New UAE tax residency criteria
08 March, 2023
In brief
On 9 September 2022, the UAE Cabinet of Ministers issued Decision No. 85 of for 2022, which provides a new domestic definition and criteria for when an individual or a legal entity shall be considered a Tax Resident of the UAE for the purposes of any UAE tax law or bilateral tax agreement from 1 March 2023.
Ministerial Decision No. 27 of 2023 on Implementation of Certain Provisions of Cabinet Decision No. 85 of 2022 on Determination of Tax Residency, published on 1 March 2023, gives further clarification on a number of the definitions relevant to the Tax Resident definition for individuals.
The domestic Tax Resident definition is aligned to internationally recognised standards and gives additional clarity to individuals and legal entities in respect of their UAE tax residency position.
Many of the bilateral tax agreements the UAE has entered into with other territories make reference to the domestic laws of the UAE for determining whether a person is a resident of the UAE for purposes of the respective treaty. This new domestic law provides a clear definition of a Tax Resident in the UAE, which will facilitate the application of these treaties and the issuance of tax residence certificates under such treaties.
A natural person will be considered a UAE Tax Resident if the individual:
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 a consecutive 12-month period; or
was physically present in the UAE for a period of 90 days or more in a 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:
(i) he or she has a permanent place of residence in the UAE; or
(ii) he or she carries on an employment or a business in the UAE.
What does the new UAE Tax Resident definition mean for individuals?
The introduction of the new UAE tax residency criteria for individuals does not mean individuals will be subject to personal income tax in the UAE.
The UAE does not levy any personal income tax on the employment or other personal income of individuals. As such, where an individual meets the above criteria to be considered a UAE Tax Resident, they would generally not be subject to taxation in the UAE on their personal income.
The new Tax Resident definition gives additional clarity to individuals in respect of their UAE tax residency position under bilateral tax agreements the UAE has entered into with other territories, many of which make reference to the domestic laws of the UAE for determining whether a person is a resident of the UAE for purposes of the treaty.
The Decision does not negate the fact that the UAE Corporate Tax Law will treat foreign natural persons conducting business in the UAE as a “Resident Person” (as defined in the Corporate Tax Law) when it comes to determining whether the person's business income is taxable in the UAE. This Corporate Tax Law concept is unrelated to whether the natural person themselves is considered Tax Resident in the UAE for other tax purposes.
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