00:00UAE's Tax Residency Law What Expats Need to Know About Recent Changes
00:06The UAE has long been recognized as a favorable tax destination for individuals and businesses,
00:11drawing expatriates worldwide with its strategic location, flourishing economy, and accommodating
00:16tax policies.
00:17However, recent challenges faced by some expats regarding their new tax residence status encouraged
00:22the UAE government to take significant action.
00:25The UAE Cabinet issued Decision No. 85-2022 on the determination of the tax domicile,
00:31accompanying in a new era of tax residency regulations aimed at modernizing the tax system
00:36and aligning with international standards.
00:38In a significant development for expatriates residing in the UAE, the Ministry of State
00:43for Financial Affairs has issued Ministerial Decision No. 247-2023, outlining the rules
00:48for obtaining a tax residency certificate for international agreements.
00:52Understanding Cabinet Decision No. 85-2022 On the determination of the tax domicile,
00:58Cabinet Decision No. 85-2022, effective from March 1, 2023, aims to simplify the process
01:04for expatriates to establish their tax residency in the UAE.
01:08Before its implementation, the lack of clear rules presented challenges, making it difficult
01:12for expatriates to prove their tax residency and access benefits from double taxation agreements.
01:18The decision introduces a definition and criteria aligning with international standards,
01:22providing expatriates with a clearer and more transparent framework for determining their
01:26tax status in the UAE.
01:28This simplification is anticipated to update procedures and enhance expatriates' ability
01:33to control the advantages offered by double taxation agreements.
01:37Criteria for Tax Residency According to Article 3 of Cabinet Decision
01:40No. 85-2022, legal persons are considered tax residents if they are established, formed
01:46or recognized following the laws of the UAE, and it is not a branch that is registered
01:51by a foreign legal person.
01:52According to Article 4 of Cabinet Decision No. 85-2022, natural persons are considered
01:58tax residents if they meet the following habitual or primary residence if a natural person's
02:03main home and the place where they handle financial matters are in the UAE, meeting
02:08conditions specified by the minister.
02:10Physical Presence Criteria Spending 183 days or more in the UAE within
02:14a 12-month period, additional conditions, being physically present in the UAE for 90
02:19days or more within a 12-month period, holding UAE nationality, a valid residence permit
02:25or the nationality of any GCC country, and meeting specific conditions like having a
02:29permanent residence or holding a position in the UAE.
02:33While the number of days remains a factor, the determination of tax residence now involves
02:37a comprehensive evaluation of an individual's situation, recognizing substantial links in
02:42economic activities in the UAE.
02:44These definitions provide clarity and specificity in determining tax residency for both legal
02:48and natural persons under the new decision.
02:51Tax Residents Under Double Taxation Agreements, DTAs.
02:55Ministerial Decision No. 247-223 on Tax Residents Under Double Taxation Agreements.
03:01Are mutual agreements entered into by two countries to avoid the double taxation of
03:05income and to promote cross-border trade and investment.
03:08These agreements generally provide rules for determining the tax residence of individuals
03:12and legal entities, as well as rules concerning how the two countries allocate taxation rights
03:17on certain forms of income.
03:18Currently, the UAE has signed double taxation agreements with more than 130 countries.
03:24The new tax residence criteria are important for those wishing to benefit from the advantages
03:28afforded by the UAE's tax agreements.
03:31To do so, individuals and legal entities must first establish their tax residency status
03:35in accordance with the rules set out in the applicable DTAs.
03:39As per Article 5 of Cabinet Decision No. 85-2022, if a legal or natural person qualifies as
03:45a tax resident, they may apply for a tax domicile certificate with the Federal Tax Authority.
03:50However, it is still to be determined what the application process will be.
03:54Article 6 of Cabinet Decision No. 85-2022 outlines that, if a bilateral or multilateral
03:59agreement specifies conditions for tax residency, those provisions will be applied.
04:05Official Decision No. 247-2023 in the UAE outlines procedures for obtaining a tax residency
04:11certificate for international agreements, effective from March 1, 2023, in cases where
04:16an international agreement specifies tax domicile determination.
04:20Article 6 of Cabinet Decision No. 85-2022 mandates applying the agreement's specifications.
04:25The tax minister will define the format and method for issuing tax domicile certificates
04:30for international agreements.
04:32Conditions for a tax residency certificate submitted with the requisite information will
04:36be approved if the applicant meets the conditions outlined in the relevant international agreement.
04:41Additionally, Article 7 of Cabinet Decision No. 85-2022 empowers the Federal Tax Authority
04:46to seek information from government agencies to implement the decision, mandating full
04:51cooperation from all government entities.
04:53Conclusion.
04:54The new tax residency rules in the UAE represent a positive step towards transparency and compliance
05:00with international standards.
05:02Taxpatriots can navigate these regulations with a clearer understanding, ensuring they
05:06establish their tax residency and avail themselves of the benefits outlined in double taxation
05:11agreements.
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