How to obtain a UAE tax residency certificate for treaty purposes

Background

The United Arab Emirates (UAE), historically free of direct federal taxes like corporate or personal income tax, recently established new domestic tax residency criteria. Introduced via Cabinet Decision No. (85) of 2022 in September 2022 and clarified further by Ministerial Decision No. (27) of 2023 in February 2023. The new rules came into effect on 1 March 2023. The aforementioned decisions stipulate tax residency criteria for both individuals and legal entities, highlighting a significant fiscal transformation for the UAE1.

On 16 October 2023, the UAE Ministry of Finance issued Ministerial Decision No. (247) of 2023 on the Issuance of Tax Residency Certificates for the Purposes of International Agreements.

The decision specifies how taxpayers can apply for a Tax Residency Certificate (TRC) for Double Taxation Agreement (DTA) purposes2.

Types of tax residency certificates

A TRC can be issued for various purposes, but the two main categories are as follows:

• Domestic TRC: This certificate establishes an individual's or an entity's status as a tax resident in a particular country according to that country's domestic tax laws. It is primarily used for domestic purposes such as complying with local tax obligations, availing local tax benefits, or fulfilling other regulatory requirements. It is based on domestic tax laws and criteria set by the issuing country.
• TRC for DTA purposes: This certificate verifies that an individual or an entity is a resident of a country for the purposes of claiming benefits under a DTA. DTAs are treaties between countries meant to avoid or mitigate double taxation of the same income. It is mainly used for international purposes. For instance, if a resident of Country A earns income in Country B, the certificate can help reduce or eliminate taxation in Country B based on the DTA between Country A and B. The criteria for being considered a tax resident for DTA purposes might differ from domestic tax residency criteria. The tax residency criteria for DTA purposes are defined based on the specific terms in the DTA between the two countries.

In essence, while both certificates establish tax residency, their applications differ. The domestic certificate is used primarily within the country of issuance, while the DTA certificate is used for cross-border transactions involving two countries that have a tax treaty in place.

Relevant procedure

In line with Article (6) of Cabinet Decision No. (85) of 2022, individuals who fulfil the tax residency requirements under an applicable DTA can apply to the Federal Tax Authority (FTA) for a TRC specific to that agreement.

To obtain a TRC for DTA purposes, taxpayers should comply with the following procedure:

• Step 1: The person should ensure that they meet the tax residency conditions under the relevant DTA.
• Step 2: The person should then submit an application to the FTA, using the prescribed format and providing all necessary details.
• Step 3: Upon receipt, the FTA will evaluate the application to determine compliance with the tax residency conditions of the DTA.
• Step 4: If the application meets the required criteria, the FTA will grant and issue the TRC, either in the form attached to Ministerial Decision No. (274) of 2023, or in any other form acceptable to the FTA.

Format

The TRC for DTA purposes will include the following details:

• Application number: […]
• Application date: […]
• Name of applicant: […]
• Nationality (if applicable): […]
• Passport number (if applicable): […]
• Resident visa number(s) (if applicable): […]
• Emirates ID number (if applicable): […]
• Commercial licence number and licencing authority (if applicable): […]
• Tax Registration Number for Corporate Tax purposes (if applicable): […]
• This certificate is valid from [../../…] to [../../…]³.
• [Signature and Federal Tax Authority’s stamp]

The TRC also includes the following declaration:

The Federal Tax Authority to the best of its knowledge certifies that [name of applicant] is a resident of the United Arab Emirates pursuant to the provisions of [full name of the double taxation agreement] entered into between the United Arab Emirates and [name of the other country] on [signature date of agreement].