UAE is becoming the most popular trade and economic hub in the world. Tax Residency in UAE is a legal document that is beneficial for companies and individuals living in the country. However, they must be having a permanent establishment in UAE for at least a year.
The Government offers various incentives such as Tax Residency to attract foreign investors to UAE. Especially, from Germany, Italy, the UK, and the rest of Europe. Foreigners can easily start a business in the UAE and settle down in the country.
Tax Residency in UAE helps investors from foreign countries to avail the benefit of Double Taxation. UAE has signed the Double Taxation avoidance agreement with more than 137 countries. Obtaining a Tax Residence Certificate in UAE will help foreign investors to save tax on their incomes earned in UAE. They need not pay taxes for it in their home country.
This article explains the benefits of Tax Residence Certificate (TRC) in the UAE for foreign companies and individuals. Also, how it will help save tax in their home country by leveraging the Double Taxation benefits.
What is a Tax Residence Certificate in UAE?
The Tax Residence Certificate (TRC) is a legal document in UAE that allows residents in UAE to avoid double taxation. They need not pay taxes in their home country for the income earned in UAE.
TRC Certificate is issued by the UAE Federal Tax Authority (FTA) to a company or individual in UAE. They must have a permanent establishment and be operating from the UAE for 1 year or more.
Tax Residence Certificate offers transparency and demonstrates accountability. Also, it helps in complying with the tax laws of the country.
Individuals and companies can pay taxes in only one country. They can pay either in their Country of residence or where the income is generated.
There are no or minimal taxes in UAE. It is beneficial for individuals from high-tax-paying countries to settle in UAE. They can set up a company and operate it from UAE.
What Does Tax Residency Status in UAE mean?
The Tax Residency status allows a UAE tax resident to be exempted from paying double taxation. Being a Tax Resident in UAE allows an individual or company to not pay taxes in their home country for the income earned in UAE.
There are certain conditions the company/individual must meet to qualify for the Tax Residency Status such as:
- Having a permanent establishment in UAE that is fully operational with staff, assets, and business transactions
- Has spent at least 90 (as per the new tax residence law amendment)or 183 consecutive days in UAE
- Have a company operating in UAE for 1 year
- Is a resident of UAE for 1 year or more (for individuals)
International companies as well as individuals can benefit from the tax residency rules in UAE. The Country has a 9% Corporate Tax that will be effective from 1 June 2023 for all companies that have a taxable income of AED 375,000 and above. There are few exemptions for Free Zone companies depending on their nature of doing business.
To know more read about: Corporate Tax in UAE
What are the benefits for a Foreign Company in obtaining a TRC in UAE?
There is a significant benefit for Foreign Companies in obtaining a TRC in UAE. Having a branch/subsidiary company or a new company in UAE is beneficial for foreign investors and individuals. Especially, from countries such as Germany, the UK, Italy, and the rest of Europe, and more.
For Example, a company operating in the UK is liable for a 25% corporate tax. Alternatively, in UAE the rate of corporate tax is only 9%. So, a foreign company branch operating in UAE is subject to 9% corporate tax only for their income earned in UAE.
Also, by obtaining the UAE Tax Residence Certificate, the company will be free from Double Taxation in their home country. They can avail the benefits of the Double Taxation Avoidance Agreement (DTAA) that the UAE has with more than 137 countries.
Additionally, the company can repatriate its branch profits without any double taxation. Hence, having a branch office or a company in UAE is an effective way to save taxes. Especially, for investors operating in other high-tax-paying countries.
To know more read about Double Taxation Avoidance Agreement.
How Aurion will Assist you?
Aurion has a team of Tax Consultants who are well-versed in the latest Tax Laws in the country. Investors from the UK, Italy, Germany, and, the rest of Europe can avail of the tax consultation from Aurion. They can choose the best tax-saving solution for themselves.
We provide complete help in setting up a company for you in UAE. The team will choose the right Free Trade Zone, educate about business and tax laws in UAE, and more. Foreign investors will have many queries before opening their branch/subsidiary company in UAE.
To get a further understanding of starting a branch/subsidiary of a foreign company in UAE, read:
Read more about ‘Why UAE is a Perfect Choice for Investors from Europe?‘