UAE Tax Procedures Guide (TPGTR1): Simplified Explanation & Key Takeaways

The UAE Federal Tax Authority (FTA) administers tax laws and ensures compliance. The FTA recently published the Tax Procedures Guide (TPGTR1). It clarifies key topics, like tax residency and Tax Residency Certificates (TRCs).

This guide is useful for both companies and individuals as it clearly sets out the rules. In this blog, I will explain the main parts of the TPGTR1 in simple words so anyone can understand it easily.

Key aspects covered

• Criteria to decide tax residency
• Classes of entities under tax law
• Process to apply for a TRC
• Documents needed
• Common questions

Deciding Tax Residency

The TPGTR1 gives guidelines on how residency is determined. Let’s break this down:

For Companies

A company’s tax residency depends on where its “central management and control” takes place or “place of effective management”. This looks at where board meetings occur, important decisions are made, and managers work.

For Individuals

Personal tax residency depends on factors like how long someone has lived in the UAE, family ties here, and intentions to stay. Different rules apply compared to companies.

Classifying Entities Under Tax Law

The tax authority defines various types of entities:

Companies in the UAE

Any company formed in the UAE is a tax resident and must follow corporate tax rules.

Foreign Companies with UAE Branches

Just the branch exists here – the foreign parent company remains the tax entity, not the UAE branch.

Offshore Companies

Offshore firms registered in UAE free zones or the mainland also count as tax residents.

Applying Double Tax Treaties

The FTA’s tie-breaker rules decide the final tax residency when a business has links to multiple locations to avoid double taxation issues based on UAE’s Double Taxation Agreements (DTAs).

Sections

1. Understanding TRC periods
2. Requirements for new companies
3. The application process
4. Document rules
5. Common questions

Understanding TRC Periods

TRCs were previously only for past periods but now can also cover:

• Current periods – Apply for an ongoing tax year not yet finished, allowing better tax planning.
• Past periods – Prior years can still be certified within 12 months as before.

Requirements for New Companies

Newly formed firms must operate for a minimum of 12 months to establish their residency status before seeking a TRC.

The Application Process

Let’s look at each step:

1. Check your tax residency status
2. Fill the online form providing details
3. Submit required papers and pay fees
4. The FTA will review and respond
5. Download the approved TRC

Document Rules

The FTA simplified some documentation:

• Audit reports are not mandatory but financial records are needed.
• Bank statements do not need to cover 6 months anymore.
• Foreign companies must show proof of UAE operations and management.
• Mention the Tax Registration Number (TRN) on applications.

Conclusion

The UAE FTA’s Tax Procedures Guide plays an important role in clarifying tax residency and TRC application rules for both companies and individuals. With provisions on determining residency status, classifying entities, applying DTAs and outlining the certification process, the TPGTR1 offers valuable clarity.

For businesses, having the accurate tax residency and TRC allows availing treaty benefits, efficient tax planning and compliance. It is thus critical to understand these guidelines.

While this blog aimed to explain the key aspects of the new procedures in plain terms, specialist assistance may still be required for status verification or applications. Following regulatory changes is also prudent. Do reach out if you need any support with tax residency or compliance under the FTA rules. A proper understanding empowers confident navigation of these requirements.

Frequently Asked Questions