Page 8 - ICAI UAE TAX UPDATE_October 2024

Tax residency under UAE domestic law months. Where they are a UAE or Gulf Cooperation
Council (GCC) national, or hold a valid UAE Resident
Meeting the criteria of the UAE domestic tax residency Permit, and they have a Permanent Place of Residence
will mean that the Person is Tax Resident and, upon a in the UAE, or carry on an employment or Business in
successful application to the FTA, this will be evidenced the UAE.
by the issuance of a Tax Residency Certificate. 3. Their usual or primary place of residence and centre of
financial and personal interests were in the UAE.
A juridical person is considered to be a Tax Resident of
the UAE if it is: Tax residency under Double Taxation Agreements

• Incorporated or otherwise formed or recognised in the If a juridical person is considered to be a tax resident in
UAE or the UAE under the applicable DTA, it is eligible to apply
for a Tax Residency Certificate in the UAE in order to
• It is otherwise considered a Tax Resident of the UAE obtain the benefits of the applicable DTA, if required.
under other Tax Laws in the UAE
In the context of DTAs, Government Entities and
The UAE tax residency rules for a juridical person Government Controlled Entities are generally considered
equally apply to persons established and operating in as UAE tax resident and should accordingly be eligible
Free Zones. to avail benefits under the DTAs, wherever relevant.
However, if the relevant DTA defines Government for
A UAE branch of a juridical person is an extension of its the purposes of the DTA, this shall prevail.
parent or head office and is not considered a separate
legal entity in its own right. A UAE branch of a foreign Some DTAs have specific rules for juridical persons
company is not considered to be a Tax Resident Person. that are commonly exempt from Corporate Tax such as
Instead, the foreign company is considered to be a Non- Government Entities, public benefit entities and pension
Resident Person. funds.

Under the Corporate Tax Law, a juridical person that is DTAs adopt various approaches to solve dual residence
not incorporated in the UAE may still be considered to situations for juridical persons. These are generally
be a Resident Person if it is effectively managed and summarised as follows:
controlled in the UAE.
• the place of effective management criteria,
The tax residency status of an Exempt Person is
determined by reference to the type of Exempt Person • the Mutual Agreement Procedure, and
in question. Exempt Persons include four categories of
persons: • other criteria, such as where the head office is located
or where the juridical person is incorporated.
Category 1: Automatically Exempt Persons
The UAE aims to avoid a situation of double taxation by
Category 2: Exempt if they notify the Ministry of Finance, defining the taxing rights of each country or granting
and meet the relevant conditions relief from double taxation. The residency criteria in a
DTA typically requires an individual seeking to apply
Category 3: Exempt Persons if listed in a Cabinet Decision the DTA to either be liable to tax, to have the relevant
and subject to meeting relevant conditions citizenship or nationality, to have physical presence in
the relevant country, or be domiciled or resident there.
Category 4: Exempt Persons upon application to, and
approval by, the FTA Many DTAs entered into by the UAE rely on other criteria
to solve dual residence situations such as the place
A natural person will be considered a Tax Resident in the of incorporation or the place where the head office is
UAE for domestic tax purposes if they meet at least one located.
of the three conditions set out :
Where a natural person satisfies the criteria to be
1. They were physically present in the UAE for 183 days considered tax resident in both the UAE and in another
or more, within the relevant 12 consecutive months. jurisdiction under the relevant DTA, the tie-breaker rules
2. They were physically present in the UAE for a period in the DTA would allocate the residence of the natural
of 90 days or more, within the relevant 12 consecutive person to either the UAE or to the other country.
8 www.icaidubai.org

UAE TAX UPDATE NEWSLETTER ISSUE 07 - October 2024