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Tax Residency in the UAE

Dubai is one of the world’s fastest-growing financial hubs, and one of the critical reasons for that is the United Arab Emirates’s zero personal income tax policy.

The UAE attracts people from all over the world to live and work. To avoid paying double tax and for your company to be exempt from paying tax, you’ll need a Tax Residency Certificate as evidence.

What are the tax categories in Dubai, UAE?

Dubai is widely recognized for its favourable tax policies, of 9% corporation tax on profits above AED 375,000 and no income tax on individuals, making it a highly attractive destination for foreign investors and entrepreneurs establishing businesses in the UAE. Despite this reputation, there exist other forms of taxes that individuals and businesses are obligated to pay in Dubai.

In Dubai, UAE, there are two main types of taxes, corporate tax and individual taxes, which we will explore to provide a comprehensive overview of the tax system in the city.

Corporate Tax

The majority of companies in the UAE are subject to a 9% tax rate on businesses who generate over AED 375,000 of profits. According to information from the UAE Ministry of Finance, only foreign banks operating in Dubai and businesses in specific sectors are subject to a 20% tax on their corporate income.

To benefit from the UAE’s favourable tax regulations and avoid corporate tax in another jurisdiction, a business must possess a Tax Residency Certificate. These certificates are issued by the UAE Ministry of Finance to compliant companies. Eligibility criteria include incorporation under Emirati law, being based in the UAE, and having directors who reside in the UAE.

Required documents for a Tax Residency Certificate for companies is as follows:

  • Valid company trade license copy.
  •  Establishment contract certified by official authorities (if it is not a sole company).
  • Shareholders’ & managers’ passport copy.
  • Shareholders’ & managers’ residence visa.
  • Shareholders’ & managers’ Emirates ID.
  • Certified copy of the latest audited financial statement/audit report.
  • Latest and validated 6-month company bank statement (stamped by the bank).
  • Certified copy of the company’s lease agreement or tenancy contract.
  • Tax forms (if any) from the country in which the certificate is to be submitted.

Individual Tax

Contrary to popular belief, individuals residing in Dubai are not taxed on their personal incomes. However, they are liable for municipal taxes on residential properties, calculated at 5% of their property’s annual rental value. Additionally, individuals must pay a 5% VAT (Value Added Tax) on specific consumable goods.

For expatriates living and working in the UAE, the government has entered into 88 double-taxation treaties with various countries globally, ensuring that they are not taxed twice on the same earnings.

Required documents for a Tax Residency Certificate for individuals is as follows:

  • Passport copy.
  • UAE Residence Visa copy.
  • Emirates ID copy.
  • A certified copy of your residential lease agreement or tenancy contract.
  • Latest salary certificate.
  • Latest & validated 6-month bank statement (stamped by the bank).
  • Entry and exit report from Federal Authority of Identity and Citizenship or a local competent Government entity (at least 180 days of residing in the UAE).
  • Tax forms (if any) from the country in which the certificate is to be submitted.

What is a Tax Residency Certificate?

A Tax Residency Certificate is proof of a person’s (or business’s) tax residency status. Issued by the UAE’s Ministry of Finance, it enables individuals and businesses to benefit from the UAE’s double taxation avoidance agreements. These certificates are valid for one year.

To be eligible for a Tax Residency Certificate, individuals must spend a minimum of 180 days a year in Dubai during the most recent tax year. Businesses, whether based in a free zone or on the Mainland, can apply for a Tax Residency Certificate, while offshore companies must opt for a Tax Exemption Certificate.

How to Obtain a Tax Residency Certificate in Dubai or the UAE?

Obtaining a Tax Residency Certificate in Dubai or the UAE involves the following steps:

Step 1: Application

Create an account on the UAE Ministry of Finance’s website.

Step 2: Complete Forms

Fill out the online application form and submit required documents in PDF or JPG format.

Step 3: Payment

Upon approval, complete the process by making the necessary payment. Individual certificates cost:

  • Tax Residency Certificate for treaty purposes
    – AED 50 for submission
    – AED 500 for all tax registrants and commercial activity.
    – AED 1,000 for non-tax registrant natural persons
    – AED 1,750 for non-tax registrant legal persons
  • Individuals
    Tax Residency Certificate for Domestic purposes: 
    – AED 50 submission fee
    – AED 500 for all tax registrants and commercial activity 
    – AED 1000 for non -tax registrants’ natural persons 
    – AED 1750 for non-tax registrant legal persons 
  • Commercial activity Certificate
    – AED 500 
  • For Printed Certificates 
    – Additional fees of AED 250 will be added for each requested hard copy certificate. 

Do residents of Dubai pay taxes?

Residents in Dubai do pay taxes, albeit not on personal incomes. Municipal taxes on residential properties and a 5% VAT rate on certain consumable goods are applicable to individuals.