Tax Residency Certificates (TRCs) are essential documents for individuals and businesses in the UAE. A TRC is a certificate issued by the UAE government that confirms an individual’s tax residency status in the country. This document is crucial for those looking to take advantage of Double Taxation Avoidance Agreements (DTAAs) between the UAE and other countries.
These agreements ensure that individuals and businesses are not taxed on the same income in both their home country and the UAE.
Therefore, it is important for you to understand the importance of TRCs in the UAE, how to obtain one, and why they are vital for those looking to understand the complex world of international taxation.
What is a Tax Residency Certificate in UAE?
A Tax Residency Certificate (TRC) in the UAE or Tax Domicile Certificate (TDC) is an official document issued by the Federal Tax Authority (FTA) that verifies your tax residency status to claim benefits under Double Tax Avoidance Agreements (DTAAs).
But what exactly is DTAA?
Imagine you’re an Indian citizen working in the UAE. You earn a salary in the UAE.
Normally, you might have to pay taxes on that income in both India (because you’re a citizen) and the UAE (because you’re earning there). This is called double taxation.
However, if India and the UAE have a DTAA in place, the agreement will determine which country has the right to tax your income. This could be based on factors like your residency status, the source of the income, or specific articles within the agreement.
Tax Residency Certificates (TRCs) allow applicants to take benefits of Double Tax Avoidance Agreements (DTAA) on income signed by the UAE.
The UAE has signed DTAAs with many countries to avoid residents being taxed on the same income in both countries. A TRC can help you get reduced or eliminated tax rates on certain types of income earned in another country, depending on the specific DTAA in place.
Types of Tax Residency Certificate in the UAE
There are two main types of UAE Tax Residency Certificates (TRCs):
1. Domestic TRC
This certificate is primarily used within the UAE. It can be helpful for various purposes, but it doesn’t directly relate to international tax treaties.
2. TRC for DTA purposes (Double Tax Avoidance)
This specific type of TRC is crucial for claiming benefits under agreements the UAE has signed with other countries to avoid double taxation. It proves your tax residency in the UAE for these international transactions.
Who Can Apply for a Tax Domicile Certificate in the UAE?
The eligibility to apply for a TRC or TDC in the UAE depends on whether you’re applying for a domestic TRC or a TRC for DTA purposes:
Domestic TRC: Any resident or business entity in the UAE can apply, but it’s recommended to consult the Federal Tax Authority (FTA) for specific details on its purpose and uses.
TRC for DTA purposes:
Individuals:
- Must have resided in the UAE for at least 183 days during the requested financial year.
- Should have a valid UAE residence visa and Emirates ID.
Businesses:
An applicant applying for a tax residency certificate for treaty purposes must have established a business in the UAE for at least one year.
Offshore companies generally cannot apply for a TRC as they aren’t considered established within the UAE’s tax system.
Documents Required for Tax Residency Certificate
The documents required for a TRC in the UAE vary depending on whether you’re applying as an individual or a business:
For Individuals:
- Passport copy
- Valid UAE residence visa copy
- Emirates ID copy
- A certified copy of your residential lease agreement (Ejari or similar)
- Latest salary certificate (if employed)
- Latest & validated 6-month bank statement (stamped by the bank)
- Entry and exit report from the Federal Authority of Identity and Citizenship (FAIC) or a local competent government entity (demonstrating at least 183 days of residence in the UAE)
For Business:
- Valid company trade license copy
- Establishment contract certified by official authorities (if not a Sole Proprietorship)
- Shareholders & manager passport copies
- Shareholders & manager residence visa copies
- Shareholders & manager Emirates ID copies
- Certified copy of the latest audited financial statements/Audit Report
- Latest and validated 6-month company bank statement (stamped by the bank)
- Certified copy of company lease agreement or tenancy contract
How to Apply for a TRC in the UAE
Applying for a Tax Domicile Certificate or Tax Residency Certificate in the UAE involves a series of steps to verify your residency status for tax purposes. This includes:
1. Registration
Register with the Federal Tax Authority (FTA) through their online portal. Create an account if you do not already have one.
- Choose the relevant Tax Registration Number (TRN) or select “No TRN” if you don’t have one. (TRN might pre-fill details if available)
- Select “Type of Requested Certificate” and choose “Tax Residency Certificate.”
- Complete the online application form accurately.
2. Submission of Documents
Upload all the required documents to the FTA portal. Ensure all documents are clear and legible.
3. Payment and Processing
Once your application is complete, you’ll need to pay a processing fee online. The FTA will review your application and documents.
4. Issuance of Tax Residency Certificate
Once your application is approved, the TRC will be issued. You will be notified via the FTA portal, and you can download the certificate from there.
The TRC submission fess is generally AED 50 for all applicants, regardless of their tax registration status.
Consider seeking guidance from a tax professional like Shuraa tax if you have any complexities or require assistance throughout the application process.
The processing time for a TRC application typically ranges from 2 to 4 weeks, but it can take longer depending on the completeness of your application and the FTA’s workload.
Validity and Renewal of TRC
The validity of a Tax Residency Certificate (TRC) in the UAE is typically one year from the date it’s issued.
You’ll need to re-apply for a new TRC if you want to continue claiming tax residency benefits beyond the initial one-year validity period.
The renewal process generally involves following the same steps as the initial application, including submitting updated documents and paying any applicable fees.
Benefits of Getting Tax Domicile Certificate in the UAE
There are several benefits to obtaining a Tax Residency Certificate (TRC), also referred to as a Tax Domicile Certificate, in the UAE:
1. Avoiding Double Taxation
A key advantage is the ability to claim benefits under Double Tax Avoidance Agreements (DTAAs) that the UAE has signed with over 76 countries. These agreements prevent you from being taxed on the same income in both the UAE and another country.
2. Streamlining Import-Export Processes
The TRC can be helpful for businesses involved in importing and exporting goods. It can assist in obtaining exemptions or reduced rates on import and export duties in specific situations.
3. Legal Recognition of Tax Residency
The TRC serves as an official document from the Federal Tax Authority (FTA) that confirms your tax residency status in the UAE. This can be valuable for various purposes, such as banking procedures or compliance requirements.
4. Streamlining International Business
The TRC can facilitate smoother cross-border business activities by providing evidence of your tax residency and potentially reducing tax hurdles. This can be beneficial for companies operating in multiple jurisdictions.
5. Reduced Withholding Tax Rates
Some countries levy withholding taxes on dividends, interest, and royalties paid to non-residents. With a TRC proving your UAE residency, you might qualify for reduced withholding tax rates under DTAAs.
6. Improved Business Reputation
Having a TRC demonstrates your commitment to tax compliance in the UAE, which can portray your business positively to potential partners, investors, and clients.
Expert Guidance from Shuraa Tax
Getting a Tax Residency Certificate in the UAE is very important for both individuals and businesses. It helps you benefit from tax treaties and avoid paying taxes twice. While the process is simple, you need to make sure you have all the right documents and meet the eligibility requirements.
If you find this process challenging, it’s a good idea to consult with tax professionals. At Shuraa Tax, we are a team of experienced and qualified tax agents, accountants, auditors, and finance advisors based in Dubai, UAE. We help you with everything from evaluating your current finances to planning your taxes and keeping your books in order. We can assist you in gathering the necessary paperwork for your UAE Tax Residency Certificate and guide you through the application process.
Trust Shuraa Tax to make the process of getting your Tax Residency Certificate easy and stress-free. Contact us today at +971508912062 or info@shuraatax.com.
Frequently Asked Questions
1. What is a Tax Residency Certificate (TRC) in the UAE?
A TRC is an official document issued by the Federal Tax Authority (FTA) that verifies your tax residency status in the UAE. This can be helpful for claiming benefits under Double Tax Avoidance Agreements (DTAAs) signed by the UAE with other countries.
2. How many days does it take to get the UAE Tax Residency Certificate?
Processing times can vary, but typically it takes 2-4 weeks to receive your TRC after a complete application is submitted to the FTA.
3. What is a Double Tax Avoidance Treaty (DTT)?
A DTT (also known as Double Tax Avoidance Agreement) is an international treaty signed between two countries to prevent a situation where the same income gets taxed in both countries. A TRC can help you prove your residency for tax purposes under a DTT.
4. Is a Tax Domicile Certificate the same as a TRC?
Yes, in the UAE, the terms “Tax Residency Certificate” (TRC) and “Tax Domicile Certificate” are generally used interchangeably. They serve the same purpose of verifying your tax residency status in the UAE.
