March 22, 2023
UAE issues additional guidance on determination of tax residency for individuals
On 22 February 2023, the UAE MoF issued Ministerial Decision No.27 of 2023 on Implementation of Certain Provisions of Cabinet Decision No. 85 of 2022 on Determination of Tax Residency. This new decision provides additional details regarding the requirements for a natural person to qualify as tax resident in the UAE.
In November 2022, the UAE Government issued Cabinet Resolution No. 85 of 2022 which introduced provisions to determine tax residency for natural and legal persons. For background, see EY's Global Tax alert, dated 16 November 2022.
According to Cabinet Resolution No. 85, effective 1 March 2023, individuals can be considered tax residents in the UAE if they meet any one of the following conditions:
If a tax treaty outlines specific conditions to be eligible for tax residency, Cabinet Resolution No. (85) of 2022 specifies that the provisions of the tax treaty shall be applicable for purposes of tax treaty application.
Additional details regarding the conditions in determining tax residency for natural persons
Ministerial Decision No. 27 of 2023 provides additional clarifications on each of the conditions mentioned above.
An individual whose principal place of residence and the center of financial and personal interests is in the UAE (irrespective of the number of days spent in the UAE).
For the above condition, all of the following requirements must be met:
An individual who has been physically present in the UAE for 90 days or more over a consecutive 12-month period; and the individual is a UAE citizen, UAE resident, or Gulf Cooperation Council (GCC) national; and the individual either has a permanent place of residence in the UAE or performs a job or business in the UAE.
For this condition, the requirements are:
AND one of the following:
Individuals who spend 183 days or more in the UAE
The new Ministerial Decision also clarifies that all days or parts of a day in which an individual is physically present in the UAE will be counted as UAE days.
The days do not need to be consecutive in determining the 183-day or 90-day period. However, any day that was spent in the UAE due to exceptional circumstances may be disregarded by the authorities. An exceptional circumstance is an event beyond the individual's control occurring while he is already in the UAE, which he could not have predicted, and which prevents him from leaving the UAE as initially planned.
Application process for Tax Residency Certificates (TRC)
Individuals can submit their tax residency certificate applications online on the Federal Tax Authority portal.
When applying for a TRC for domestic tax purposes, individuals will need to select one of the three options relating to the conditions outlined above and upload the corresponding required documents.
For each TRC application, the fee is currently AED50 for submission plus one of the following fees:
Individuals and businesses should review the conditions for determining UAE tax residency for individuals to establish whether any of the conditions apply to them or to their employees, respectively. Where applicable, it should be verified whether such individuals can meet the relevant requirements under the applicable condition.
Attention should also be given to the days when an individual is considered as physically present in the UAE, particularly when arriving in or departing from the UAE.
For additional information with respect to this Alert, please contact the following:
EY Consulting LLC, Dubai
EY LLP (United States), Middle East Tax Desk, New York