Living in the UAE comes with many perks. You get to enjoy a high standard of living, low taxes, and lots of sun! However, your tax duties may not end just because you set up base here. Your home country can still ask you to file returns and taxes. This is where a tax residency certificate comes in handy.
What is a Tax Residency Certificate?
A TRC is an official paper. It says that you live in the UAE for tax purposes. The UAE issues it to people who stay here over 183 days in a year. It also goes to companies in free zones with licenses from the UAE.
With a TRC, your home country knows that you pay taxes in the UAE. You can use it while filing tax returns abroad. It prevents double taxation.
Who Needs a Tax Residency Certificate in the UAE?
Before we explore who needs a TRC, let’s first understand what tax residency means. In simple terms, tax residency refers to the country where you are liable to pay taxes. The UAE determines tax residency based on several factors, such as:
- The duration of your stay in the country
- Your employment status
- Your business activities
It’s essential to note that being a resident of the UAE does not automatically make you a tax resident. The UAE has specific criteria that determine your tax residency status, which we’ll explore further in this blog post.
UAE Residents with Assets Abroad
Do you have a house, bank account, or investments overseas? For instance, stocks in the US or a flat in India? Then you must file tax returns with those countries. And you’ll need a TRC from the UAE to avoid double taxes.
Some examples include:
- UAE expats who own property in their home country
- People with active bank accounts and deposits abroad
- Investors with stocks, funds, or other assets overseas
All these people should get a UAE tax residency .
Remote Employees of Global Firms
Multinational companies often have staff in the UAE. These remote employees get salaries here. But their employer may seek tax returns in the headquarters country.
For instance:
- An Indian analyst working for a US bank from Dubai
- European executives employed in regional Dubai offices of UK agencies
These employees need to show their UAE TRC.
Business Owners with International Partners
Say you run a firm with partners abroad. You share profits globally. Then tax agencies worldwide will want tax due from the profits. Your TRC proves you pay taxes on your income here.
Consider these cases:
- A cosmetics trader with suppliers in Europe and Asia
- An Indian restaurant owner with outlets in Dubai and New Delhi
Retirees with Overseas Pension Funds
Retirees get pensions from abroad. Without a TRC, both the UAE and your home country can tax this income! This certificate prevents double taxation.
For example:
- British retirees getting UK pensions while living in Dubai
- Indian seniors with 401ks/IRAs still active after moving to the UAE
Such retiree profiles need a UAE TRC.
Citizens Working Abroad Temporarily
Some Emiratis work overseas for short tenures. They’re still UAE tax residents as they live here usually. A TRC will avoid double levies on their income.
Cases in point:
- An Emirati manager posted in a Dubai firm’s London office for 18 months
- UAE diplomats on foreign postings for 2-3 years
They require UAE tax residency certificates too.
Why is a Tax Residency Certificate Important?
There are a few key benefits of having a tax residency certificate in the UAE:
1. Prevents Double Taxation
With a TRC, your home country knows not to tax you twice on the same income. The certificate acts as proof that you pay due taxes in the UAE already.
2. Smoother Audits and Assessments
Tax agencies abroad can question your returns without a UAE TRC. This document backs up your position as a tax resident here. It makes tax audits and assessments easier.
3. Banking/Investing/Buying Assets Abroad
Banks, brokers and property dealers may ask for a TRC. It proves that you pay taxes here and not evading liabilities elsewhere.
4. University/Visa Applications for Kids
Many students study abroad. Embassies ask for a TRC when they apply. This shows the family pays taxes properly in the UAE.
Conclusion
Living overseas? Have assets abroad? Work for an international firm? You may require a tax residency certificate. The TRC helps avoid double taxation. It also makes overseas tax procedures simpler.
Use the guide above to apply for your UAE residency certificate. It shields you from tax liabilities globally if you pay due taxes in the UAE already.
FAQs
A UAE tax residency certificate is valid for one year. You must renew it annually.
Unfortunately, you cannot yet submit a complete application for a UAE tax residency certificate online. However, you might be able to initiate the process or access forms online through the Federal Tax Authority website (https://tax.gov.ae/en/).
It depends. If your spouse also has assets, income, or tax obligations outside the UAE, then they may need to apply for a separate tax residency certificate.
