TRC- Tax Residency Certificate in the UAE
The UAE has gone from being a country entirely reliant on oil revenue to a country with a broad economy that attracts investment from all over the world in a relatively short amount of time.
The Emirates of Dubai and Abu Dhabi, in particular, have established themselves as global financial hubs that embrace cutting-edge technology, as well as attractive tourist destinations with world-famous landmarks and high-end hotels.
The UAE’s favorable tax climate is one of the many advantages that lure firms to the country. The great majority of enterprises that have their headquarters in the UAE are tax-free. Furthermore, it has signed double taxation treaties with several trading partners to ensure that the same taxpayer is not taxed twice in two different nations.
The UAE currently has 135 double taxation agreements in place or the works. This promotes open trade and investment from other countries while also safeguarding member countries from double taxation on products, capital, and services exchanged.
Companies or individuals must have a Tax Domicile Certificate (TDC), also known as a Tax Residency Certificate, to take advantage of the UAE’s double taxation avoidance agreements (TRC).
What is a Tax Residency Certificate?
A Tax Residency Certificate is a document provided by the UAE Ministry of Finance (MoF) to a firm operating in the country to establish tax residency and take advantage of double taxation treaties.
Any company operating on the mainland or in a Freezone that has been active in the country for at least a year is eligible for a Tax Residency Certificate. Offshore corporations are not eligible and must instead get a tax exemption certificate rather than a Tax Residency Certificate.
Individuals who have lived in the UAE for at least 180 days and seek to establish tax residency in the country can apply for a Tax Residency Certificate. This is especially advantageous for people whose home countries do not have a double taxation treaty with the UAE. To apply, persons must have a valid UAE resident visa that is valid for more than 180 days
What are the requirements to obtain the Tax Residency Certificate?
Individuals must meet different standards than corporations to acquire a Tax Residency Certificate. In both circumstances, the steps are outlined below:
Requirements for an individual to obtain the Tax Residency Certificate in the UAE
The following documents are required:
- Passport copy and valid visa copy issued at least 180 days earlier
- Emirates ID copy
- 6 months of personal UAE bank statements, stamped by the bank
- Proof of income in UAE – e.g. employment agreement, share certificate, salary certificate
- A report from the General Directorate of Residency and Foreign Affairs (GDRFA), showing evidence of all entries into and exits from the UAE
- A copy of the certified tenancy contract or title deed, valid for at least three months before the application
The Tax Residency Certificate application fees are AED 2000, payable to the Ministry of Finance (MoF). These fees must be paid through UAE e-Dirham Card.
What is the process for obtaining the Tax Residency Certificate?
- Create an account on the payable to the Ministry of Finance (MoF) portal
- Complete the application form
- Attach the required documents in PDF or JPEG format
- Your application and attached documents will be verified and if they meet the criteria, you’ll receive an email confirmation and be asked to pay the remaining fees via the system
- After payment confirmation, you’ll receive the certificate via an express courier
How long does it take to obtain the UAE Tax Residency Certificate?
The pre-approval process with the Ministry of Finance (MoF) normally takes 4 to 5 working days if all essential documents are in order. The MoF can take up to 5 working days to provide the tax residency certificate after pre-approval and confirmation that all documents are correct.
The validity duration of the Tax Residency Certificate / Tax Domicile Certificate is one year, and it can be renewed each year, subject to the resubmission and renewal process.
What are the benefits of obtaining a UAE Tax Residency Certificate?
When establishing a firm in Dubai or Abu Dhabi, investors in the UAE gain access to international markets. Being a Tax Resident in the UAE and acquiring the UAE Tax Residency Certificate has the added benefit of avoiding double taxation and receiving tax incentives. Individuals and businesses can apply for separate UAE Tax Residency Certificates, which allow income to be covered on both an individual and corporate basis.
Effective tax planning requires an overall view of your business structure and personal circumstances, and we recommend that you seek professional tax advice, as well as accounting and finance support, to ensure that your corporate structure and personal situation comply with tax rules, so you can get the most out of your UAE tax residency.
KSA Cabinet approves Double Tax Treaty with the UAE
The DTT between the Kingdom of Saudi Arabia and the United Arab Emirates is the first between two GCC member states, and it is intended to allow more cross-border trade and investment between the two countries. The DTT mostly follows the OECD Model Tax Convention from 2014.
The DTT includes a description of the types and levels of activity that would generate a taxable presence in the other nation, as well as certain significant modifications to the taxation of payments (e.g. interest, royalties, service fees) between the countries. This may lessen taxation and compliance obligations while also providing better assurance to taxpayers.
Individuals and businesses residing in the Kingdom of Saudi Arabia and the United Arab Emirates have access to the DTT. Individuals from the UAE and Saudi Arabia do not need to stay in the UAE or Saudi Arabia for DTT purposes.
A summary of the key provisions of the DTT is listed below:
- An exemption from withholding tax (“WHT”) on interest and service fees
- A reduced WHT rate of 10% on royalty payments
- A maximum 5% WHT on dividends (same as the domestic dividend WHT rate in KSA)
- No relief from non-resident taxation on the transfer of shares or immovable property
- Foreign national residents of the UAE or KSA may also benefit from the DTT
- Sovereign Wealth Funds and certain entities that are exempt from tax expressly qualify for DTT benefits.