Did you know that the United Arab Emirates (UAE) doesn’t impose income tax on individuals? Additionally, several businesses are also exempt from taxes. If you want to enjoy a tax-free income in UAE, you have to prove that you are a tax resident in the region. This is where the tax residency certificate comes in.
UAE has double taxation avoidance agreements with several countries across the globe. Double taxation avoidance agreements prevent non-UAE residents from being taxed in their countries and the UAE.
However, to benefit from the double taxation avoidance agreements, you must have a Tax Domicile Certificate (TDC), also known as Tax Residency Certificate (TRC). Here is what you need to know about this certificate and how you can apply for one.
What is a Tax Residency Certificate in the UAE?
According to the UAE double taxation avoidance agreements, an individual can be a resident of different countries but only be a tax resident of one country. The Tax Domicile Certificate or Tax Residency Certificate is a document that proves you pay your taxes to a certain country and exempts you from double taxation.
In the UAE, the Tax Residency Certificate is issued by the UAE Federal Tax Authority (FTA) and is valid for one year. International companies operating in a Freezone of the mainland in the UAE can apply for this certificate and benefit from the double taxation agreement.
Individuals, legal entities, and organizations in the UAE can apply for the Tax Residency Certificate and enjoy a tax-free income. However, companies must prove that they have been active for a minimum of one year, and individuals must have resided in the UAE for a minimum of 180 days to be eligible for the Tax Residency Certificate.
Additionally, individuals must have a valid UAE resident visa to apply for the certificate. Note that offshore companies are not eligible for Tax Residency Certificate. Instead of the Residency Certificate, offshore companies must receive a tax exemption certificate.
How to Apply for Tax Residency Certificate in the UAE
If you are working in the UAE and want to apply for the tax residency certificate as an individual, you must be resident in the UAE for more than half a year. You can become a UAE resident in several different ways.
To ensure you have the right visa, it may be ideal to work with expert consultants. The right consultant will ensure you have a smooth application process and that you get everything right the first time.
Whether you are an employee or want to start a company in the UAE, you can be eligible for the Tax Residency Certificate. Here is what you need and how you can apply for this certificate if you plan to move to Dubai.
The Tax Residency Certificate Application Process within the UAE
If you spend a lot of time working in the UAE, it may be best to obtain the Tax Residency Certificate. This will save you from paying taxes and ensure that your country recognizes you are tax-compliant.
Companies, individuals, legal entities, or organizations wishing to apply for the Tax Residency Certificate must visit the Federal Tax Authority website and create an account. Once you create an account, you will fill in the online application form and attach the required documents.
You need to upload the document in JPEG or PDF formats. The government will then verify your application and approve it. This can take at least three business days. If your application is approved, you will receive a confirmation email, which will prompt you to pay for the certificate online.
After making the payment, a local delivery company will deliver the certificate to your location. And, that’s it.
Documents and Requirements for Getting an Official Tax Residency Certificate as an Individual
If you want to apply for Tax Residency Certificate as an individual, there are several documents you have to submit. These documents include:
- A copy of a valid UAE resident visa
- An Emirates ID copy and passport
- A copy of a lease agreement or a title deed in the UAE
- Proof of income in UAE (salary certificate)
- Approved personal UAE bank statements for the last six months
- Tax forms, if any, from the country that will receive the Tax Residence Certificate when need be
You will also need a report from the General Directorate of Residency and Foreigners Affairs, which shows evidence of all entries into and exits from the UAE.
Note that the lease agreement must be registered in Ejari or other respective authorities. Also, your proof of income can be an official document in the form of your latest salary certificate, share certificate, or an employment agreement.
Before applying for Tax Residency Certificate, ensure your passport or visa is more than 180 days old. The lease agreement or title deed must be valid for at least three months before the application.
Documents and Requirements for Getting Tax Residency Certificate as a Company
To get the Tax Residency Certificate for a legal entity, your company and all partners must provide the following documents and tax forms during the application process.
- The company organizational structure chart
- A copy of the Memorandum of Association
- A copy of the trade license
- A certified copy of the audited financial accounts
- A copy of the owners or directors of the company passports/IDs
- A certified copy of the company owners or director’s valid UAE resident visa
- A copy of the company’s Certificate of Incumbency
- A copy of the company lease agreement in the UAE or tenancy contract tax forms
- Valid UAE Trade License
You will also need UAE company bank statements or the latest certified copy of audited financial statements for the last six months. A UAE bank must stamp these documents.
The trade licence must be active for more than one year in a UAE Freezone or Mainland. Lastly, ensure the copy of the lease agreement or title deed is valid for three months before you apply for the certificate.
Note that if you are a company, you need to prove that you have a physical office space because virtual office spaces are not accepted.
Tax Residency Certificate Application Fees in the UAE
Individuals and companies have to pay for the certificate. The Tax Residency Certificate application fees are AED 1,750 for non-tax registrant legal persons, AED 500 for all tax registrants, and AED 1,000 for non-tax registrant natural persons.
The fees are payable to the UAE Federal Tax Authority through the e-Dirham Card. An expert consultant will help you through the process of securing a corporate or individual tax residency certificate.
You will have to pay some fees when submitting the application and the rest once your application is approved. Suppose you lose your original certificate. In that case, you will have to pay around AED 103 through the e-Dirham Card to get a replacement for the damaged or lost certificate.
UAE Tax Residency Certificate Timeframe in the UAE
The process of applying for tax residency certificates is exclusively online. This will make the application process much easier and faster.
Once you sign up, upload the required documents, and apply for the certificate on the UAE Federal Tax Authority website, the pre-approval process will take at least four to five working days. The government takes this time to confirm if you have uploaded the required documents and also to ensure the documents are valid.
Suppose your documents are valid. You will make payment and allow another five working days for the certificate to be processed. Therefore, to avoid being taxed, it is crucial to start the application process early.
The Tax Residency Certificate is valid for one year. The validity period begins from the financial year an individual or company selects. If you are still in the UAE after a year, you must renew the certificate. Learn more about the renewal and resubmission process and ensure you get it right.
Remember, an applicant must have been residing in the UAE for at least 180 days before applying for the certificate. Companies or any other legal entities must also have been established in the UAE for a minimum of one year before applying for the certificate.
Benefits of UAE Tax Residency Certificate
The UAE government allows companies and individuals to have different certificates. This allows the income to be covered at both corporate and individual levels.
Other benefits of having the tax registration certificate include:
- Avoiding double taxation
- Receive tax incentives while in the UAE
- Avoiding paying extra taxes through the import-export process
- Company or individual legal recognition in the UAE
To promote its business development goals and plan, the UAE has 115DTAA with several trade numbers. This also means that there are various opportunities for tax planning for companies and individuals with a valid Tax Residency Certificate.
Companies also get to enjoy access to international markets, especially when setting up their business in Dubai or Abu Dhabi.
Avoid Double Taxation with the UAE Tax Residency Certificate
Obtaining a UAE Tax Residence Certificate has several advantages. If you want to avoid paying income tax in your country of tax residence and also the UAE, it may be best to get the certificate as soon as possible after moving to the UAE. To get everything right and minimize delays, consider working with an expert consultant.
Our professional staff here at Virtuzone will make your job easier by getting the relevant documents and certifications to finish the Tax Residency Certificate application process on time. Whether you are an individual or a company, contact us and book a free consultation with our experts today.