Want To Avoid Double Taxation? Obtain A UAE Tax Residency Certificate
The UAE, which is considered as a cooperative jurisdiction for tax purposes by the European Union, has implemented an extensive favourable Double Tax Treaties network with 90 applicable Double Tax Agreements and 39 in negotiation, signature, or ratification. UAE joined, on 16 May 2018, the Organisation for Economic Cooperation and Development (“OECD”) Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) and adhered to the multilateral convention incorporating BEPS (Basis Erosion Profit Shifting) clauses into its Double Tax Treaties.
UAE double tax treaties grant one of the lowest withholding taxes for dividends & interests (including the countries availing 0% EU directive withholding tax) and a very profitable withholding tax regime for royalties. Even more UAE double tax treaties grants for some countries (such as with Indonesia, Thailand, Singapore, Mexico, Uruguay, Ukraine and Czech republic)- by availing the benefit of Favoured nation’ clauses which automatically attribute to UAE entities any more favourable withholding tax rates for dividends, interest and royalties that the concerned nations may get with any other jurisdiction- the best withholding tax rates available on dividends, interest and royalties.
In addition, UAE has O% tax applicable to:
- dividends, interest, royalties;
- capital gains;
- service fees;
- and other types of income earned in the UAE or from foreign source countries.
Furthermore, UAE has 0%:
- Withholding tax or similar non-resident tax on repatriation of income abroad;
- Personal income tax on employment income, fees or carried interest.
It is important to note that only UAE financial free zones (ADGM & DIFC) have the right to exempt their entities from future federal taxation (such as federal corporate income tax) in addition to the ones from the Emirate where the entity is located, unlike other free zones.
To benefit from these Double Taxation Agreements, tax incentives, and tax benefits for import and export, eligible natural and legal persons can apply for and obtain a UAE Tax Residency Certificate (TRC). A natural person residing in the UAE for at least 180 days can apply for the TRC, and a legal person operating in the UAE for at least 1 year can apply. The TRC is valid for one year and is usually renewable provided that conditions at the time are met. Effective Tax Planning should be applied here to ensure that the corporate and individual situation adheres to the tax rules to gain the maximum benefits from a UAE Tax Residency Certificate.
“UAE has substantial tax, legal, corporate, geographical, political and financial upsights to be considered as a jurisdiction of choice for corporate and transactional tax efficient structuring’’.
TRC can be obtained through the UAE Ministry of Finance (“MOF”). UAE companies to benefit from DTTs will need to provide the tax authority of the income source country with a TRC evidencing its UAE tax residence.
Companies need to provide a specific set of documents to obtain a UAE TRC, within 10days in general, such as:
- UAE residency of manager/director or shareholders;
- locally audited financial statements for the application period;
- 6 months local bank statements during the same period;
- Tax treaty application form from the source country requiring the TRC.
The MoF has signed Memoranda of Understanding (“MoUs”)2 on transparency in information exchange on tax matters, as per OECD requirements, with the following free zones: DIFC, ADGM, DMCC, JAFZA, RAK FTZ, RAKIA, Fujairah FZA, and UAQFTZA.
Individuals need to provide a specific set of documents to obtain a UAE TRC, within 10days in general, such as:
- UAE residence card;
- tenancy contract (Ejari;
- bank statements for at least 6 months for the application period;
- source of income;
- sponsor certificate stating individual activity & income source;
- report from the GDRFA showing number of days the resident spent in UAE (Exit & Entry report).
Benefits of a UAE Tax Residency Certificate (TRC)
- 0% Income Tax
- 0% Corporate Tax
- Benefit from the Double Taxation Treaties (DTT), to avoid double taxation in more than 100 countries.
- A jurisdiction that steers clear of controversies and has no disputes with international regulators. The UAE maintains a spotless record when it comes to lawsuits or disputes with international regulators who are on the hunt for financial centers around the world.
- Tax benefits for import and export
- Uae Residency with all the benefits of being a resident:
- Visa-free travel to certain destinations (check with foreign embassies in the UAE).
- Access to the vibrant property market and other local investment opportunities
- Easy obtainment of UAE driving license.
- Open a bank account.
- Access to public services, such as government health services (e.g. Covid Vaccination), health insurance, and schools.
- Residency in a country with a robust economy and a stable political climate.
- Benefits of global position with access to international trade.
- State-of-the-art business infrastructures.
- 2-year or 3-year residency, typically renewable provided that conditions are met.
- Business Owners are allowed to sponsor UAE Residency Visas for their family members such as a spouse, children as well as parents, provided they meet certain requirements.
- With a UAE Residency you are assured that your family, business, and wealth are secured and highly protected within the sophisticated vehicles available in the country.
- The best quality of life in the Middle East.
As a registered tax & corporate service provider Wincore shall assist you in the structuring or restructuring of your company(ies) or Group:
- Assessing your current or proposed structuring or restructuring.
- Assisting you in optimising your tax and governance planning.
- Assisting you in structuring or restructuring your entities.
- Assisting you in obtaining the UAE Tax Residency Certificate.
For a comprehensive understanding of Double Tax Treaties (“DTTs”), Application to UAE Entities, list of UAE Double Tax Treaties, UAE Double Tax Treaty network rates, UAE Tax Residency Certificate (“TRC”), VAT Exposure for UAE Holding Companies and Economic Substance Regulations – BEPS Related DTT Actions, then read our full article here on UAE Double Tax Treaties.
For Support and assistance on any of these matters Get in Touch with our Corporate Team Today
Wincore specializes in Tax, Corporate and Fiduciary matters. We provide pragmatic, flexible and efficient solutions to individual entrepreneurs, startup businesses, foreign and local SMEs, multinationals, wealthy international families, HNWIs and UHNWIs.