In September 2022, the United Arab Emirates (UAE) introduced, for the first time, rules for determining tax residency in the UAE (Cabinet Resolution No. 85 of 2022 (the Resolution). This marked an important step in aligning the UAE’s tax residency framework with international standards by clearly defining when an individual or legal entity is considered a tax resident.
Here we summarise the relevant rules for individuals. Anyone considering relocating to the UAE should obtain specific legal advice on the application of the rules to them.
Tax residency for individuals
Under Article 4 of the Resolution, a natural person (ie an individual) is regarded as tax resident if they meet any of the following conditions:
Centre of life in the UAE
The individual’s usual or primary place of residence and the centre of their financial and personal interests is in the UAE.
An individual's primary place of residence is where the individual habitually or normally resides – that is, where they spend most of their time compared to any other jurisdiction.
183-day test
The individual has been physically present in the UAE for 183 days or more within a consecutive 12-month period.
90-day test
The individual has been physically present in the UAE for 90 days or more within a consecutive 12-month period and meets the following conditions:
- is a UAE national, holds a valid residence permit in the UAE, or is a citizen of a Gulf Cooperation Council member state
- has either a permanent place of residence in the UAE or carries on an employment or business in the UAE.
A permanent place of residence is somewhere that is continuously available to the individual to occupy, whether owned or rented by that individual or otherwise.
Business is any activity carried out on an ongoing basis regularly and independently, including, but not limited to, commercial, professional, service, or industrial activities.
All days (including part-days) spent in the UAE count towards the 90-day and 183-day thresholds, event if not consecutive.
An individual can be or become tax resident in the UAE by meeting any of these tests..
Double taxation agreements (DTA) and the Tax Residency Certificate (TRC)
An individual (or legal entity) deemed tax resident in the UAE may apply to the Federal Tax Authority (FTA) for a TRC (Article 5 of the Resolution). This document serves as official confirmation of UAE tax residency and is often required to claim treaty benefits under a DTA.
While the three tests outlined above determine residency for an individual for domestic UAE purposes, the FTA has indicated that for a TRC to be issued to an individual for (non-domestic) DTA purposes, an individual must have been physically present in the UAE for 183 days or more within a consecutive 12-month period.
The starting position is that this is the Gregorian calendar year although potentially this could be a different consecutive 12-month period. For example, for UK tax purposes (the UK tax year running from 6 April in one year to 5 April in the following year) it would be helpful if the period of the TRC reflected the 12-months from 6 April to 5 April.
As such, individuals seeking a TRC for DTA purposes will need to ensure they meet the 183-day requirement (ie limb two of the tests set out above).
Practical considerations
If you intend to establish tax residency in the UAE, applying for a TRC can help provide formal confirmation of your residency status and support your position with foreign tax authorities.
If you or your clients have any questions on UAE tax residency, please let us know and we would be pleased to support.
