People are traveling frequently in today’s day and age and are becoming pragmatic on where they choose to live and function. In modern-day countries with minimal to no taxes is becoming increasingly common, this is a consequence of the value it holds over those places that have a high consistent tax bracket. The UAE is a tax-free country, but if you are a citizen of the Emirates, if the Double Taxation Avoidance Agreement has been concluded between those two nations, you will be relieved of the tax burden of your home country. What tax residency certificates are in the UAE or how they are applied to double taxation or indeed what double taxation entails can be unclear for certain individuals. We will cover the details you need to know about the tax citizenship certificate and a little of the history of double taxation in this post.
What is a Tax Residence Certificate?
The UAE Tax Residency Certificate (or TRC or UAE Tax Domicile Certificate) is an official document provided electronically to persons and private organizations living in the UAE by the UAE Ministry of Finance (before mid-2018, it was a paper document). UAE tax residents may be exempted from taxes in their home country on the basis of this credential since they are deemed to be tax residents of the UAE. It is necessary to grant a certificate either in English or in Arabic. The document’s legitimacy and accuracy can be checked online.
We must first describe what it actually implies before getting into specifics concerning tax residency certificates (TRC). A certificate of tax residence (domicile) is a document stating that, from the point of view of local authorities, a corporation or a private citizen has the right of tax resident in the UAE. That is, a corporation or individual in this nation earns revenue and pays taxes here at the local rate (almost in all cases 0 percent). In the new era, the position of benefit is no longer restricted to the country of company registration or a person’s home country, since the sources of profit will be everywhere in the world. At the same time, by taxing its citizens, each nation seeks to collect its revenue. Double taxation arrangements were once signed between countries in order not to pay different payments for the same revenue. A tax residency certificate is necessary to validate the fact that the tax authority in your nation collects taxes in another country, i.e. you may use the double tax treaty in effect.
As long as such requirements are met by them, both persons and onshore and free zone businesses are entitled to assert the Tax Residency Certificate. However, as they are not deemed to be citizens of the country, the Ministry of Finance of the UAE does not allow offshore corporations to have a Tax Residency Certificate.
Benefits of Tax Residency in the UAE
- Use a 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 stated, a tax residency certificate may be received by individuals who live in the UAE. In addition, it may also be used to benefit from dual tax treaties. In the absence of a double tax treaty between the UAE and a particular country, the certificate of residence may be of great importance because it serves as an official confirmation of the residence of a person or 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)
There are also some conditions for enterprises that they need to fulfill before they can receive a Tax Residency Certificate. Without testing whether they apply, a company may not easily request the credential, because their application can be denied if they may not meet the necessary criteria. Below is the set of requirements that must be met by companies:
- 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
- The 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
Certificates of tax residence are pretty definitive confirmation of tax residency. In addition, a taxpayer could offer considerable tax savings. Sometimes at the “expense” of agreeable nations for which a tax treaty was concluded by the UAE. TRCs are therefore not quickly given out, and some substance is needed. The tax certificate of residency is given by the Ministry of Finance of the UAE. The credential can be given either to a business registered in the UAE or to persons residing in the UAE. The duration of the Tax Citizenship Certificate is for one year.
When depending on a treaty, it is necessary to verify beforehand if this condition is enforced by the source state and what the policy of the UAE Ministry of Finance is regarding the question of tax residence certificates in light of this treaty. For instance, the Ministry does not issue tax residence certificates for foreign corporations, but it does issue for mainland and free zone entities.
We Are Here for You
Please reach out to us if you need any guidance or help to receive your TRC tax residency certificate – for a private individual or business. With all the measures and papers, our advisors at Riz and Mona Consultancy will support you. To book your appointment with our advisors, contact us today.