UAE Tax Residency

Being a tax resident in a country with zero income tax and zero corporate tax is probably the dream of many. You may easily achieve this dream, as explained on these pages.

The United Arab Emirates does not tax any income of any kind. By obtaining UAE Tax Residency, you will benefit from this advantage.

Please note that the UAE has now introduced a corporate tax rate of 9%, starting with the fiscal year beginning on July 1st, 2023, or with the fiscal year beginning on January 1st, 2024, depending on companies’ choice. Qualifying income of free zone companies will be taxed at zero rate.

This article will be updated within February 2023.

The UAE does apply CRS (Common Reporting Standard) and (AEOI) Automated Exchange of Information, which means that passive income on bank accounts of non-tax residents are reported to the fiscal authorities of the country of tax residence of the non-tax resident bank account holder or of the non-tax resident beneficial owner in case where companies are bank account holders.

No CRS (AEOI) Reporting on behalf of UAE Residents

However, as in all countries participating in CRS and AEOI, the above cross-border reporting applies only to bank accounts of non-residents and to bank accounts of companies with non-resident shareholders and beneficial owners.

Passive income on bank accounts of UAE residents is not reported to any other country. The UAE does not raise any tax on any income of individuals at all.

Consequently, the banks in the United Arab Emirates do not report bank account balances of UAE Residents to their own Ministry of Finance, which consequently does not exchange any data related to bank accounts of UAE Residents and their UAE companies to the former home country of which a foreign UAE Resident has been a permanent resident prior to becoming a resident of the UAE.

To be considered as a permanent resident of the United Arab Emirates, a person needs to stay at least 183 days per any 365 days in the UAE.

UAE Residency – details to be considered:

• The UAE does require a UAE Resident to maintain owned or rented residential property for living in order to maintain UAE Residency. Alternatively, UAE Residents may stay in hotels; many hotels provide special rates and services for long-term guests.
  
  
• In case where an individual company owner (shareholder) does not permanently (mainly) live in the UAE and thus does not carry out the management of the company from the UAE, it is important that the UAE Company maintains a proper permanent establishment (office) with resident managers.

  Otherwise, tax authorities of the country where a shareholder of a UAE company is a permanent resident may consider the UAE company as tax-transparent and tax that company’s taxable profits. Most countries assume the place of management of a company as the place of taxation.

  Example: If the shareholder(s) of a UAE company are not residing in the UAE but in, for example, the UK, and the UAE Company does not have maintain operative economic substance (office and management appropriate for its scope of business) in the UAE, then the UK Inland Revenue (UK Tax Authorities) will judge that the UAE Company’s business is managed and carried out from the UK and thus its profit would be taxable in the UK.

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