UAE tax residency criteria for individuals

On 9 September 2022, the UAE Cabinet of Ministers issued Decision No. 85 of for 2022, which provides a new domestic definition and criteria for when an individual or a legal entity shall be considered a Tax Resident of the UAE for the purposes of any UAE tax law or bilateral tax agreement from 1 March 2023.

What does the new UAE Tax Resident definition mean for individuals?

  • The introduction of the new UAE tax residency criteria for individuals does not mean individuals will be subject to personal income tax in the UAE.
  • The UAE does not levy any personal income tax on the employment or other personal income of individuals. As such, where an individual meets the above criteria to be considered a UAE Tax Resident, they would generally not be subject to taxation in the UAE on their personal income.
  • The new Tax Resident definition gives additional clarity to individuals in respect of their UAE tax residency position under bilateral tax agreements the UAE has entered into with other territories, many of which make reference to the domestic laws of the UAE for determining whether a person is a resident of the UAE for purposes of the treaty.
  • The Decision does not negate the fact that the UAE Corporate Tax Law will treat foreign natural persons conducting business in the UAE as a “Resident Person” (as defined in the Corporate Tax Law) when it comes to determining whether the person’s business income is taxable in the UAE. This Corporate Tax Law concept is unrelated to whether the natural person themselves is considered Tax Resident in the UAE for other tax purposes.

What counts as a day of presence in the UAE?

In determining whether the individual has met the 183 or 90 day thresholds for a continuous 12 month period, all days or parts of a day on which the individual was physically present in the UAE will be counted. This straightforward rule will makes it simple for individuals to track their UAE days. Days spent in the UAE do not need to be consecutive.

Days spent in the UAE due to exceptional circumstances

  • Individuals may choose to disregard from the day count, any days on which their presence in the UAE was due to exceptional circumstances.
  • An exceptional circumstance is an event or situation outside of the individual’s control, which could not have reasonably been anticipated or prevented and which stops the individual from leaving the UAE when they originally planned.

Permanent Place of Residence

  • A Permanent Place of Residence is a furnished house, apartment, room or other form of dwelling place.
  • The residence must be continuously available to the individual and occupied by them on a regular basis with some degree of permanency and stability.
  • The individual does not need to own the residence – it can be rented or otherwise occupied by them.

When is an individual carrying on an employment in the UAE?

  • An individual is carrying out an employment if they are party to an employment contract with an employer, which is incorporated or otherwise formed or recognised in the UAE.
  • Certain other employment-like arrangements will also qualify, provided all or substantially all of the individual’s income for their labour carried out in the UAE is derived from one party.
  • The employment can be limited or unlimited and the work may be carried out on a full time or part time basis. Voluntary roles will not be classed as employment.

When is an individual carrying on a business in the UAE?

  • An individual will be considered to be conducting a business if they carry out any activity regularly, on an ongoing and independent basis, e.g. industrial, commercial, agricultural, professional, vocational, service or excavation activities or activity related to the use of tangible or intangible properties.
  • Individuals may also be tax resident in the UAE if this is the place where they normally live as part of their settled routine and where they spend most of their time as compared to any other jurisdiction.
  • The UAE must also be the place where their centre of financial and personal interests is the closest or of the greatest significance to them. This takes into account their occupation or place of business, their family and social relations, cultural or other activities and any other relevant facts.

Usual or Primary Place of Residence and Centre of Financial and Personal Interests

  • Individuals may also be tax resident in the UAE if this is the place where they normally live as part of their settled routine and where they spend most of their time as compared to any other jurisdiction.
  • The UAE must also be the place where their centre of financial and personal interests is the closest or of the greatest significance to them. This takes into account their occupation or place of business, their family and social relations, cultural or other activities and any other relevant facts.

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