How to Change Tax Residency To Dubai

Residency taxes Dubai serves as a venue for the relief of double taxation burdens for people, companies, and foreign investors and commercial entities. A Dubai tax residency certificate can be obtained by any business that has been operating in the emirate for more than a year, regardless of whether it is located in a free zone or on the mainland. The validity of a tax residency certificate in Dubai is one year from the issuance date. In order to receive a tax residency certificate or domicile certification, one must have resided in the United Arab Emirates for a duration longer than six months. In addition to double taxation treaties, the UAE has negotiated agreements and treaties with numerous other nations. An important document that can help both people and corporations save money on taxes is the tax residence certificate.

Tax Residency in Dubai: Implications and Requirements

The procedures and ramifications of gaining tax residency in Dubai are as per the decisions of the Federal Tax Authority which is the authority for tax residency certificates to business entities (having headquarters in UAE) and individuals.This is important because, in some cases, not having a tax residency certificate could have dire repercussions, such as having your home country continue to view you as a tax resident.

1.1. Requirements For Tax Residency in Dubai 

The Ministerial Decision No. 247/23 & 27/2023 are issued by the Ministry of Finance UAE for the implementation of Cabinet Decision No. The tax residence requirements for the United Arab Emirates per Cabinet Resolution No. 85 of 2023:

• Primary residence and financial pursuits:-

  A person is regarded as a UAE tax resident if they possess a primary or secondary home in the United Arab Emirates or have the UAE as a base for business and personal endeavors.This indicates that the United Arab Emirates is where they live and work most of the time.

• Genuine Presence:-

  An individual may also be considered a tax resident if they satisfy any of the following requirements 12 months, they have physically spent at least 183 days in the United Arab Emirates. They have to have spent at least ninety days in the UAE physically during a year, provided that certain requirements are satisfied.

• • They are nationals of the United Arab Emirates.
  • Their resident permit in the UAE is currently valid.
  • They are citizens of any Gulf Cooperation Council nation (GCC).
  • They either have a permanent residence in the UAE or work or conduct business there.

 

• Effect Tax Agreements(Double tax treaty):-

  Tax treaties go beyond other limitations. Tax residence criteria specified in a tax treaty take precedence as the UAE is a signatory of about 140 double tax treaties.

 

1.2. Determine the Tax Residences of Natural Persons

An individual must consider the United Arab Emirates to be the core of their personal and financial existence to establish tax residency as a natural person there. This comprises:

• having a primary home, usually in the United Arab Emirates.
• exhibiting a strong interest in personal and professional matters related to the UAE, such as managing finances, interacting with friends and family, and attending cultural events. This implies that during their frequent trips, they spend more time there than anywhere else. the UAE, rather than just a quick getaway.
• Personal and Financial Matters Interests:-The individual's primary areas of interest include the United Arab Emirates. This covers their business dealings, financial handling, ties to friends and family, participation in pertinent cultural events, and any other ties they might have to the United Arab Emirates.

Step 1.3: Providing Proof of Residential Status

The applicant has to fulfill the 90-day and 183-day standards to be eligible. He must be a GCC citizen or resident who has spent at least ninety days living and working continuously in the United Arab Emirates. It could take less than a year for an applicant to be considered a tax resident. An entry and exit record issued by the UAE government or a local competent authority must be shown. Furthermore, you ought to supply either:

• Proof of Income: Pay stubs or official corporate documentation are accepted as proof of a consistent source of income in the United Arab Emirates.
• Utility bills, a long-term rental agreement, or a property title can all serve as evidence of a permanent residence.
• Travel record: The arrival and departure records of any person who has spent more than 183 days in the United Arab Emirates must match. 

The Ministerial Decision goes on to say that any portion of a day spent in the United Arab Emirates is eligible for credit towards these days. These days don't need to follow one another. Nonetheless, those days could not be tallied if unforeseen events keep you from departing the UAE on schedule. Something unexpected and beyond your control is called an unusual circumstance.

Dubai Tax Residency Process:-

• Online Submission of Application:- Through the Federal Tax Authority website, individuals can apply online for tax residency certificates.
• Selecting Requirements and Documents:-In order to apply for a TRC for internal tax reasons, persons need to upload the necessary documents and select one of the three alternatives about the above-mentioned circumstances.
• To obtain a tax residency certificate: Need to provide several essential documents: a copy of your passport, UAE residence visa, and Emirates ID. Additionally, you'll need to submit six months of UAE bank statements, proof of income in the UAE (such as a wage slip), an immigration report, and a certified copy of a tenancy agreement or title deed to a property.

2.1. Companies applying for a Tax Residency Certificate (TRC)

• Valid Trade Licence (Free Zone or Mainland DED)
• A copy of the Company Memorandum of Association
• A copy of the Chamber of Commerce 
• The company’s organizational chart 
• Tenancy agreement or title deed as Virtual office space is not accepted.
• A passport and visa 
• Emirates ID copies of the directors/managers/shareholders
• bank-stamped bank statements or approved audited financial accounts 
• The application fee for a Tax Residency Certificate is AED 10,000, which can be paid online with the e-Dirham Card to the UAE Federal Tax Authority.

Requirements to acquire a Tax Domicile Certificate (TDC)

• A current copy of the passport of least 180 days valid  before the application
• An Emirates ID (if applicable)
• six-month bank statements 
• Evidence of income earned in the UAE (work contract) 
• Verified entry and departure record (if applicable)
• Certified lease or title deed copy 
• For Tax Domicile Certificates, AED 2000 is the application fee, which must be paid with an e-Dirham Card.

Process time:-

• A completed application is received by the United Arab Emirates Federal Trade Authority in three business days.
• Seven business days following the completion of certificate payments, physical copies are mailed.
• After the FTA receives the completed tax form, the applicant tax form FTA attestation takes five business days. 

Ramifications for people and companies

• Examining the Requirements for Tax Residency: Both individuals and companies must examine the requirements for tax residency in the United Arab Emirates to ascertain whether any of the requirements pertain to them or their staff, respectively. If appropriate, it should be confirmed if these people are capable of fulfilling the necessary conditions under the relevant circumstances.
• Taking Into Account Physical Presence: Care should also be taken to record the days on which a person is deemed to be physically present in the United Arab Emirates, particularly on their arrival or departure.

 

Change in tax residency landscape:-

The Tax residency landscape has changed with the implementation of VAT (5%) and corporate tax(9%) which have impacted individuals and businesses. In this new scenario, if a freelancer reaches a certain threshold, they too have to pay taxes like big businesses. The United Arab Emirates gives an exemption of 375,000 AED ($100,000) along with salary, capital gains and dividends. Additionally, the UAE keeps its exclusions on certain income which makes withholding tax schemes possible through international agreements i.e. Double Tax treaty. Additional benefits include the simplification of the tax residency application process.

Frequently Asked Questions (FAQ)

Q1. How can I change my tax residency to Dubai?

Tax residency can be changed to Dubai under the following:- 

• Employer sponsorship/Job contract:- It is a common method of relocating to Dubai for tax purposes. It is often renewed every three years. Verify that the employment contract and visa are in order. 
•  Real Estate Investing:-In Dubai, the property can be purchased for as little as $275,000. Property ownership is a means of obtaining tax residence in Dubai; however, compliance with property ownership regulations is crucial.
•  Company Incorporation:-Dubai's free trade zones offer options for tax residency, and legal advice can help choose the optimum free zone and business structure.

Q2.What documents are required to update tax residency status to Dubai?

The following documents are required for applications for individual tax residency:

• Trade Licence (current and valid), if relevant:
• If you are a director or shareholder in a business, attach the necessary paperwork.
•  Contract for Certified Establishment (if not a sole proprietorship):

Q3.How long does it take to complete the process of changing tax residency to Dubai?

•  The pre-approval procedure takes four to five business days. Necessary hard copies are also required to send
• Confirmation from the authorities is mandatory
• Tax Residence Certificate may be issued in 5 business days after its approval.
• A formal document verifying your status as a resident for tax purposes will be sent to you.
• Pay the relevant fees and accept the certificate via expedited delivery.

Q2.What are the eligibility criteria for transferring tax residency to Dubai?

To be eligible for a transfer of tax residency to Dubai:

• Permanent Home:
• Employment or Business Relationships:
• Stay of 183 Days:

Q3.Are there any fees associated with updating tax residency status to Dubai?

• Depending on the individual or company application, costs differ:
  • Individuals: Usually fall within the AED 2,000–AED 2,500 range.
  • Companies: Usually between 10,000 and 11,000 AED.

Q2.What are the implications of switching tax residency to Dubai for tax purposes?

• There is no personal income tax.
  • One alluring thing about Dubai is that there is no personal income tax. Both enterprises and expatriates can greatly profit from this.
• Observance and Comprehension:
  • Verify adherence to regional laws.
  • Recognize the tax ramifications in your nation of origin.
  • Seek expert guidance to manage the complications.

 What is the impact on tax residence due to double tax treaties in Dubai?

The UAE has signed about 140 double taxation treaties therefore, residents can avoid paying taxes in Dubai and other contracting countries by taking advantage of these treaties and tax residence certificates granted by the Federal Tax Authority.

 What are the new prerequisites for Dubai Tax Residency starting in 2023-2024?

With effect from February 22, 2023, new requirements have been established for tax residency. People may be eligible if they spend a certain amount of time physically present in the United Arab Emirates or if their primary residence and financial interests are in Dubai.

 

SUMMARY

In summary, A legal document verifying a person's tax resident status in Dubai, United Arab Emirates, is called a Tax resident Certificate (TRC). Ministerial Decision 247/2023's prerequisites must be met to get it. For company arrangements with other nations, TRCs provide exemptions and benefits, lower withholding tax rates, and do away with double taxation. International conventions against double taxation are ratified by the UAE.