WHAT IS A TAX RESIDENCY CERTIFICATE AND HOW TO OBTAIN A TAX RESIDENCY IN THE UAE?
The United Arab Emirates or the UAE has quickly become a leading country when it comes to a lavish lifestyle, innovative landscapes and booming international trade. In the last few decades, the UAE especially Dubai and Abu Dhabi have seen a great rise in tourism and international trade. A country that was once only known for its treasure of oil is now attracting businesses from a variety of sectors and investors in the country.
This participation of international businesses and investors in the country is possible because the UAE is one of the countries that signed the Avoidance of Double Taxation Treaty or Double Taxation Avoidance Agreement (DTAA) with several nations around the world. This agreement allows the UAE to issue a Tax Residency Certificate which in return relieves the traders, investors and individuals from paying taxes in both the countries for the same income which results in a free flow of trade among the countries.
What is a Tax Residency certificate?
Tax Residency certificate, which is also known as Tax Domicile certificate is an official statement that is issued by the Ministry of Finance (MOF) of the UAE, International Financial Relation and Organisations Department which allows the companies and individuals to enjoy the various benefits of the Double Taxation Avoidance Treaty, an agreement between the UAE and several other countries around the world. To know with which countries the UAE has signed the Double Taxation Avoidance Treaty take a look at the complete list on the official website Ministry of Finance of the UAE.
A person gets a Tax Residency in Dubai, UAE only if he or she has resided for at least 180 days in the UAE. The certificate that is issued to an individual or the corporate organisation will be valid only in one country.
What is Avoidance of Double Taxation Agreement?
The Avoidance of Double Taxation Treaty or Double Taxation Avoidance Agreement (DTAA) is an agreement signed between the UAE and the countries so that the public or private companies, as well as individuals, are exempted from paying tax twice, for the same income. This becomes relevant when the individual is a resident of one country but earns his or her income from the other.
To make the avoidance of tax residency in the UAE eligible the UAE has signed the Avoidance of Double Taxation Agreement with more than a hundred countries in the world which includes Singapore, India, Hong Kong, New Zealand, Japan, Germany, Italy, The United Kingdom and many other countries around the globe.
What is the purpose of Avoidance of Double Taxation Agreement?
- The main goal of the agreement is to get rid of double taxation, fiscal taxes and additional taxes and indirect taxes.
- This form of relief from paying double taxes ensures foreign investment in the country, as the investors are exempted from paying any additional taxes.
- The agreement makes sure that there are no hurdles in cross- border trade and the flow of investment.
- A concession on tax rates is provided
What is the purpose of Tax Residency in the UAE?
The chief aim of tax residency in Dubai or in the UAE is to make an individual or a public or private company, eligible for the exemption of paying double tax for the same income.
That means if you are a UAE resident getting your income or other finances from a different country then with the help of a Tax Resident Certificate you can be relieved from paying the taxes twice for the same income.
As different Tax Residency Certificate is provided to both the individuals and the companies, a person can enjoy subsidies on both personal incomes and on the corporate level.
With the tax residency in Dubai, UAE along with your salary, your personal or corporate assets, capital gains etc. also receive a subsidy from paying tax. The Tax Residency Certificate will make sure you pay the taxes to any one country if the country has signed the Double Taxation Avoidance Agreement with the UAE.
Having Tax Residency Certificate will free you from paying taxes twice, however, it will not guarantee complete relaxation of payment. But it will spare you the payment of hefty numbers.
What are the criteria to get a Tax Residency in the UAE?
For getting a tax residency in the UAE there are certain criteria that the individual or the corporate entity has to meet. Some of the rules that are needed to be followed by both the companies and the individuals are mentioned below.
Criteria for individuals
- An individual can apply for tax residency only if they have spent at least 180 days in the UAE. Residents who do not reside in the country are not eligible for application.
- In order to apply for tax residency, it is mandatory to have a residency address in the UAE.
- The applicants are mandated to have a personal bank account for at least 6 months in a UAE bank as the authorities will not accept foreign bank statements.
Criteria for the companies
- Before applying for Tax Residency Certificate, the corporate organisations must conduct their commercial activities in the UAE for a year.
- The company must have a physical office space as virtual office space will not be sufficient for the application.
- The applicants are mandated to have a company bank account for at least 6 months in a UAE bank as the authorities will not accept foreign bank statements.
Which documents are required for applying for Tax Residency Certificate in the UAE?
If you are planning to apply for getting a Tax Residency Certificate, then you have to make sure that you have all the documents and statements that are required to carry out the process. The requirement of the documents may vary for individuals and companies and corporate entities. The below mentioned are the documents essential for the companies-
- A certified copy of audited financial statements of the company
- Approved company bank statement of a UAE company bank account for 6 months, verified by the bank
- A copy of the trade license
- A copy of the Memorandum of Association or MOA
- A certified copy of commercial tenancy or lease agreement that is valid for 3 months before applying
- A copy of the Chamber of Commerce Certificate
- A copy of the company’s proprietors/partners/shareholders/managers/directors’ passports, IDs and documents of residence.
- In a case where the firm is not a sole company, an establishment contract verified by an authorized official has to be submitted.
- Again, if the firm is not a sole company the organisational structure of the company s necessary.
Documents necessary for the application of Tax Residency Certificate for individuals are as follows-
- A copy of valid passport
- A copy of a visa provided at least 180 days prior to application
- A copy of Emirates ID
- A copy of the company’s proprietors/partners/shareholders/managers/directors’ passports, IDs and documents of residence.
- A copy of valid documents of residency
- Validated personal bank statement of a UAE bank account for 6 months, verified by the bank
- Evidence of income in the UAE like an income certificate
- A report from the General Directorate of Residency and Foreigners Affairs (GDRFA) presenting proofs of the duration stayed by the individuals in the UAE that is at least 180 days and all the ins and outs from the country.
- A certified copy of tenancy or lease agreement that is valid for 3 months before applying
What is the procedure to apply for Tax Residency Certificate in the UAE?
- Firstly, you need to create an online account and get registered with the Federal Tax Authority or the FTA.
- Fill the application form for the Tax Residency Certificate
- Attach the required documents that are necessary for the process in PDF OR JPEG format.
- At this stage, the authenticity of the submitted documents will be verified by the authorized officials.
- Once the verification of the documents is completed and if you meet all the criteria, you will receive an email that will notify you about the successful verification process and will ask you to make the payment through electronic means.
- Pay the necessary fees to carry out the further procedure, electronically.
- The Tax Residency Certificate will be issued to you and sent to your registered address through an express courier.
How many fees are charged for the issuance of the Tax Residency Certificate in the UAE?
As the Tax Residency Certificate in the UAE for both the companies and the individuals differ in nature, their costs also differ. The fees charged by the UAE authorities for Tax Residency Certificate issuance are as follows-
Charges for the corporate organisations
The fees charged for the application of the certificate is 100 dirhams and an extra 3 dirhams and it is supposed to be paid through an e-Dirham card. The amount for issuing the certificate and getting it delivered are required to be paid through an e-Dirham card.
Charges for the individuals
If you are applying for a Tax Resident Certificate you have to pay an initial fee of 100 dirhams and an extra 3 dirhams for the application through an e-Dirham card. For issuing the certificate and to get it delivered an amount is charged by the UAE Federal Tax Authority or the FTA which will be informed by the authorities and it must be paid by using an e-Dirham card.
In a case where you misplace the certificate or due to some reason it is damaged you can issue a replacement of the original certificate by paying 100 dirhams to the Federal Tax Authority (FTA) through an e-Dirham card.
How long does it take to get the Tax Residential Certificate in the UAE?
The duration of time is not fixed but the estimated time to check the documents and to verify the authenticity of the same before beginning the process to get the approval of the Federal Tax Authority (FTA) may take around 4 to 5 working days. Subsequently, after the approval is given and the confirmation is granted, the further process of issuing the certificate takes place which usually takes up to more than 4 to 5 working days.
How long is the Tax Residency Certificate valid in the UAE?
The Tax Residency Certificate can be made use of for a year from the date it was issued which means it is valid just one year from the day it was issued. After a year is complete, you can apply for the tax residency in Dubai or Abu Dhabi as an individual or a corporate entity again for the next year. The certificate that will be issued to you will be valid only in one country.
How will MBB Auditing assist you to get a Tax Residency in the UAE?
MBB Auditing has been in the industry for almost 20 years and is providing unparalleled services to our clients. Because the quality of our work is high we are often requested services from clients that include government offices and organisations, private corporate firms from all over the UAE and from around the world.
Applying for a Tax Residency Certificate can be very hectic and a hassle, as there are dozens of documents that need to be arranged and submitted. But when you have MBB Auditing on your side it will not be so complicated. Our experienced industry experts will guide you through each step of the process and make sure that the application process goes smoothly without any interruptions.
We have great pride in our team of extremely determined and hardworking professionals that are dedicated to solving your problems without any delay and without any errors. So, if you are looking for tax residency in the UAE and are looking forward to applying for a Tax Residency Certificate MBB Auditing is the right place for you.
This blog has seemed helpful to me. It has in-depth information about the Tax residency in Dubai, which I was looking for. Understanding the criteria to get a tax residency in the UAE part was helpful. Grateful for the efforts taken on your side.