UAE: Finance Ministry Clarifies Tax Residency Rules

The UAE Ministry of Finance has clarified rules to certain provisions on the Determination of Tax Residency, bringing the Emirates in line with other countries that have similar legislation.

The rules, which came into effect on Wednesday, are designed to clarify the domestic definitions for determining whether a person or a legal entity may be considered a tax resident of the UAE.

“The ministerial decision on implementing domestic tax residency rules is important as it gives additional clarity to individuals in respect of when they are considered as tax residents under UAE taxation laws,” Younis Haji Al Khouri, Undersecretary in the Ministry of Finance, said on Wednesday.

In 2020, it was announced that tax residency and commercial activities certificates would be issued through the Federal Tax Authority of the UAE.

Tax residency certificates are issued to eligible government entities, companies and people looking to benefit from double taxation agreements signed between the UAE and other countries.

Double taxation agreements allocate taxing rights and ensure people and businesses are only taxed once.

They clarify how certain types of income — such as dividends, property income and pensions — should be taxed, and lay out rules on non-discrimination to prevent different treatment based on factors such as nationality or residency.

The UAE has double taxation treaties with 137 countries, including the UK, India, Egypt, Germany and Japan.

Employees in the UAE do not pay income tax on their salaries, property or other investments.

However, in January last year, the UAE introduced a federal corporate tax with a standard statutory rate of 9 per cent, which will come into effect for businesses whose financial year starts on or after June 1 this year.



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