UAE Tax Residency Certificate: Benefits And Requirements

What is a UAE Tax Residency Certificate (TRC)?

A Tax Residency Certificate is an official document issued by the UAE Federal Tax Authority that certifies that an individual or a company is a resident in the United Arab Emirates for a given tax year.

This certificate plays a relevant role in benefiting from the provisions of Double Tax Avoidance Agreements that the UAE has signed with multiple countries. These agreements help prevent double taxation on the same taxpayer on the same tax base (e.g., income), allowing UAE residents to avoid being taxed by both the UAE and their home country.

Required Documents for Individuals

Individuals seeking a tax residency certificate in the UAE need to provide the following documents:

1. Passport.
2. Valid Residence Permit.
3. Emirates ID.
4. Certified Copy of Residential Lease Agreement or electricity bill.
5. Title deed in case of private property.
6. Source of Income/Salary Certificate.
7. Bank Statement, covering six months within the financial year related to the request.
8. Entry and Exit Report, confirming that the applicant has resided in the UAE for more than 183 days within the financial year related to the request*.
9. Proof of Permanent Place of Residence.

Also, there are third additional requirements based on specific circumstances, such as the following:

• For self-employed individuals, provide a trade license and share certificate.
• If the applicant owns a property and uses the earnings as a source of income, provide a lease agreement if the property is leased.
• If the applicant is retired, provide a letter addressed to the FTA stating that they are using their own savings, bonds, or investments. Additionally, provide an official supporting document.
• If the applicant is sponsored by their husband or wife, provide a salary certificate, Marriage certificate or proof of income of the sponsor.

*If the applicant has not spent more than 183 days in the UAE, then it may only qualify for a TAX Residency Certificate for Domestic purposes.

Required Documents for Companies

For private companies seeking a tax residency certificate, the following documentation is necessary:

1. Trade License.
2. Memorandum of Association.
3. Proof of Authorization (from Memorandum of Association or Power of Attorney).
4. Audited Financial Report.
5. Certified Lease Agreement.
6. Bank Statement, covering six months within the financial year related to the request.

Benefits of obtaining a UAE Tax Residency Certificate

Acquiring a tax residency certificate in the UAE is essential for individuals and businesses aiming to take full advantage of UAE's favourable tax environment. This certificate serves as official documentation of residency, confirming that, in accordance with the applicable Agreement for the Avoidance of Double Taxation between the UAE government and a third jurisdiction, the UAE Federal Tax Authority recognizes the taxpayer as a resident of the United Arab Emirates.

In this sense, a UAE tax residency certificate offers several key advantages:

• Prevention of Double Taxation: enables individuals and businesses to take advantage of the UAE's attractive tax policies, ensuring they are not taxed twice on the same income in different jurisdictions.
• Verification of residency: provides proof of residency, which is essential for UAE residents when engaging with third parties, such as during Know Your Customer (KYC) or Know Your Business (KYB) processes.
• Proof of Tax Residency: allows individuals and entities to establish their tax residency in the UAE, a jurisdiction that imposes no personal income tax and maintains low corporate tax rates.
• Cross-border transactions: provides benefits for expatriates and businesses with cross-border financial interests, as it facilitates international transactions and can be provided as proof of compliance with tax obligations.

In summary, obtaining a UAE tax residency certificate is a strategic move for anyone looking to optimize their tax situation and navigate the complexities of international taxation effectively.

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.