Tax Flash

10 November 2022

The UAE recently issued ‘Cabinet Resolution No. (85) of 2022 Regarding Determining Tax Domicile’ (hereafter referred to as ‘the Resolution’). This Resolution aims to introduce the new statutory requirements and conditions for natural and legal persons to determine tax residency in the UAE.

The UAE recently issued ‘Cabinet Resolution No. (85) of 2022 Regarding Determining Tax Domicile’ (hereafter referred to as ‘the Resolution’). This Resolution aims to introduce the new statutory requirements and conditions for natural and legal persons to determine tax residency in the UAE.

Previously, the UAE did not have a statutory definition for ‘tax residency’. The Ministry of Finance (‘MoF’) which was later replaced by the Federal Tax Authority (‘FTA’), determined tax residency for natural and legal persons by way of issuing tax domicile certificates also referred to as Tax Residency Certificates (‘TRC’).

Tax residency for natural persons was determined primarily based on the number of days spent in the UAE (more than 183 days in a 12 month period) substantiated with the certain documentary requirements.

Similarly, tax residency for companies was based on the entity being incorporated for a minimum period of one year and the provision of certain documentary evidence as required by the FTA.

The new statutory definition broadens the criteria of UAE tax residency (for natural persons in particular) to remain in line with UAE’s continued effort to adapt to the evolving tax and regulatory landscape in the UAE and international practice.

For legal persons:

Under the Resolution, a legal person (i.e. entity or establishment) is tax resident in the UAE if the entity:

• was established, formed, or registered in accordance with the UAE laws. It does not include branches of foreign legal persons; or
• is considered as a tax resident under the applicable UAE tax law. We would expect more clarity on this condition once the imminent Federal Corporate Tax legislation is released.

For natural persons:

Under the Resolution, a natural person (i.e. an individual) is tax resident in the UAE if:

• the individual’s usual or principal place of residence is in the UAE and the center of his financial and personal interests are in the UAE or the individual meets the other conditions prescribed by the Minister; or
• the individual has been physically present in the UAE for a period of 183 days or more in a 12-month period; or
• the individual has been physically present in the UAE for a period of 90 days or more over a 12-month period and is a UAE citizen, UAE resident, or GCC national who either:
• has a permanent place of residence in the UAE; or
• carries out a job or business in the UAE

The Resolution will become effective from 1 March 2023.

• A legal or natural person who meets the above-mentioned criteria may submit a request for applying for a TRC which will be approved based on the discretion of the FTA.
• For the purpose of enforcing this Resolution, the FTA has the power to ask for any relevant information and documentation regarding the applicant (whether natural or legal person) from any government agency within the nation.
• The FTA will be responsible to issue clarifications and directives for the implementation of the provisions of this Resolution.
• The conditions for determining tax residency specified under any Double Tax Treaty (DTT) that the UAE has concluded with its partner jurisdictions would prevail.  It appears that the current procedure and documentation requirements for obtaining the TRC may be substantially amended to be specified in a decision made by the Minister.

• Help individuals/natural persons to assess if they are now eligible for TRCs where previously they were not entitled to apply for one because of the non-qualification the DTT definition of tax residence.
• Assist with TRC application and having foreign tax documents attested by the FTA.

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