As we all know, Dubai is the leading hub for investors and entrepreneurs coming from around the world to invest here as no such high range of taxes is being imposed by the Government of the United Arab Emirates. There is no income tax is leveled upon the person who is working or earning in United Arab Emirates. However, recently Corporate Tax has been introduced by the Ministry of Finance wherein a minimum of 9 percent of the Tax has been imposed upon the corporations performing their function in the territorial boundaries of the UAE or getting paid by delivering services outside the United Arab Emirates.
Corporate Tax is not of grave concern as it is the lowest Tax imposed comparatively to other countries. Moreover, no withholding taxes are levied upon the individual\’s income from the dividends, profits, or any other interest.
In this short article, we will be dealing with the recent change which has been brought by the Ministry of Finance concerning the determination of Tax Residency.
The Cabinet Decision No. 85 of 2022, which is issued concerning the Determination of Tax Residency has come into effect on 1st March 2023, states that:
A natural person shall be considered a Tax Resident in the State where any of the following conditions are met:
- If his usual or primary place of residence and the center of his financial and personal interests are in the State, or he meets the conditions and criteria determined by a decision from the Minister.
- If he has been physically present in the State for (183) one hundred and eighty-three days or more, within the relevant (12) twelve consecutive months.
- If he has been physically present in the State for a period of (90) ninety days or more, within the relevant (12) twelve consecutive months, and he is a UAE national, holds a valid Residence Permit in the State, or holds the nationality of any member state of the Gulf Cooperation Council, and meets any of the following:
- He has a Permanent Place of Residence in the State.
- He carries on employment or Business in the State.
In substance, it is to be considered that by spending 90 days consecutively for 12 months, the person can be regarded as a tax resident under this new law subject to the conditions mentioned above.
If you believe that you fall under this category then you can simply log in to the Ministry of Finance website and can create the id; after that, uploading the required documents as mentioned by the ministry, you can have access to the certificate, which is to be provided by the ministry.
IMPACT OF THE NEW LAW
The new law also provides greater flexibility for individuals and businesses, allowing them to choose where they want to be tax residents.
However, it is essential to note that the new tax residency laws do not affect the UAE\’s status as a tax-free jurisdiction. The country does not levy income tax on individuals or businesses, meaning those tax residents in the UAE will not be subject to any income tax on their worldwide income. This is one of the main reasons why the UAE is such an attractive destination for foreign investors.
Nevertheless, the tax residency laws changes are still significant, as they provide greater clarity and certainty for individuals and businesses operating in the UAE. They also bring the country more in line with international standards, which could help to boost its reputation as a business-friendly destination.
It is worth noting that the new tax residency laws have been introduced in the context of broader changes to the UAE\’s tax system.
In conclusion, the UAE\’s new tax residency laws are an essential development for individuals and businesses operating in the country. They provide greater clarity and certainty and bring the UAE more in line with international standards. While the changes are not expected to have a significant impact on the country\’s status as a tax-free jurisdiction, they are a sign that the UAE is committed to modernizing its tax system and enhancing its economic competitiveness.