Corporate Tax UAE

Recently, the United Arab Emirates (UAE) issued Cabinet Decision No. 85 of 2022 dated 2 September 2022 (Decision), laying down the criteria for being considered as a tax resident for legal and natural persons . So far, In absence of Personal or Corporate tax, there was never a definition of tax residence and criteria for the same. In view of increasing importance of establishing Tax residency from CRS and other perspective, the request for issuance of Tax Residency certificate was on rise and hence, Ministry of Finance thought it fit to spell out the criteria that they consider satisfactory for this purpose. Below are the highlights of the Decision:

- It is effective from 1 March 2023;

- It lays down the requirements and conditions for determining the tax residency of a legal and natural person in the UAE;

- The juridical or natural person may submit an application to the Federal Tax Authority (FTA) for issuing a Tax Residency Certificate (TRC); and

- If any Double Tax Treaty (DTT) specifies any conditions for determining a person's tax residency, the provisions of that DTT shall apply.

The conditions for determining tax residency are given below:

A legal person shall be considered a Tax Resident in the State in either of the following cases: 

- It was incorporated, formed or recognised in accordance with the legislation in force in the UAE, and that does not include the branch of a foreign legal entity in the UAE

- It is considered a Tax Resident in accordance with the Tax Law in force in the UAE.

A natural person shall be considered a Tax Resident in the State where any of the following conditions are met:

- If his usual or primary place of residence and the centre of his financial and personal interests are in the UAE, or he meets the conditions and criteria determined by a decision from the Minister

- If he has been physically present in the State for a period of (183) one hundred and eighty-three days or more, within the relevant (12) twelve consecutive months

- If he

a. has been physically present in the UAE for a period of 90 days or more, within the relevant 12 consecutive months and is a UAE national, holding a valid Residence Permit in the UAE; or

b. holds the nationality of any other Gulf Cooperation Council country; and

c. has either a Permanent Place of Residence (i.e. the place located in the UAE and available to the natural person at all times) in the UAE, or carries on employment or business in the UAE.

The above Cabinet decision is significant and seems to pave way for the upcoming Corporate Tax regime in the UAE as the scope of Corporate tax is based on the residency criteria. Further, it lays down clearly for Individuals what are the conditions to be met.