The concept of tax residency is a key factor in determining which jurisdiction a person or entity is liable to for tax purposes. Since each country defines tax residency differently, individuals and businesses engaged in cross-border activities may find themselves considered tax residents in multiple jurisdictions.
When a person is considered a tax resident in two or more countries, the relevant Double Taxation Agreement (DTA) typically determines which country will be the primary residence for tax purposes. These agreements help allocate taxing rights between the jurisdictions, potentially reducing or eliminating the risk of double taxation.
To claim relief under a DTA or to avoid being taxed twice, individuals and businesses may be required to provide a Tax Residency Certificate (TRC), issued by the relevant tax authority. In the UAE, the Federal Tax Authority (FTA) is responsible for issuing TRCs to those who meet the necessary criteria.
Under UAE law, a person can be either a resident or non-resident for tax purposes. A “resident person” is defined as:
A “non-resident” person may be subject to UAE corporate tax if they meet any of the following conditions:
In determining corporate tax residency, the place of incorporation alone may not always reflect the economic reality of where the business is managed. The concept of “effective management and control” is used to determine tax residency. This is similar to the “central management and control” test used by other countries.
Operational or legal activities like maintaining company records or implementing decisions do not qualify as key management activities for tax residency purposes.
A natural person is considered a tax resident in the UAE if they meet one of the following conditions:
1. They are physically present in the UAE for 183 days or more within a 12-month period.
2. They are physically present in the UAE for at least 90 days in a 12-month period and either:
3. Their primary residence and financial interests are located in the UAE.
Each of these conditions requires supporting documentation to apply for a Tax Residency Certificate.
Where a person is a tax resident in both the UAE and another country, the DTA between those jurisdictions will apply the “tie-breaker” rules to determine the person’s residence for tax purposes. These rules consider factors such as:
For businesses (juridical persons), the DTA will consider the place of effective management to resolve dual residency issues.
A Tax Residency Certificate (TRC) certifies that a person is a tax resident of the UAE. TRCs are typically requested for two purposes:
1. For use under a DTA to avoid double taxation.
2. For purposes unrelated to a DTA (such as confirming residency for local tax purposes).
A TRC can be requested for the current tax period or for any prior 12-month period. The application can only be processed under the following conditions:
Newly incorporated companies must wait 12 months before applying for a TRC.
Navigating tax obligations across multiple jurisdictions can be complex, especially for individuals and businesses with international operations. In the UAE, a Tax Residency Certificate (TRC) is a vital document issued by the Federal Tax Authority (FTA). It allows individuals and entities to benefit from Double Taxation Agreements (DTAs) and prove their tax residency status.
Whether you’re an expatriate seeking relief from double taxation or a business operating internationally, understanding the TRC process is essential. This guide explains what a TRC is, who can apply, what documents are needed, and the application steps.
A Tax Residency Certificate (TRC) is an official document issued by the UAE’s FTA to confirm an individual’s or entity’s tax residency. It enables taxpayers to:
This certificate is critical for individuals and businesses with income streams in multiple countries.
Eligibility for a TRC depends on the applicant’s category:
The criteria for tax residency in the UAE differ for natural persons (individuals) and legal entities (businesses). Understanding these conditions is essential for determining eligibility for a Tax Residency Certificate (TRC).
An individual is considered a tax resident in the UAE if they meet any of the following criteria:
A business is classified as a tax resident in the UAE if it meets one of the following conditions:
Obtaining a TRC in the UAE offers several advantages:
To successfully apply for a Tax Residency Certificate (TRC) in the UAE, applicants must provide specific documents that verify their residency and compliance with UAE regulations. These requirements vary depending on whether the applicant is an individual or a business.
To apply for a TRC, you will need:
The required documents include:
You can apply for a TRC for the current tax period or any prior 12-month period. Timing conditions include:
Here’s how to apply for a TRC through the Federal Tax Authority:
A Tax Residency Certificate (TRC) is valid for one year from the date of issuance. To continue benefiting from DTAs or meeting tax compliance requirements, applicants must renew the TRC annually.
Understanding tax residency and navigating the application process for a Tax Residency Certificate (TRC) is crucial for managing your international tax obligations effectively. At CTC Accounting, we are here to guide you through every step—whether you need assistance determining eligibility, gathering the required documents, or complying with UAE tax regulations.
Contact us today to schedule a consultation and get expert guidance on your Tax Residency Certificate application. Let us make the process seamless, so you can focus on your success.
A TRC is valid for one year, after which it must be renewed to maintain its benefits.
You can track the status of your TRC application by logging into your account on the Federal Tax Authority (FTA) portal. Navigate to the “My Applications” section, where you’ll find updates on your application progress. Ensure you have your reference number handy for quick access.
Yes, business owners residing abroad can apply for a TRC if their company is incorporated or operates in the UAE. You must demonstrate that the business is effectively managed and controlled in the UAE and provide supporting documents like a trade license, financial statements, and UAE bank activity.
Yes, a TRC is valid for one year and must be renewed annually. To renew, submit a new application through the FTA portal with updated documentation proving your continued eligibility, such as recent residency or business activity records.
Digital nomads can apply for a TRC if they meet the residency criteria, such as spending at least 183 days in the UAE within a 12-month period and holding a valid residence visa. Additional proof, such as a lease agreement or bank activity in the UAE, may be required.
Owning property alone does not automatically qualify you for a TRC. You must meet residency requirements, such as spending at least 183 days in the UAE annually and having financial ties to the country, such as maintaining a local bank account or conducting business activity.
