The United Arab Emirates (UAE) has cultivated a thriving economic environment that has attracted substantial foreign investment and trade. However, the complexities of international taxation can pose challenges for businesses and individuals operating within this dynamic landscape. One crucial instrument for mitigating these challenges is the Tax Residency Certificate (TRC).

A TRC is an official document issued by the UAE tax authorities that verifies the tax residency status of an individual or legal entity within the country. This certification is pivotal for availing the benefits provided under the UAE’s extensive network of double taxation treaties. Essentially, a TRC serves as a passport that allows its holder to navigate international tax regulations more efficiently.

Determining Tax Residency

Establishing tax residency is crucial for determining tax obligations. The UAE employs a combination of factors to ascertain an individual’s tax residence:

  • Domicile: This refers to an individual’s permanent home or country of origin. While not a sole determinant, it’s a significant factor.
  • Center of Vital Interests: This concept evaluates where an individual’s economic and personal life is primarily centered. Factors such as employment, family, property ownership, and financial assets are considered.
  • Physical Presence: Spending a substantial amount of time, typically 183 days or more within a 12-month period, in the UAE can also establish tax residency.
  • Specific Criteria for Certain Individuals: UAE and Gulf Cooperation Council (GCC) nationals, as well as expatriates with valid UAE residence permits, may meet specific criteria based on a shorter physical presence of 90 days to qualify for tax residency.

For legal entities, tax residency is generally determined by the country of incorporation or organization. However, provisions in double taxation treaties can supersede this general rule.

Documents Needed for Obtaining a Tax Residency Certificate

To secure a Tax Residency Certificate, certain essential documents must be provided, with specific requirements varying depending on the entities involved. The following outlines the necessary documents for different entities:

Tax Residency Certificate Requirements for Companies

  • Certificate of Incorporation (copy)
  • Corporate Organizational Structure
  • Copies of Directors, Shareholders, or Managers’ Passports with valid UAE residency visas
  • A current UAE trade license (Mainland DED or Free Zone) with a minimum operational history of one year
  • Memorandum of Agreement (copy)
  • Most recent certified audited financial statements or bank statements for the past six months, stamped by the bank

Tax Residency Certificate Requirements for Individuals

  • Passport, UAE Residence Visa, and Emirates ID (copy)
  • Copy of the residential lease agreement or Tenancy Contract
  • Latest Salary Certificate
  • Verified Bank Statements from the previous six months
  • Report from the General Directorate of Residency and Foreigners Affairs detailing entries, exits, and the duration of stay in the UAE

Tax Residency Certificate Requirements for Investors

  • Company License
  • Partner’s Name
  • Other documents as specified earlier

Tax Residency Certificate Requirements for Housewives

  • Marriage Certificate
  • Passports and Residency Permits copies of both the Husband and Wife
  • Partner’s Salary Certificate and Work Contract

These documents are crucial for the successful application and issuance of a Tax Residency Certificate.

Steps to Obtain a Tax Residency Certificate in UAE

The process for applying for a Tax Residency Certificate online involves the following steps:

  1. Account Setup:
  • Log in or create a Tax Certificate account on the FTA Portal.
  • For registered taxpayers, select “Yes” in the popup message on the dashboard and enter your TRN & Email address.
  • If you are a new taxpayer, select “No” and proceed with the application.
  1. Application Submission:
  • Complete the application for a tax residency certificate.
  • Upload the necessary documents in PDF or JPEG format.
  • Pay the application fee to finalize the application.
  1. Application Status:
  • Monitor the application status on the dashboard.
  1. Pre-Approval and Issuance:
  • Pre-approval typically takes 4-5 days.
  • The UAE Tax Residency Certificate is usually issued within 5-7 working days after application approval.

Note: For Tax Group members applying for the Tax Certificate, enter the Member’s TRN/TIN and email address.

Downloading the Tax Residency Certificate in UAE

To download the Tax Residency Certificate:

  1. Navigate to the “Payment Pending” option on the FTA Tax Certificate dashboard and proceed with the payment process.
  2. After a successful payment, a download icon will appear for certificate retrieval.
  3. Complete the final payment through the dirham payment gateway.
  4. Upon successful transaction, the Tax Residency Certificate will be sent to your registered email address.
  5. Click to download the certificate.
  6. Open the password-protected file containing the certificate.
  7. The password for the downloaded certificate will be the user’s username and the last four digits of their mobile number.

Advantages of Obtaining a Tax Residency Certificate

In the context of the UAE’s favorable tax landscape, acquiring a Tax Residency Certificate holds numerous benefits that underscore its significance:

Exemption from Income Taxes: –

    Individuals and businesses are exempted from income taxes, fostering a tax-friendly environment.

    Boost to International Trade:

      Facilitates and encourages trade activities between countries, promoting economic growth.

      Legal Confirmation:

        Confirms the legal status of individuals or organizations within the UAE jurisdiction.

        Tax Efficiency in Trade Operations:

          Facilitates smooth import-export processes by helping to avoid additional tax burdens.

          Enhanced Trade Relations:

            Strengthens bilateral trade relationships by showcasing compliance with tax regulations.

            Tax Benefits:

              Enables residents to benefit from tax exemptions and avoid double taxation, enhancing financial advantages.

              Multiple Certification Opportunities:

                Allows individuals and companies to obtain multiple certifications, further enhancing their credibility and opportunities within the UAE market.

                These benefits collectively highlight the importance and advantages of holding a Tax Residency Certificate in the UAE.

                Tax Residency Certificate Assistance in the UAE

                Ensuring adherence to tax regulations and bolstering your company’s governance demands adept tax advisory and support. A meticulously devised tax strategy entails an unbiased assessment of your business framework and personal situation.

                ProAct Chartered Accountants stands out as a premier Tax consultancy firm based in Dubai, focusing on delivering specialized services in the UAE, specifically concerning the Tax Residency Certificate (TRC). With a dedicated team of professionals aiding in document preparation and certification, we are devoted to streamlining the process for you, guaranteeing a swift and effective completion of the TRC process.

                Tax Benefits to Indian NREs using TRC

                Indian NREs can claim exemptions from Indian income tax using Tax Residency Certificate (TRC) on Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) from the sale of movable assets in India, such as mutual funds, gold, unit-linked insurance plans etc, but not on shares/stocks/equity.