As the UAE continues to grow its economy and industrial sector, more foreign investors choose it as their main place to do business, the tax benefits of this nation are one of the many advantages that it offers. But, to obtain the greatest benefits of the local tax system, you must have a UAE Tax Residency Certificate. On Connect Services Middle East, we love sharing our experts’ knowledge to make this path easier for you.
In this article, you will learn about what this document is and why you should obtain it. The UAE has signed agreements to avoid double taxation with other countries to ensure that the same taxpayer is not taxed twice in two different countries, which turns out to be a very important advantage when establishing a company with significant capital in the UAE. We invite you to join us and explore the following points in more detail:
1. What is a UAE Tax Residency Certificate?
Among the advantages of having a company in the UAE is that by registering a company in a free zone, the entrepreneur can obtain a UAE Tax Certificate. In simple words, a UAE Tax Residency Certificate is a document from the Ministry of Finance that certifies the residence of a natural or legal person.
The tax residence certificate is meant for any resident company that carries out its commercial activities in the country, including free zone companies, such as businesses operating in the continental territory. This means that the company can take full advantage of the benefits resulting from the treaties to avoid double taxation.
The main objective of this document is to confirm that the United Arab Emirates is the legal residence of the person or company; meaning that they will not have to pay taxes on the earnings generated in the nation. You should note that this advantage does not apply to offshore companies, also known as International Business Companies (IBC). Instead, these businesses may be eligible to receive a tax-exempt certificate.
2. Why should you apply for this certificate?
Knowing the definition of Tax Residence Certificate, these are the main advantages of having this document:
- As mentioned above, an entrepreneur in the UAE can avoid double taxation between the UAE and their country. This will prevent them from paying taxes generated in their country of origin.
- When setting up a business in the UAE, it is an essential requirement to have a tax residence certificate in order to access international markets.
- In the case of the United States, its legislation establishes that citizens and those with permanent residence must pay taxes whether or not they reside in the country. If the same year you paid the taxes, you became a resident of the UAE, you can claim this payment.
In general terms, the main advantage sought is to avoid double taxation, and to achieve this two conditions must be met:
- That the foreign entrepreneur obtains the tax residence certificate in the UAE.
- That the foreign entrepreneur is originally from a country with which the UAE has signed an agreement that avoids double taxation.
3. How to apply for a UAE Tax Residency Certificate?
First of all, remember that both natural and legal persons can obtain this certificate and that the TDC serves as official ratification before the competent body on the fiscal residence of a natural or legal person in the UAE.
The process will vary depending on whether the individual is a natural or legal person. However, both are subject to meeting specific requirements.
3.1 Requirements for natural persons
- Copy of the applicant’s valid passport.
- Copy of UAE residence visa.
- Copy of Emirates ID.
- Bank movements of the last six months in the UAE.
- Valid certification document in the UAE. For example, a contract, or salary certification.
- Immigration report.
- Copy of the lease agreement or home ownership title.
3.2 Requirements for Companies
Companies must also meet certain conditions and provide specific documents before opting to obtain a Tax Residence Certificate. To prevent an extended process and financial losses, they must always ensure that they meet all the requirements.
- Copy of valid trade license.
- Lease contract or property title of a commercial establishment of a minimum of three months before making the request.
- Copy of the valid passport of the company’s legal representative.
- Copy of the visa and Emirates ID of the company’s director/manager.
- The latest audited financial statement containing the bank movements of the UAE company for the last six months; stamped by the bank.
The documents will be submitted together with the application to the Ministry of Finance. If the application is approved, they will issue a Tax Residence Certificate in a period of approximately three weeks.
4. Steps to apply for this document
To make the request, you must visit the Federal Tax Administration website. Then, complete the registration form.
4.1 Create a Tax Certificate account for new users
First, you must register on the website and create a new account. Keep in mind that you will need to enter the following information:
- Email address.
- ZIP code.
- Key code.
- Security code.
- Security response.
- Answer suggestion.
The user will be directed to the login page where the username and password will be requested. When logged in, the user can see the status of the request. Also, the user will be shown the following statuses for the submitted request:
- Draft: This means the form has not been completed or submitted.
- Draft awaiting payment: The user has reached the payment stage but it has not been made.
- Pending: Submitted and awaiting approval. To be processed within 3 days.
- Returned: This means that it is necessary to provide more information or documentation.
- Pending payment: Here, the request was approved, and you must pay the corresponding fee to download the certificate.
- Issued: The process was completed successfully and the certificate was issued.
- Rejected: The request was rejected due to not fulfilling all the requirements.
5. Eligibility criteria
The eligibility criteria to obtain a UAE Tax Residency Certificate will also vary depending on whether the applicant is a natural or legal person.
- Natural persons
The applicant must be a resident of the UAE for at least the last 180 days. It is also important that you prove that you have a housing lease for a minimum of one year.
- Legal persons
To be eligible to obtain a TRC, the legal entity must be established for at least a one-year period. The financial statements must be certified by an accounting firm. This financial report must cover the fiscal year corresponding to the date of the request for the certificate. If the certificate is for the current year, the report must cover the previous year.
6. How much does it cost to obtain a UAE Tax Residency Certificate?
The cost is another factor that will vary according to whether the applicant is a natural or legal person. The cost for applying for the Tax Residency Certificate is higher in legal entities since they bring greater capital to the country and demand a greater number of requirements to process this document.
More specifically, these are the costs to obtain the UAE Tax Residency Certificate:
- Legal persons: From AED 568 to AED 1842. This is equivalent to 155 to 500 American dollars.
- Natural persons: AED 1077.50. This is equivalent to 300 American dollars approximately.
This does not contemplate the cost of processing this service. However, you can always contact us at Connect Services Middle East for more information about our pricing and packages. We offer you the best services for processing your UAE Tax Residency Certificate fast and easily. The best part? You can request our solutions at any time, so get started now!
7. What is double taxation?
Today, the business world is a global trading platform. International trade is at the fore, and the UAE is one of the world’s main business hubs today, helping improve commercial partnerships between countries. However, at the same time, entrepreneurs face certain problems when there is a tax conflict.
This is when, due to the laws of their country of origin, they must pay taxes on the commercial activity they carry out abroad. In other words, the country where you carry out this commercial activity will require you to pay the corresponding taxes.
Likewise, the tax residence certificate issued by the UAE authorities is beneficial for natural and legal persons. Anyone who obtains this certificate has the benefit of protection from the Double Taxation Treaty (DTT) that prevents this tax conflict between the signatory countries.
Double taxation refers to imposing the same tax several times on a taxpayer who has the same income, based on a single generating event. Likewise, international double taxation is defined as a situation in which the same income or the same good is subject to taxation in two or more countries during the same taxable period and for the same reason.
This is what a person prevents by obtaining this certificate as long as the UAE has signed a treaty to avoid double taxation with the country from whom this certificate is requested.
8. How can we help you obtain the UAE Tax Residency Certificate?
Obtaining a tax residence certificate from the UAE offers many advantages, among which is the fact of having to pay taxes both in the UAE and in your home country. If you wish to obtain a UAE Tax Residency Certificate in order to avoid double taxation, you should consider leaving this in the hands of a consulting firm like us, Connect Services Middle East.
Our extensive experience is what characterizes us. In our agency, we are devoted to helping our clients achieve their business goals by increasing their profits, saving costs, and streamlining processes. Also, we offer top solutions for immigration-related matters, such as visa processing and relocation. Aside from the already mentioned, we put at your disposal the following services:
We are glad to offer you the best services in the Middle Eastern market, helping you establish your business without complications. For this reason, we invite you to trust us as your main business solutions provider. Take your company to the next level by partnering with experienced professionals, do not hesitate any longer!
If you wish to hire our best services and obtain this important document, you can do so by contacting us at +971 433 16 688. Our representatives can get you a free appointment with one of our consultants for you to ask us any questions you may have regarding this process. Also, email us today at email@example.com. Your interests are our main priority. Share all your concerns with us and allow us to take care of the rest.