How to Obtain Tax Residency Status in the UAE

Becoming a tax resident in the UAE offers a range of advantages, thanks to the country’s favorable tax environment, thriving economy, and stable political landscape. This status not only provides relief from double taxation but also opens doors to numerous benefits, especially for investors and entrepreneurs seeking to capitalize on the UAE’s dynamic business climate.

Why Pursue UAE Tax Residency?

UAE tax residency is available to both individuals and legal entities, providing a pathway to significant financial and operational advantages. Obtaining a Tax Residency Certificate (TRC), which was formalized under Cabinet Resolution No. 85 in September 2022, allows you to benefit from the UAE’s tax treaties and other incentives.

Key Advantages of UAE Tax Residency:

1. Simplified Registration: The process of obtaining tax residency is straightforward, allowing you to focus on your business or investment activities.
2. Favorable Business Environment: Entrepreneurs and company owners benefit from various state privileges and incentives, enhancing business growth prospects.
3. Confidentiality: Company details are stored in a secure, closed registry accessible only to the owner and legal authorities.
4. Tax Benefits: Individuals enjoy a tax-free environment, while legal entities are subject to a minimal VAT of 5% and a corporate tax of 9% for turnovers exceeding 375,000 dirhams.
5. Avoidance of Double Taxation: UAE tax residency helps mitigate the risk of double taxation, particularly beneficial for foreign nationals.

Eligibility Criteria for UAE Tax Residency

To qualify as a tax resident in the UAE, individuals must meet one of the following conditions:

• Physical Presence: Spend at least 90 days in the UAE within a calendar year (for UAE or GCC citizens) or 183 days for other nationals.
• Economic Ties: Establish significant economic ties to the UAE, such as owning a business or holding permanent employment.
• Legal Entities: Companies must be registered and operate under UAE law, with a focus on conducting legitimate and compliant business activities.

Step-by-Step Guide to Obtaining a Tax Residency Certificate

1. Document Preparation: Gather necessary documents such as passports, residency visas, and proof of permanent residence. Legal entities must provide registration certificates, financial statements, and relevant identification for directors or shareholders.
2. Contact the UAE FTA: Reach out to the Federal Tax Authority (FTA) or relevant local tax service for guidance. Applications can be submitted online through the FTA portal.
3. Application Submission: Complete the online application, upload the required documents, and pay the associated fees.
4. Fee Payment: Administrative fees vary, with costs ranging from 50 AED to 1,750 AED depending on your registration status.
5. Await Approval: After submission, the FTA will review your application. The approval process typically takes about 7 working days, but it may extend depending on the completeness of the documentation.

Challenges and Considerations

While the process is generally straightforward, common reasons for denial include incomplete documentation, data entry errors, or security check issues. Ensuring that all paperwork is accurate and complete will increase the likelihood of a successful application.

Conclusion

Securing tax residency in the UAE is a strategic move for both individuals and businesses aiming to optimize their tax position and take advantage of the UAE’s robust economic opportunities. The Level Consulting is here to assist with every step of the process, from company registration to document preparation and beyond. Reach out today to start your journey toward UAE tax residency.