New “UAE Tax Residency” rules came into effect

Starting from 1 March 2023, new definition and criteria of the tax residence in the UAE have started to apply for the purposes of any UAE tax law or bilateral tax treaties/agreements on avoidance of double taxation. The new definition is aligned with internationally recognized standards and will facilitate the application of bilateral tax treaties and the issuance of tax residence certificates under such agreements.

The UAE has currently entered into bilateral treaties on the avoidance of double taxation with 137 countries and many of these treaties refer to the domestic laws of the UAE for determining whether a person (natural or legal) is a resident of the UAE for purposes of the respective treaty. Bilateral tax treaties allocate taxing rights and ensure people and businesses are only taxed once.

Since 2020, tax residency and commercial activities certificates have been issued by the Federal Tax Authority of the UAE. Tax residency certificates are issued to eligible government entities, companies and natural persons looking to benefit from bilateral tax treaties signed between the UAE and other countries.

Tax residency criteria for a natural person

A natural person will be considered a UAE tax resident if he or she:

  • Has their usual or primary place of residence and their centre of financial and personal interests in the UAE; or
  • Was physically present in the UAE for a period of 183 days or more during the consecutive 12-month period; or
  • Was physically present in the UAE for a period of 90 days or more during the consecutive 12-month period and the individual is a UAE national, holds a valid residence permit in the UAE or holds the nationality  of any GCC Member State, where:
  • He or she has a permanent place of residence in the UAE or
  • He or she carries on employment or business in the UAE

Tax residency criteria for a legal person

A legal person is considered to be a Tax Resident of the UAE if:

  1. it is incorporated or otherwise formed or recognised in the UAE; or
  2. it is otherwise considered a tax resident of the UAE under the Corporate Tax Law.

UAE branches of a domestic or a foreign juridical person are an extension of their “parent” or “head office” and are not considered separate legal persons. A branch of a foreign juridical person registered in the UAE would therefore generally not be considered a tax resident of the UAE.