NEW GUIDELINES FOR DETERMINATION OF TAX RESIDENCY IN THE UAE

New Rule for determining tax residency in the UAE will come into effect from 01^st March 2023. The guidelines have been published in cabinet decision No.85 of 2022, approved by the UAE government.

The changes are going to be applicable to both natural (individuals) and legal persons (establishments in the UAE)

The below criteria will be used to determine the persons’ tax residency in the UAE as per the new rule

Legal Person (Generally the establishments/companies in the UAE)

As per Article 3, the residency status of a legal person shall be determined through either of the below cases:-

1. Incorporated, formed, or recognized as per the UAE Legislation. Any foreign company’s branch formed in the UAE will not be considered a resident even though it is registered in the country.
2.  Tax Resident as per the UAE Law.

Natural Person (Generally the individuals)

As per Article 4, the residency status of a natural person shall be determined if the natural person’s;

1. Usual or primary place of residence and the center of his financial (business, income source, etc.) and personal interests (family, social, political, etc.) are in the UAE or;
2. If physically present in the UAE for a period of 183 days or more, within the relevant 12 consecutive months or;
3. Physically present in the UAE for a period of 90 days or more within the relevant 12 consecutive months and the natural person is either
   • UAE national or;
   • UAE resident or;
   • GCC national

and the natural person is meeting any of the following conditions:-

01. Has a permanent place of residence in the UAE. It is not mandatory to have own property in the UAE to prove the permanent place of residence, it can be rented also.

Or

02. Carries on employment or business in the UAE.

The below point is to be considered before determining tax residency in the UAE.

• If the person is a tax resident in any other country along with UAE and if the UAE has signed the Double Taxation Avoidance Agreement (DTAA) with that other country, the tax residency will be determined as per the clauses mentioned in the DTAA.