For individuals or businesses looking to optimize their tax position in Dubai and take advantage of the UAE's Double Taxation Avoidance Agreements, a Tax Residency Certificate (TRC) is the key solution. The tax residency certificate Dubai ensures that individuals and businesses are not paying taxes on the same income in two different countries, their home country and the UAE. Through this official document, the UAE government confirms the applicant’s tax residency status in the country.
Since navigating the complex world of international taxation is a challenge, we have provided a detailed overview of the TRC certificate Dubai, its importance, advantages, and the structured process to acquire it.
What is a Tax Residency Certificate (TRC)?
A Tax Residency Certificate (TRC or Tax Domicile Certificate (TDC) is an official document that verifies the tax residency status of an individual or business to claim benefits under Double Tax Avoidance Agreements signed between the UAE and other countries. To qualify for these agreements, they are required to present a Tax Residency Certificate Dubai that proves their tax status.
What are Double Taxation Avoidance Agreements?
When the taxpayer is subjected to taxes on the same income in two different countries, it leads to Double taxation, hindering trade between nations. Hence, to address this issue, the UAE has signed Double Tax Avoidance Agreements (DTAA) with many countries to eliminate or reduce the risk of double taxation.
Advantages of a Tax Residency Certificate Dubai
A TRC certificate Dubai is beneficial for both individuals and businesses, making it an essential document. Here’s how:-
- Managing Double Taxation: With the Tax Residency Certificate, individuals and businesses can take advantage of the Double Taxation Avoidance Agreements signed between the UAE and various other countries. This saves them from being taxed twice on the same income across different jurisdictions.
- Strengthened Credibility: A TRC certificate proves tax residency in the UAE and enhances the credibility of its holder, especially with foreign tax authorities.
- Reduced Withholding Taxes: Tax residency certificate holders can benefit from reduced withholding taxes on dividends, interest, and royalties.
- Tax Planning Effectiveness: A TRC helps individuals and businesses plan tax structures more competitively, thereby reducing their overall tax obligations.
- International Market Access: DTA helps businesses access foreign markets and operate more effectively by reducing tax burdens and increasing profitability.
- Compliance with the Law: Holding a TRC certificate ensures compliance with international tax regulations, safeguarding individuals and businesses from legal complications related to tax residence and double taxation.
- Avoid double taxation: By obtaining a Tax Residency Certificate Dubai, businesses and individuals in the UAE can leverage the Double Taxation Avoidance Agreements signed by the UAE to avoid paying taxes on the same income in different countries.
- US tax filing obligations: US citizens are required to file tax returns with the IRS, regardless of their residency in the UAE. The Tax Residency Certificate may help them manage tax liabilities in other jurisdictions.
- Compliance with the Common Reporting Standard (CRS): The tax residency certificate can be used to establish tax residency of those whose home country is part of the CRS while ensuring compliance with international regulations.
- Reclaim taxes: Entities that have become a tax resident of the UAE halfway through the year can reclaim taxes paid to their previous country of residence for the same year, helping them improve their tax situation.
- Fairness and Protection for All Taxpayers: The tax certificate ensures fairness and clarity for businesses and individuals, contributing to the overall stability and integrity of the UAE’s economy.
Types of TRC certificate Dubai
Basically, there are two types of Tax Residency Certificates in Dubai:-
- Domestic TRC - Primarily used within the UAE for various purposes; however, it doesn’t directly relate to international tax treaties.
- TRC for DTA purposes - Crucial for claiming benefits under DTAAs to avoid double taxation, proving the holder’s tax residency in the UAE.
Eligibility Criteria for a TRC
The following qualify for a TRC certificate in the UAE:
- Dubai Mainland Companies
- Free Zone Companies
- Employed Individuals
- Corporations with impressive credentials
Offshore corporations do not qualify for tax residency certificates. Therefore, they are required to obtain a tax exemption certificate.
The Federal Tax Authority has set specific criteria for both legal entities and natural persons while applying for a Tax Residency Certificate.
1. For Legal Persons
- Operative for at least one year.
- Audited financial statements from a certified accounting firm.
- Audited financial report covering the relevant financial year.
- Audit report of the previous year.
- Active engagement in commercial activity within the UAE.
2. For Natural Persons
- Primarily based in the UAE, with the majority of financial and personal interests located in the country.
- Physical presence in the UAE for at least 183 days within a year.
- An annual lease agreement.
Step-by-step process to apply for a Tax Residency Certificate Dubai
Applying for a Tax Residency Certificate involves a series of steps -
- Log in or Register: Start off by creating an account on EmaraTax. Those who already have an account can simply log in.
- Navigate to TRC Application: Once logged in, go to the "Other Services" section on the dashboard and click on "Tax Residency Certificate". Choose "Yes" if you are a registered taxpayer; otherwise, select "No."
- Provide Tax Details: Enter your Tax Registration Number (TRN) and email, or choose the option "TRN Not Available".
- Select TRC Purpose: Choose the purpose of TRC, whether it is for "Domestic Purposes" or "Tax Treaty Purposes.”
- Choose Application Type: If you are applying as a company, choose “Legal Persons”; As an individual, choose "Natural Persons"; and as a government entity, choose "Legal Person Government."
- Enter Required Information: Legal entities need to provide their Trade License Information, while individuals must input relevant residency details. Choose the country for which the certificate needs to be issued and provide the beginning date of the financial year that needs to be mentioned on the certificate.
- Upload Documents: Make sure all the necessary documents and application are submitted accurately. Verify the details on the confirmation screen.
- Enter Delivery Information: If you need a hard-copy certificate, provide the address. Self-declare the conditions by checking the required boxes.
- Payment: Make the final payment via Credit/Debit Card or any other method to complete your application.
- Download Your TRC: Once the application is successfully processed and approved, you can either download your Tax Residency Certificate from the EmaraTax portal or get it via email.
Documents required for obtaining a TRC in the UAE
The documentation required for a Tax Residency Certificate varies depending on whether the applicant is an individual or a corporate entity.
1. For Tax Treaty Purposes
For a Natural Person:
- Emirates ID (aligning with the name on the card)
- copyright
- copyright
- A copy of the lease agreement (attested)
- Source of Income/Salary Certificate
- copyright (for the last 6 months)
- Entry and Exit Report from FTA
- Proof of Permanent Residence (e.g., Electricity Bill or Lease Agreement)
- Title Deed for private property
Source of Income:
- Self-employed individuals must provide their trade license
- Property owners who are receiving income must submit their lease agreement
- Retired individuals must provide supporting documents explaining the use of their savings and investments
- If the individual is sponsored by their spouse, they must provide a marriage certificate, source of income, or salary certificate.
For a Legal Person:
- Emirates ID and copyright of the authorised person
- Trade License
- Memorandum of Association (MoA)
- Proof of Authorization
- Audited financial report by a certified auditor
- Lease Agreement
- copyright for the last 6 months within the financial year
For a Legal Person – Government Entity:
- Trade License
- A letter from the Government Authority
2. For Domestic Purposes:
For a Natural Person who has spent more than 183 days in the UAE:
- copyright, Emirates ID, and UAE Residence Visa
- Entry and Exit Report from the ICA (Federal Authority of Identity and Citizenship) or any Government entity in the UAE
For a Natural Person who has spent at least 90 days in the UAE:
- copyright, Emirates ID, or Residence Visa
- Entry and Exit Report from the ICA or a local Government entity
- Proof of income, salary certificate, proof of business activities, or copyright
For a Natural Person who has spent less than 90 days in the UAE:
- copyright, Emirates ID, or Residence Visa
- Entry and Exit Report from the ICA
- Proof of financial and personal interests
- Proof of copyright, such as the Title Deed, Utility Bills, or a Long-Term Rent Contract
Seek professional guidance from our tax experts
If you find this process challenging, consult with our team of experienced and qualified tax agents who will systematically guide you through the TRC application process, evaluate your current finances, and plan your taxes for better efficiency. They will also assist you in gathering the necessary paperwork and make the process easy and stress-free.
Contact us today!