In a global landscape where commercial activities in the UAE are surging and international trade links are strengthening, the complexity of tax regulations poses challenges such as double taxation for businesses. To tackle this issue, the UAE offers a Tax Residency Certificate (TRC), providing access to the benefits of Double Tax Avoidance Agreements (DTAA) as per UAE government provisions.
Join us for an in-depth exploration of the importance of Tax Residency Certificates (TRCs) in the UAE. We’ll break down key aspects such as eligibility criteria, the necessary documentation, the application procedure, associated fees, and the benefits of possessing TRCs in UAE.
NOW Consultant expert team facilitates you in a smooth TRC application process for individuals and companies, navigating the complexities of tax residency in the UAE.
What is Tax Residency Certificate in UAE?
A Tax Residency Certificate, also referred to as a Tax Domicile Certificate (TRC), empowers individuals and businesses in the UAE to leverage the tax benefits facilitated by the UAE government through double taxation avoidance agreements. This official document is granted to eligible natural and legal entities, enabling them to benefit from the provisions of Double Tax Avoidance Agreements (DTAA) pertaining to income, as agreed upon by the UAE.
Tax Residency Certificates (TRCs), formerly administered by the Ministry of Finance (MoF) until November 11, 2020, have since transitioned to the oversight of the Federal Tax Authority (FTA) in accordance with Cabinet Resolution No. (65) of 2020, which took effect on November 14, 2020. To obtain this certificate, residents of the UAE, whether individuals or incorporated entities, can apply under the guidelines outlined in the Double Tax Avoidance Agreements.
The Federal Tax Authority in the UAE issues Tax Residency Certificates to companies (both mainland and freezone) operating within the country for a minimum duration of one year and individuals holding UAE residency visas or permanently residing in the UAE for at least 180 days.
Double Tax Avoidance Agreement and Tax Residency Certificate
A Double Tax Avoidance Agreement (DTAA) represents a tax treaty inked by nations and states to mitigate the occurrence of dual taxation in the context of international commerce. It helps to avoid paying tax twice on income from activities like import-export and Value Added Tax. The certificate essentially functions as a form of double tax avoidance arrangement.
The first pact addressing double taxation prevention was established through a mutual agreement between the United Arab Emirates and France. Over time, the UAE, including Dubai, has gone on to establish 92 such agreements with countries all around the globe.
Importance of Tax Residency Certificate in UAE
A Tax Domicile Certificate or TRC acts as an authorized document issued by the government of UAE to confirm the residency status of either an individual or a company within the territory of UAE. The connection between this certificate and the Double Tax Avoidance Agreement (DTAA) is notable.
Various entities like banks, financial institutions, and government departments acknowledge this certificate as evidence of one’s tax residency in their home country.
Eligibility For Tax Residency Certificate
Within the UAE, companies are of three types: Mainland, Free Zone, and Offshore (International Business Companies – IBC). Both Mainland and Free Zone companies can access the benefits associated with a Tax Domicile Certificate or TRC. However, Offshore companies don’t qualify for these tax treaty benefits and can’t obtain such certificates. Nevertheless, Offshore companies can seek a tax exemption certificate to enjoy tax residency benefits.
Essential Documents Required For a Tax Residency Certificate in the UAE
To obtain a tax residency certificate in the UAE, the following documents are required. The documents are different depending on whether the applicant is an individual or a company. Let’s delve into the essential documents:
Documents of TRC For Individuals:
Individuals need to provide the following documents while applying for a tax residency certificate in the UAE:
- A Salary Certificate is required for employed applicants.
- Applicant holding any company in the UAE requires a company license, where their name is listed).
- A bank statement verified for the last six months.
- Applicant also requires a certified copy of the tenancy contract or residential lease agreement.
- The individual needs copies of one passport, UAE residence visa, and Emirates ID
Documents of TRC For Companies:
The following documents are required for companies in UAE:
- It requires a copy of the company’s Certificate of Incorporation for applying TRC.
- Duplicate copies of the passports for the company’s directors, shareholders, or managers, along with their valid UAE residency visas, are a mandatory requirement.
- Require Emirates ID copies of the shareholders.
- The company must have a minimum of one year of operational history and possess a valid UAE trade license, which can be either Mainland or Free Zone.
- Include a copy of the company’s Memorandum of Agreement (also known as Memorandum of Association)
- Attach a copy of the company’s lease agreement.
- The most recent certified audited financial accounts for the past six months of the UAE company.
- Bank statements with an official stamp from the bank.
How to Get a Tax Residency Certificate in UAE.
The procedure for obtaining a the certificate in the UAE is as follows:
- First of all, create an account on the website of the Federal Tax Authority (FTA).
- Go to the ‘Services’ section after successfully logging in.
- From the dropdown menu, choose ‘Certificates.
- Choose ‘Request for TRC, which will open an application form.
- Fill out the form with your details, including your name, Emirates ID number, tax registration number, contact information, and more.
- Upload all the necessary documents, such as passport copies, Emirates ID, tenancy contract, utility bills, and any other requested documentation.
- After clicking ‘Submit,’ you’ll be directed to a payment gateway where a processing fee will be charged.
- The FTA will carefully review your application, and if it’s approved, they will issue your TRC within a few days.
- You will receive the certificate via email and can also download it from your FTA account.
Cost of Obtaining a Tax Residency Certificate:
Fees associated with the certificate are as follows:
- AED 50 for submitting a TRC application.
- AED 500 for all tax registrants, encompassing both individuals and companies.
- AED 1,000 for individuals who are not registered for tax.
- AED 1,750 for non-tax-registered companies.
- A nominal service charges for consultant
Timeframe For The Process
The processing times for TRCs by the Federal Tax Authority UAE are as follows:
- For online applications, it typically takes 3 business days from the date the application is received.
- If you opt for a hard copy, the processing time extends to 7 business days from when the certificate fees are paid.
- For individuals or entities requesting FTA certification on their tax forms, the typical processing time is five business days, starting from the day the fully filled form is received by the FTA.
Tax Residency Certificate is Valid Upto:
The UAE Tax Residency Certificate, known as TRC UAE, holds its validity for a period of one year, commencing from the date of issuance. The certificate is applicable to both individuals and companies. Individuals and companies can submit additional certificate applications as necessary, depending on specific requirements.
Advantages of TRCs In UAE
Launching a business venture in the United Arab Emirates holds great promise, and one compelling factor is the favorable tax climate. The following are the advantages of the certificate in the UAE:
- Exemption from individual and corporate income taxes.
- Facilitation of international trade on a substantial scale.
- Affirmation of an individual’s or company’s legal status in the UAE.
- Evasion of extra taxes during the import-export process.
- Reinforcement of bilateral business relations.
- UAE residency status shields against double taxation and opens doors to tax incentives.
- The flexibility to obtain multiple certifications for both individuals and businesses.
Why Choose NOW Consultant for Your TRC?
NOW Consultant offers efficient tax guidance and expertise, streamlining the UAE’s Tax Residency Certificate (TRC) process. Our expert team provides personalized assistance, navigating the intricacies of TRC with ease and confidence.
With Now Consultant, you can trust your TRC application to capable hands, avoiding potential delays and complications. For assistance and updates related to your TRC in the UAE, contact the team of experts in NOW Consultant, who will guide you through the process.