The United Arab Emirates (UAE) offers numerous benefits to business owners including no personal income tax and a competitive corporate tax rate. Did you know that starting a company is also a route to gain valuable UAE tax residency status? In this guide, we will explain how to obtain residency through company registration along with valuable planning tips.
Key Benefits of UAE Tax Residency
There are several advantages that come with being recognized as a tax resident in the UAE:
No Income Tax
As a resident, you do not pay any tax on salaries, business profits, capital gains, interest, dividends or any other personal income earned inside or outside the UAE.
Corporate Tax Rate
The corporate tax rate in the UAE is only 9% which is lower than many other countries. Profits up to 375,000 AED are even charged 0% tax.
Double Tax Treaties
The extensive double tax treaty network protects residents from being taxed twice on the same income in the UAE and another country. Over 100 treaties currently exist.
Regulatory Stability
Laws and regulations are largely predictable in the politically and economically stable environment of the UAE. This provides confidence for long-term business planning.
Eligibility for Residency
To qualify as a tax resident, one of the main requirements is to be an owner or director involved in the daily management of a locally registered company. Some key conditions include:
- Incorporating a company in the UAE as a shareholder or board member.
- Physically being present in the country for a minimum of 183 days in a single tax year. This can be proven with entry/exit stamps.
- Maintaining the business activity and commercial purpose of the company ongoing.
Following these residency rules allows individuals to benefit from double tax treaties protecting business income earned via the UAE company. It also provides tax filing obligations clarity.
Incorporating Your Company
When launching a company for tax planning purposes, there are two main incorporation options in Dubai:
Free Zones
Various free zones like Dubai International Financial Centre (DIFC) or Dubai Multi Commodities Centre (DMCC) have benefits like 100% foreign ownership, 15 years tax exemptions, and common law. Registrations typically take 2-4 weeks.
Mainland
Requires minimum 51% UAE national ownership but permits nationwide operations. Timeline is similar but additional permissions from local authorities may be required.
Costs range between 25,000-200,000AED depending on the activity, freezone selected, and any office rental or deposition requirements. Professional advice can help analyze the best fit.
Obtaining Your Tax Residency Certificate
After setting up the company, the tax authority requires documentation proving residency conditions are satisfied:
- Passport copy, Emirates ID card scan, and visa pages
- Proof of company ownership position like a share purchase agreement
- Bank statements showing UAE address
- Copies of entry/exit stamps across the year
- Utility bills of the UAE address
- Certificate of company registration
The online application is reviewed within 2-4 weeks. An annual renewal substantiates on-going residence and trade activity to retain residency access.
Bank Account Opening
Access to a corporate bank account is necessary for doing business in the UAE. While challenging in the past, many freezones now simplify this process. Documents required are basic due diligence as part of company registration rather than opening each new account. Maintaining average deposit balances preserves account access too.
Popular freezones that ease banking include DIFC, Dubai Silicon Oasis and Abu Dhabi Global Market (ADGM). Accounts provide features like multi-currency wallets, online/mobile access, corporate debit/credit cards and international money transfers supporting active trade needs.
Tax Planning Strategies
To maximize advantages, continuous compliance and planning is recommended:
- Incorporate holding companies based on income streams for separating liabilities.
- Take advantage of Freeport zone benefits for imported/exported goods without customs duties or taxes.
- Make use of double taxation avoidance agreements when dealing with overseas parties.
- Claim incentives proposed for research and development activities.
- Segregate personal versus corporate finances with proper bookkeeping.
- Consult a local professional for specialized accounting and advisory needs.
Proper documentation also prepares renewing residency and passing any future UAE tax authority inspection audits with ease.
Conclusion
Obtaining UAE tax residency through company setup can be a strategic move for entrepreneurs and investors seeking to establish a foothold in this thriving business hub. By fulfilling the necessary requirements and navigating the application process diligently, individuals can unlock a range of benefits that contribute to long-term financial stability and growth.
Gaining tax residency in the UAE not only provides relief from double taxation but also opens doors to a diverse array of investment opportunities within the country’s vibrant economy. Moreover, the UAE’s business-friendly environment, with its robust infrastructure, strategic location, and supportive policies, creates an ideal platform for companies to thrive and expand their global reach.
FAQs
To renew tax residency each year, you need to prove 183 days UAE stay along with maintaining company commercial activity such as ongoing business deals, employee payroll, and license/permit updates.
Popular choices for their well-established accessibility include DIFC, DMCC and ADGM which offer services in common law and ease of use comparable globally.
While it adds legitimacy to have presence, it is not a strict requirement as long as the 183-day rule and evidence of company purpose is fulfilled such as leased office invoices or coworking memberships.
