Businesses in the UAE often face uncertainty about their tax status. This arises because there is separate treatment for residents and non-residents in corporate tax rules. Without clarity, there’s a risk of making mistakes in compliance or filing incorrect tax returns.
The solution lies in understanding who is a resident person and who is a non-resident person under the UAE corporate tax (CT) law. The rules have been explained through Cabinet and Ministerial Decisions, making it easier to determine the right status.
If you are still confused about your CT status, Tax Gian can help you understand your liabilities with the help of expert corporate tax agents in the UAE.
Defining UAE Resident Persons
A resident person under the UAE corporate tax law can be:
- A company established in the UAE.
- A company established outside the UAE but effectively managed and controlled inside the country. The key factor is where major commercial and management decisions are made.
- A natural person who carries out business or commercial activities in the UAE.
- Any other person specifically declared as a resident by a Cabinet decision.
This classification shows that residency is not limited only to incorporation. Control, management, and actual activities also matter in deciding whether a person is treated as a resident for tax purposes. If you fall under the definition of a UAE resident person for CT purposes, know your liabilities better with the help of corporate tax agents in the UAE.
Definition of a UAE Non-Resident Person
A non-resident person is someone not covered by the above rules but has a taxable presence in the UAE. This applies if the non-resident:
- Has a permanent establishment in the UAE,
- Earns income sourced from the UAE, or
- Has a nexus in the UAE as determined by Cabinet decision.
For non-resident companies, a nexus could include earning income from immovable property in the UAE. The nexus rules apply only to legal entities, not to individuals.
Tax Residency of Juridical Persons
A juridical person (company or legal entity) is considered tax resident in the UAE if:
- It was incorporated, formed, or recognised under UAE laws. This includes branches registered locally, but not foreign companies’ branches.
- It fulfils conditions for residency for tax purposes under UAE law.
Tax Residency of Natural Persons
The rules for individuals are explained in Ministerial Decision No. 27 of 2023. A natural person is treated as a tax resident if any one of the following applies:
- The UAE is the usual or primary place of residence, and it is also the centre of financial and personal interests.
- The person has been physically present in the UAE for 183 days or more during a 12-month period.
- The person has been in the UAE for 90 days or more during a 12-month period, holds a UAE residence permit, or is a national of the UAE, GCC, or a member state of the Gulf Cooperation Council, and also has either:
- A permanent residency in the UAE, or
- A business or employment carried out in the UAE.
If you are a natural person who is a tax resident in the UAE, learn about your CT liabilities better with the help of corporate tax agents in Dubai.
Understanding Place of Residence and Financial Interests
The concept of “usual or primary place of residence” means the UAE is where the person normally lives as part of their routine. It should not be temporary or short-term.
The “centre of financial and personal interests” refers to where the closest economic and personal ties exist. Factors include:
- Place of occupation or business,
- Family and social relationships,
- Location of cultural or daily activities,
- Management of property,
- Other relevant circumstances.
This helps determine whether the UAE is the true base of a person’s life and financial matters.
Rules on Counting Days of Presence
To calculate physical presence in the UAE:
- A “day” means a full calendar day or even part of a day.
- Days do not need to be consecutive. Both short and long stays add up to meet the 183 or 90-day requirement.
- Exceptional circumstances may allow certain days to be ignored by the Authority, ensuring fairness in unusual cases.
Why These Rules Matter
The distinction between resident and non-resident persons is crucial under UAE corporate tax. A resident is taxed on worldwide income, while a non-resident is taxed only on income from UAE sources. Correct classification avoids double taxation and ensures compliance with UAE law. By defining residency clearly for both individuals and companies, the UAE provides transparency for businesses and people.
Still confused about tax residency? Seek assistance from corporate tax agents in Dubai.
How can Tax Gian Help?
Understanding whether you are a resident or non-resident for tax purposes is crucial for seamless taxation and to avoid double taxation. The UAE corporate tax law, supported by Cabinet and Ministerial Decisions, outlines straightforward rules based on incorporation, management, physical presence, and personal or financial ties. Tax Gian helps companies and individuals review their situations carefully to determine the right status and meet their tax obligations with confidence. Our expert tax agents in the UAE help businesses comply with tax laws and operate smoothly.
