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Tax Residency Certificate

TAX RESIDENCY CERTIFICATE

What Is Tax Residency/Domicile Certificate

Today businesses are in Global Platforms. Cross-culture business activities are not new anymore! Trade relations definitely enhanced, but we see enterprises and individuals caught and confused in complicated tax structures. Being subject to double taxation became a misery. A document which would serve as a proof of residence was required.

The UAE Tax Residency Certificate is an official document issued by the UAE Ministry of Finance confirming that an individual or corporate entity resides in the UAE.

Authorities and banking institutions inside and outside the UAE consider the UAE Tax Residence Certificate as a sufficient proof of tax residency in the UAE.

The Certificate in UAE is issued by Ministry of Finance (MoF UAE) that permits eligible government entities, companies, and individuals to take advantage of agreements of Double Taxation Avoidance Agreement (DTAA). 

This Certificate protects businessmen, entrepreneurs, organizations, investors’ interests as they operate from other jurisdictions or countries and it improves the Common Reporting Standard requirements of Organization for Economic Co-operation and Development (OECD).

WHO SHALL BE ELIGIBLE TO OBTAIN TRC

Companies operating in Mainland.

Free Zone Companies.

An individual.

One of the main advantages of doing business in the UAE is the fact that by registering as a Free Zone Company, a UAE Tax Certificate can be obtained. The Tax Residency Certificate is issued to a resident company operating in the country, such as a Free Zone company or a firm operating in mainland and lets the company fully take advantage of the benefits stemming from double taxation avoidance treaties.  invest in UAE.

BACKGROUD – WHY TRC?

A Tax Residency Certificate is a requirement by OECD to prove that a business is a resident of the UAE jurisdiction. Tax residence of a Business or Individual is determined under the domestic tax laws of each jurisdiction. There might be situations where a person qualifies as a tax resident under the tax residence rules of more than one jurisdiction. 

For the purposes of the Common Reporting Standard (CRS), Financial Institutions must ensure that Account Holders (or Controlling Persons) disclose all tax residences in the required certification.  

WHAT ARE RBI SCHEMES?

“Residence by Investment” (RBI) schemes are being offered by a substantial number of jurisdictions and allow foreign individuals to obtain citizenship or temporary or permanent residence rights based on local investments or against a flat fee. UAE has adopted “Residence by Investment” (RBI) scheme.

Individuals may be interested in these schemes for several legitimate reasons, including the wish to start a new business in the jurisdiction, better education, and job opportunities etc.

TAX RESIDENCY CERTIFICATE AND COMMON REPORTING STANDARD

In order to avoid the misuse of RBI Schemes and to tighten the control on taxation rules, OECD made ‘Self-Certification’ a requirement for Business or individual persons, in order to prove their residence in a country. This also allows them to take advantage of the Double Taxation Avoidance Agreement (DTAA).

Financial Institutions must consider all relevant information available, including the results of the OECD’s RBI risk analysis. As a result, when, considering all relevant information, it should take appropriate measures to ascertain the tax residency(ies) of such persons. Hence, Tax Residency Certificate became the solution adopted by Financial Institution in UAE. 

BENEFITS OF OBTAINING TAX RESIDENCY CERTIFICATE – SUMMED UP!

✔ Utilization of benefits of DTAA.

✔ Preventing unnecessary litigations and procedures. 

✔ Reduces working capital shortage.

✔ Strengthens trade relationship.

✔ Facilitating the exchange of information

✔Fostering International Trade.

Under the status of tax residence in the UAE, you can freely benefit from the attractive business environment, 0% income tax, and preferential tax treaty network.

A Tax Residency Certificate in UAE is issued by International Financial Relations and Organizations Department of Ministry of Finance.

WHAT ARE THE REQUIREMENTS FOR AN INDIVIDUAL TO OBTAIN A TAX RESIDENCE CERTIFICATE?

  • Passport Copy 
  • Valid Residence Copy
  • Certified Tenancy Contract / Title Deed. 
  • Certified bank statement for at least 6 months during the required year. 
  • Source of Income/Salary Certificate. 
  • Full Immigration Report of residency (Exit & Entry report) from the General Administration of Residency and Foreigners Affairs on the number of days of residency. 

WHAT ARE THE REQUIREMENTS FOR COMPANIES TO OBTAIN A TAX RESIDENCE CERTIFICATE?

  • A copy of the trade license and partners’ attachment.
  • Establishment contract certified by official authorities (if it is not a Sole Company).
  • A copy of the company’s owners/partners/directors’ passports
  • A copy of the company’s owners/partners/directors’ IDs
  • A copy of the company’s owners/partners/directors’ permits of residence
  • A certified copy of the audited financial accounts
  • A validated 6-month bank statement
  • A certified copy of the lease agreement.
  • Tax forms (if any) from the country in which the certificate is to be submitted.
  • The company must have been established for a period of at least one year. Financial accounts must be audited by an accredited audit firm and attached with other required documents to the application. The audited financial accounts must be prepared by an accredited audit firm. The report must be certified and stamped by the audit firm.

Remember – Tax Authorities only care about the facts. And for you/your entity’s residence the Tax Residency Certificate is the ultimate proof in UAE!

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