In today’s world, people are traveling more and are becoming flexible about where they want to live and work. Countries with low or no taxes are getting extremely popular in the modern-day, this is a result of the advantage it holds over those places who have a high consistent tax bracket. UAE is a tax-free country, so if you are a tax resident in the Emirates, you will be relieved from the tax burden in your home country, if Double Taxation Avoidance Agreement has been signed between those two countries. It might be confusing for some people what tax residence certificate in UAE is or how it is connected to double taxation or even what double taxation means. In this article, we will discuss the information that you need to know regarding the tax residency certificate and a bit of the history of double taxation.
What is a Tax Residence Certificate?
UAE Tax Residency Certificate (or TRC (for short) or UAE Tax Domicile certificate) is an official document issued by the UAE Ministry of Finance electronically (before mid-2018 it was a paper document) to individuals and corporate entities residing in the UAE. Based on this certificate, UAE tax residents can be relieved from taxes in his home country as he is considered a tax resident of the UAE. A certificate can be issued either in English or in Arabic. The validity and authenticity of the document can be verified online.
Before going into details on tax residency certificates (TRC), we must first define what it really means. A tax residency (domicile) certificate is the document confirming that a company or a private person has a tax resident status in the UAE from the viewpoint of local authorities. That is, a company or an individual receives income in this country and pays taxes here at the local rate (almost in all cases 0%). In a modern world, the place of profit is no longer limited to the country of business registration, or native country of a person, since the sources of profit can be anywhere around the world. At the same time, each country seeks to receive its income by taxing its residents. In order not to pay several fees for the same income, double taxation treaties were once concluded between the countries. A tax residency certificate is required to confirm the fact of receiving income in another country to the tax authority of your country, that is, you can use the double tax treaty in practice.
All individuals and onshore and free zone companies are allowed to claim the Tax Residency Certificate as long as certain conditions are fulfilled by them. However, the UAE’s Ministry of Finance does not allow the offshore companies to have the Tax Residency Certificate as they are not considered to be residents of the country.
Benefits of Tax Residency in the UAE
- Use double taxation avoidance agreement between UAE and your country in order to levy income taxes at home
- Claim back the taxes in case you had paid them in the same year when you became a UAE tax resident
- A tax residency certificate avoids double taxation during the import-export process
- It leads to the strengthening of trade relations between countries
- Fairness across the board for taxpayers, companies, or individuals, and protecting the national economy
As already mentioned, individuals who are residing in the UAE can obtain a tax residency certificate. Furthermore, it can also be used for double tax treaties’ advantages. In the circumstances when there is no double tax treaty between UAE and some particular country, the residency certificate can be of great importance as it serves as the official confirmation on the tax residency of a person or a legal entity in the United Arab Emirates.
Documents Required to Obtain Tax Residence Certificate
Listed below are the documents that are necessary to be submitted by individuals in order to obtain the Tax Residency Certificate:
- A valid passport and visa copies issued at least before 180 days of expiration
- Emirates ID copy
- Six-month UAE bank statement (should be stamped by the bank)
- Valid proof of income in the UAE (e.g., employment agreement, salary certificate, etc.)
- Immigration report (shows the recorded entries of coming in and going out of the UAE)
- Tenancy agreement or title deed (certified copy, it should be valid for a minimum of three months before the application)
For companies, there are also certain requirements that they need to meet before they can obtain a Tax Residency Certificate. An organization cannot simply request for the certificate without checking if they qualify since their application might be rejected if they do not follow the needed requirements. Below is the list of the conditions that companies are required to fulfill:
- Copy of the company’s valid trade license
- Tenancy agreement or title deed certified copy (this should be valid for a minimum of three months before the application) vat in UAE
- Physical office space, not a flexi desk
- Valid passport
- Copy of visa and Emirates ID of the company Director/Manager
- A latest financial statement that has been certifiably audited or the company’s UAE bank statements for the last six months (should be stamped by the bank)
The documents and the application are provided to the Ministry of Finance, which will proceed with the compliance procedure and will issue the Tax Residency Certificate within approximately 2-3 weeks.
Tax Residence Certificate Process
Tax residence certificates are quite definitive proof of tax residency. Moreover, they could offer significant tax savings to a taxpayer. Often, at the “expense” of friendly nations with whom the UAE signed a tax treaty. Therefore, TRCs aren’t handed out easily, and some substance is required. The tax residence certificate is issued by the Ministry of Finance of UAE. The certificate can be issued to a company registered in the UAE and also for individuals who are residing in the UAE. The Tax residency certificate validity is for one year.
It is important to check beforehand when one is going to rely on a treaty, whether the source state imposes this requirement and what the policy of the UAE Ministry of Finance is regarding the issue of tax residence certificates in the context of this treaty. For instance, the Ministry does not issue tax residence certificates for international companies, but it does issue for mainland and free zone entities.
We Are Here for You
If you need any advice or support on getting your tax residency certificate TRC – for a private person or company – simply get in touch with us. Our advisors at Riz and Mona Consultancy will help you with all the steps and documents. Call us today to book your appointment with our consultants.