Tax Residency Certificate in UAE 2024
Individuals who spend 183 or more days in the UAE during a year are considered tax residents. They can obtain Tax Residency Certificates (TRCs) and benefit from Double Tax Avoidance Agreements (DTAA) signed by the UAE with a number of countries.
According to the Federal Tax Authority website, it takes about 45 minutes to submit an application. The TRC is valid for one year from the beginning of the financial year selected by the applicant.
Step-by-step process to get a TRC, costs
According to John, applicants can follow this process to obtain a certificate:
- Create an account on the Federal Tax Authority (FTA) website.
- After logging in, click on the ‘Services’ tab.
- Click on ‘Certificates’ in the drop-down menu.
- Click on ‘Request for Tax Residency Certificate’.
- This will open up an application form. Fill in all details such as name, Emirates ID number, tax registration number, contact details, etc.
- Upload all required documents like copies of passport, Emirates ID, tenancy contract, and utility bill, to name a few.
- It is crucial to review all the details in the application are accurate and up to date before submitting.
- After clicking on ‘Submit’, the user will be directed to a payment gateway. A processing fee will be charged.
- Upon receiving your application, the FTA will review it thoroughly. If they grant an approval, the individual will be issued a TRC within a few days.
- This certificate will be sent by email but will also be available for download in the individual’s FTA account.
Understanding Tax Residency Certificate in the UAE
A Tax Residency Certificate (TRC) is a document issued by a tax authority of a country, which certifies that the holder is a tax resident of that country. Tax residency refers to the country where a person or a company is liable to pay tax on their worldwide income.
In the United Arab Emirates (UAE), the Federal Tax Authority (FTA) issues the Tax Residency Certificate. It serves as proof that an individual or a business is a tax resident of the UAE and is eligible to claim benefits under the UAE’s tax treaties with other countries.
Who Needs a Tax Residency Certificate in the UAE?
All individuals and businesses who are tax residents of the UAE can apply for a Tax Residency Certificate. A tax resident is a person or entity that has lived or conducted business in the UAE for at least 183 days in a tax year (which runs from January 1 to December 31).
Both individuals and businesses can apply for a Tax Residency Certificate. For individuals, the application must be submitted by the individual themselves, while for businesses, the application must be made by an authorized signatory.
It’s worth noting that individuals or businesses that are subject to tax in other countries may need to provide additional documentation, such as a tax clearance certificate, to obtain a Tax Residency Certificate. Therefore, it’s advisable to seek professional advice from a tax expert service provider like Adam Global to ensure that all the necessary documentation is provided when making the application.
What Documents are required to obtain a Tax Residency Certificate in the UAE?
To obtain a Tax Residency Certificate in the UAE, applicants must submit the following documents:
- A copy of the applicant’s Emirates ID.
- A copy of the applicant’s passport.
- A copy of the applicant’s residency visa.
- Proof of residency, such as a utility bill or a tenancy agreement.
- A bank statement from a UAE bank that shows the applicant’s transactions for the past six months.
- A letter from the applicant’s employer that confirms the applicant’s employment and salary.
- For businesses, a copy of the trade license and the Memorandum of Association.
Benefits of Having a Tax Residency Certificate in the UAE
The UAE has signed tax treaties with over 115 countries, which allows individuals and businesses to claim certain tax benefits, such as reduced withholding tax rates, tax exemptions, and tax credits.
A Tax Residency Certificate is essential to claim these benefits under the tax treaties. For example, if a person or business earns income from a country that has signed a tax treaty with the UAE, they may be eligible for reduced withholding tax rates on that income. Without a Tax Residency Certificate, the person or business may be subject to the standard withholding tax rate, which can be significantly higher.
Moreover, a Tax Residency Certificate can help to avoid disputes with foreign tax authorities. In the absence of a Tax Residency Certificate, foreign tax authorities may consider a person or business as a tax resident of their country, leading to double taxation and disputes.
What are the advantages of obtaining a tax residency certificate?
There are treaties agreed upon between several countries to avoid the situations of double taxation. The tax residency certificate is considered to be one of the major supporting documents to prove residency for any person for tax accounting purposes. Individuals can use this certificate to avoid the income tax, where ever legally possible and prevent the situations of double taxation. Especially financial institutions such as banks consider this certificate to decide on the tax deductions requirements of individuals based on their residency.
What is the Authority’s Power under this decision?
The certificate issuing Authority has the power to request the applicant or any other government agencies in UAE
- Any information,
- Data or documents
- or any other details
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