreements.
Tax Residency Criteria:
- For Legal Persons: Established or recognized under UAE laws, not a foreign branch.
- For Natural Persons:
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- Habitual or Primary Residence: If a natural person's main home and the place where they handle financial matters are in the UAE, meeting conditions specified by the Minister.
- Physical Presence Criteria: Spending 183 days or more in the UAE within a 12-month period.
- Additional Conditions: Being physically present in the UAE for 90 days or more within a 12-month period, holding UAE nationality, a valid Residence Permit, or the nationality of any GCC Country, and meeting specific conditions like having a permanent residence or holding a position in the UAE.
The new regulations aim to:
- Simplify the process for expatriates to establish tax residency
- Enhance access to benefits from double taxation agreements
- Improve transparency and compliance with international standards
Individuals and entities meeting the criteria can apply for a tax domicile certificate with the Federal Tax Authority. The UAE has signed double taxation agreements with over 130 countries.
These changes represent a significant step in the UAE's tax landscape, providing clearer guidelines for expatriates and businesses operating in the country.
Originally published 9 Sept 2024
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