The United Arab Emirates has transformed itself from a country once completely reliant on oil revenue, to one with a diverse economy attracting investment from all around the world. Certain emirates like Dubai or Abu Dhabi have become financial centers that attract hundreds of entrepreneurs thanks to their multiple incentives. One of these incentives is the favorable tax environment. For this reason, we will now learn in-depth how to obtain a tax residency certificate in the UAE.
In this article, you will find information about the taxation system in the UAE, the process to obtain a tax residency certificate in the UAE, and how we can help you with this process.
- Taxation in the United Arab Emirates
- What kind of taxes exist in the UAE?
- Tax residency certificate in the UAE
- Requirements to obtain the tax residency certificate
- Process of obtaining the tax residency certificate in the UAE
- How long does it take to obtain the tax residency certificate in the UAE?
- Benefits of obtaining the tax residency certificate
- How can Connect Zone help you get a tax residency certificate in the UAE?
1. Taxation in the United Arab Emirates
In a globalized world, companies no longer have to be restricted to a single geographical territory, instead, they are spread across the globe. As total income is generated by different countries, each country wishes to tax the profits earned and the global tax income of its residents on its land.
In order to curb double taxation and ensure that entrepreneurs do not pay tax for the same income twice, countries like the UAE have entered into the Double Tax Avoidance Agreement (DTTA). Then, once the DTTA is signed between the two countries, it mandates tax authority to produce a tax residence certificate, which helps individual residents and investors claim the treaty benefits.
1.1 Double Tax Avoidance Agreement
UAE’s double taxation treaty (DTT) or DTAA is a bilateral agreement that upholds and preserves the interest of companies and foreign investors coming from other taxable jurisdictions and investing in the UAE. Any national or foreign company already paying taxes abroad for the profits earned in its business can mitigate any potential tax burden as a result of this treaty. Investments in the United Arab Emirates are 100% tax-free and the government does not impose any taxes through DTT on the business owners planning to establish their business.
Not only the companies, but the individuals who are fiscal residents in the United Arab Emirates for more than 180 days and can deliver the documents required by the Federal Tax Authority (FAT) are eligible to use the advantages of the treaty.
The United Arab Emirates has signed the Double Taxation Treaty (DTT) or Double Taxation Avoidance with the following countries:
- United Kingdom
- Venezuela, etc.
2. What kind of taxes exist in the UAE?
One of the characteristics of the United Arab Emirates is the almost non-existent tax policy. However, there is a latent tax system:
2.1 Corporate taxation
This type of tax is only payable in certain industries in the United Arab Emirates. The tax rate is the following:
- The progressive rate of up to 55% for oil and gas companies
- Rate up to 20% for foreign bank branches
- No tax rate for all other companies and industries
In order to fully enjoy the tax exemptions and be able to declare to foreign tax authorities that your company is a Dubai company, you must obtain a tax residence certificate.
Although the Emirati laws do not stipulate articles regarding the tax residency of companies, the Ministry of Finances provides a tax residency certificate in the UAE for a company under certain circumstances. Generally, they require the company to be incorporated under Emirati law, have resident directors, and be domiciled in the UAE.
These rules imply that companies must follow the following substance tests:
- The entrepreneurs must manage their companies in the UAE (board meetings in the country)
- Companies must demonstrate that core revenue-generating activities have been carried out in the nation.
- The company must have an adequate number of qualified employees in the country, have an office (or co-working space), and incur expenses in the nation.
2.2 Taxation of individuals
In the United Arab Emirates, there is no personal income tax, therefore there is no law that governs it. Hence, an individual residing in the UAE will not have to pay taxes on his personal income.
As there is no law, there is no concept of tax residence, so until recently the UAE Ministry of Finance did not issue a tax residency certificate for an individual. This meant that anyone moving there could not provide their tax residence since the only certificate available was the certificate of nationality.
Fortunately, the Ministry of Finance now provides a tax residency certificate for an individual who can prove that he resided in the country for more than 183 days during a tax year.
2.3 Other taxes: Real estate and VAT
The UAE does levy real estate taxes in the form of a 5% municipal tax on the annual rental value of the residential property. In addition to this, there is an incipient value-added tax or indirect tax since 2018 of 5% on some consumable goods.
2.4 More tax advantages
Certain emirates, like Dubai, do not have gif tax, inheritance tax, and no wealth tax. The country has signed 88 treaties to avoid double taxation and has signed the multilateral instrument, making some Emirates a great financial center from which to coordinate your company.
For this reason and given this attractive tax framework, many professionals, digital nomads, athletes, etc, have decided to relocate to the UAE.
3. Tax residency certificate in the UAE
A tax residency certificate is an official document delivered by the Federal Tax Authority (FTA) to a company operating in the country to establish tax residency and allow it to benefit from the double taxation avoidance agreements.
The Dubai tax residency certificate aims for any business operating in a free zone or in the Mainland that has been in the country for at least a year. Offshore companies cannot apply for this certificate and must receive a tax exemption instead of the tax residence certificate.
As well as companies, this Dubai tax residency certificate is also available for individuals who have resided in the country for at least 180 days and who wish to establish tax residence in the country. This is beneficial for individuals whose native countries do not have a double taxation agreement with the UAE. Keep in mind that an individual must have a valid United Arab Emirates resident visa for more than 180 days to apply.
4. Requirements to obtain the tax residency certificate
The documents needed to apply for this Dubai tax residency certificate vary if you are a company or an individual. The steps for both cases are the following:
4.1 Requirements for an individual to obtain the tax residency certificate in the UAE
Some documents are the following:
- 6 months of personal bank statements, certified by the bank.
- Emirates ID copy
- Proof of income in the United Arab Emirates – e.g share certificate, salary certificate, employment agreement.
- Passport copy and valid visa copy.
- A copy of the certified tenancy contract or title deed, valid for at least three months prior to application.
- A report from the General Directorate of Residency and Foreign Affairs (GDRFA) showing all exits and entries from the UAE.
Note that the tax residency certificate in the UAE cost is around AED 2000, payable to the FTA. This fee must be paid through the UAE e-Dirham card.
4.2 Requirements for a company to obtain a tax residency certificate in the UAE
- Memorandum of Association’s copy
- The organizational chart structure of the company
- Passport, valid UAE resident visa copy, and Emirates ID of the company directors, managers, or shareholders.
- A copy of the certificate of incumbency for the company – normally the Chamber of Commerce certificate.
- Certified commercial tenancy contract copy or title deed, valid for at least three months prior to application, physical office space is mandatory (virtual office space will not be sufficient)
- Valid UAE trade license (Mainland DED or free zone) the company must have been active for over 1 year.
- Latest certified audited financial statements or UAE company bank statements from the last 6 months, stamped by the bank.
The tax residency certificate in the UAE cost around AED 10,000 payable to the FTA, paid through the e-Dirham Card.
5. Process of obtaining the tax residency certificate in the UAE
The certificate of residence in the UAE was created to take advantage of the double taxation avoidance agreements signed between the UAE and the foreign jurisdictions. Note that the FTA issues Commercial Activities Certificates to enable individuals to refund the VAT paid in advance outside the country, whether or not DTAAs are applicable.
To obtain the tax residency certificate in the UAE login you must complete the following:
- Create an account on the payable FTA portal
- Complete the application form
- Attach the required documents in JPEG or PDF format
- Your attached documents and applications will be verified and if they meet the criteria, you will receive email confirmation and be asked to pay the remaining fees via the system.
- After payment confirmation, you will receive the certificate of residence in the UAE via express courier.
5.1 What happens if the tax residence certificate is lost or damaged?
For damaged, lost or an extra copy of origin you have to pay AED 100 for issuing a replacement plus AED 3, paid through the e-Dirham Card.
5.2 Eligibility for tax residence certificate
To be eligible to obtain a tax residency certificate in Dubai sample, you must be the following:
- Freezone company
- An individual employee
- Companies operating in UAE Mainland
- An individual business/investor owner
- Offshore company
- Branch of a foreign company
- A non-employed individual (with a spouse visa)
6. How long does it take to obtain the tax residency certificate in the UAE?
If all the necessary documents are correct, the pre-approval process with the FTA generally takes 4-5 business days. Following pre-approval and confirmation that all documents are correct, the FTA then takes up to a further 5 working days to issue the tax residence certificate.
The tax domicile certificate or tax residence certificate is valid for 1 year, and can then be renewed each year, subject to resubmission and renewal process.
7. Benefits of obtaining the tax residency certificate
Entrepreneurs in the United Arab Emirates enjoy access to international markets when they decide to establish their company in one of the country’s Emirates. The added benefit of being a tax resident in the nation and obtaining the UAE tax residence certificate is to receive tax incentives and avoid double taxation by being a resident. Companies and individuals can obtain a separate UAE tax residence certificate which allows income to be covered both at the corporate and individual levels.
An overall view of your business structure and individual circumstances should support your effective tax planning. Therefore, we recommend you always seek professional tax advice, along with finance and accounting support to ensure that your individual situation and corporate structure are in line with tax rules to obtain the maximum benefit from UAE tax residence.
8. How can Connect Zone help you get a tax residency certificate in the UAE?
Whether you are an individual resident or the owner of a company, maintaining a legal and administrative order and being up to date with the tax laws of the country will allow you to reside in the UAE without problems. The government of this country is very strict regarding the following of the tax regulations and the residency status. This is why hiring a team of professionals, such as Connect Zone, to support you during these stages is more than necessary.
Connect Zone’s professionals are highly trained to complete the entire tax residency certificate in the UAE format on your behalf. Our agency has more than 20 years helping entrepreneurs in the United Arab Emirates achieve their goals. Some of our services include a wide range of PRO services, and full guidance during your freelance visa application.
Do you want to meet your goals with a team of professionals willing to assist you at every step? Feel free to share all of your concers with us. Contact us now by calling at +971 43 316 688. On the other hand, write us an email at firstname.lastname@example.org.
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