UAE's Tax Residency Law: What Expats Need to Know About Recent Changes

The UAE has introduced new tax residency regulations to modernize its tax system and align with international standards. Key developments include:
1. Cabinet Decision No. 85/2022: Effective from March 1, 2023, this decision defines criteria for tax residency in the UAE.
2. Ministerial Decision No. 247/2023: Outlines rules for obtaining a Tax Residency Certificate for international agreements.
Tax Residency Criteria:
For Legal Persons: Established or recognized under UAE laws, not a foreign branch.
For Natural Persons:
A. Habitual or Primary Residence: If a natural person’s main home and the place where they handle financial matters are in the UAE, meeting conditions specified by the Minister.
B. Physical Presence Criteria: Spending 183 days or more in the UAE within a 12-month period.
C. Additional Conditions: Being physically present in the UAE for 90 days or more within a 12-month period, holding UAE nationality, a valid Residence Permit, or the nationality of any GCC Country, and meeting specific conditions like having a permanent residence or holding a position in the UAE.
The new regulations aim to:
Simplify the process for expatriates to establish tax residency
Enhance access to benefits from double taxation agreements
Improve transparency and compliance with international standards
Individuals and entities meeting the criteria can apply for a tax domicile certificate with the Federal Tax Authority. The UAE has signed double taxation agreements with over 130 countries.
These changes represent a significant step in the UAE's tax landscape, providing clearer guidelines for expatriates and businesses operating in the country.
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