The Tax Residency Certificate (TRC) in the UAE serves as a crucial document for individuals and businesses seeking to affirm their residency status for tax purposes, thus playing a pivotal role in the avoidance of double taxation under the UAE’s expansive Double Taxation Avoidance Agreements (DTA). It is accessible to both natural and legal persons, indicating a wide scope of applicability across different entities within the country. The TRC’s significance is further underscored by its availability through a dedicated 24/7 online platform, demonstrating the UAE’s commitment to facilitating seamless tax administration.

Understanding Tax Residency in the UAE

In understanding tax residency in the UAE, it’s essential to grasp the foundational elements that define its unique tax landscape:

Taxation Policies:

• The UAE does not levy income tax on wages, dividends, interest, or other forms of income earned outside the country. This policy extends to both individuals and businesses, with corporations facing a modest tax rate of 9% on profits exceeding 375,000 dirhams ($100,000 USD) annually.
• Privacy is a cornerstone of the UAE’s tax system, as evidenced by its non-participation in the Automatic Exchange of Tax Information (AETI), which safeguards financial information from automatic global sharing.

Benefits of Tax Residency:

• Tax residency status in the UAE facilitates easier bank account operations and access to high-quality healthcare and educational services. The country’s safety, stability, low crime rate, and high living standards further complement the financial benefits of tax residency.

New Criteria for Tax Residency:

• As of 1 March 2023, individuals may qualify as UAE tax residents if they have their primary residence and center of financial and personal interests in the UAE, or if they have been physically present in the country for at least 183 days over a consecutive 12-month period. Legal entities gain tax residency status if established or recognized under UAE law, excluding foreign legal person branches. This comprehensive approach ensures that substantial links and economic activities within the UAE are recognized, simplifying the process for expatriates and aligning with international standards.

Eligibility Criteria for Obtaining a TRC

To qualify for a Tax Residency Certificate (TRC) in the UAE, applicants must meet specific criteria, which differ slightly between natural persons and legal entities. Here’s a breakdown of the eligibility requirements:

For Natural Persons:

• Residency Duration: Must have resided in the UAE for at least 180 days.
• UAE Residence Visa: A valid UAE residence visa is mandatory.
• Annual Lease Agreement: An official documented annual lease agreement is required.
• Additional Criteria: Meeting the in-country day-counting criteria, such as staying in the UAE for at least 183 days within 12 consecutive months or other special conditions, may also apply.

For Legal Persons:

• Establishment Period: The entity must have been established in the UAE for a minimum of one year.
• Audited Financial Accounts: Financial accounts must be audited or prepared by an accredited audit firm.
• Valid Trade License and Other Documents: A valid Trade License, certified establishment contract, Shareholders and Manager Information, Audited Financial Statements for the past 12-month period, bank stamped statements for the previous six months, certified lease agreement or tenancy contract, and Tax Forms (if applicable) are required.
• Exclusion: Offshore companies are not eligible for the TRC service.

These criteria ensure that both individuals and companies demonstrate a substantial economic presence and commitment to the UAE before being granted a TRC, aligning with global tax residency standards.

Benefits of Holding a UAE Tax Residency Certificate

Holding a UAE Tax Residency Certificate (TRC) offers a plethora of benefits, crucial for individuals and businesses looking to optimize their tax obligations and enhance their financial and operational efficiency. Here are some of the key advantages:

1. Double Taxation Avoidance:

• The TRC plays a pivotal role in preventing the need to pay taxes in two countries simultaneously, thanks to UAE’s double taxation avoidance agreements with numerous countries globally. This ensures that income is taxed in only one country, providing significant savings and financial efficiency.

2. Legal and Financial Benefits:

• Legal recognition of tax residency status in the UAE, facilitating easier banking operations, including the opening of bank accounts, and leasing properties for residential or business purposes.
• Almost complete tax exemption and the right to claim benefits related to import-export processes, enhancing the competitiveness of businesses on an international level.

3. Credibility and Compliance:

• Holding a TRC enhances the credibility and transparency of individuals and companies, proving their residency in the UAE. This is particularly beneficial in maintaining compliance with the Common Reporting Standard (CRS) group of nations and allows for claims of excess taxes paid, ensuring fairness in taxation for taxpayers and the government alike.

These benefits collectively contribute to the strategic advantage of holding a TRC, not just in terms of tax savings but also in reinforcing the legal and operational standing of entities and individuals in the UAE and abroad.

Required Documents for Application

When applying for a Tax Residency Certificate in the UAE, both natural and legal persons must prepare a comprehensive set of documents to prove their eligibility and residency status. The requirements vary slightly depending on the applicant’s category but are designed to ensure a smooth application process:

For Natural Persons:

• Passport copy 
• UAE Residence Visa copy 
• Emirates ID copy 
• Certified copy of the residential lease agreement or Tenancy Contract Copy
• Source of income (e.g., Salary Certificate, Trade License, etc.)
• Validated bank statements for 6 months from a local UAE Bank 
• A report from the General Directorate of Residency and Foreigners Affairs or Federal Authority for Identity and Citizenship (ICA) specifying the number of days the resident has stayed in the UAE 
• Tax forms (if any) from the country in which the certificate is to be submitted 

For Legal Persons:

• A copy of the trade license and directors/shareholders’ attachment 
• Establishment contract certified by official authorities (if it is not a Sole Company)
• A copy of the legal person’s owners/partners/directors’ passports, Emirates IDs, and permits of residence
• A certified copy of the audited financial accounts 
• Validated bank statements for 6 months from a local UAE Bank
• A certified copy of the lease agreement 
• Requesting letter issued by the company (signed and stamped by the Authorized signatory) 

These documents collectively help ascertain the applicant’s tax residency status in the UAE, ensuring compliance with local and international tax regulations.

Conclusion

Obtaining a Tax Residency Certificate (TRC) in the UAE is a strategic move for individuals and businesses. This guide outlines how to get a TRC, highlighting the UAE’s commitment to a streamlined tax system. Holding a TRC not only simplifies tax planning but also enhances your financial standing globally. By understanding eligibility and the application process, you can leverage the TRC to optimize your tax obligations and enjoy the benefits of the UAE’s tax system.