Further to the UAE's cabinet decision no. 85 of 2022 on the determination of tax residency, the Ministry of Finance announced a Ministerial Decision (no.27 of 2023) setting out certain provisions that add clarity in determining tax residency.
Legal entities are considered UAE tax residents if they are established or recognized in the UAE. This excludes UAE branches registered by entities in other jurisdictions. Companies established outside the UAE can still be UAE tax residents if their management and control is based in the UAE.
One of the provisions in regard to Natural Persons, which sets out the ground for determining their tax residency, is physical presence in the UAE.
Natural Persons who stay in the UAE for 183 days (or parts of days) in 12 consecutive months and have their personal and financial interests in the UAE, are considered tax residents.
The 90-day rule applies to UAE citizens, residents and GCC nationals who have physical presence of 90 days (or parts of them) in the UAE for a 12-month period. An extra clarification provided by the latest decision is that one does not need to have ownership of their permanent residence in the UAE as long as it is available to them.
Adding more clarity to the 183-day rule, one of the provisions set by the latest Ministerial decisions is that both financial interests as well as personal interests will be taken into account when determining one's tax residence. If a Natural person stays in the UAE for 90 days and has significant connections -professional, personal, financial, or other interests- with the UAE then he/she could be considered a tax resident.
Another small detail added to the process of determining one's tax residency is the fact that parts of the days will also count towards the 90-day and the 183-day rules. This part affects significantly all professionals based in Dubai whose professions require substantial travelling outside the Emirates.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.