The UAE Ministry of Finance has issued new guidelines that clarify tax residency status for residents in the country. This move is aimed at offering more clarity to individuals in respect of when they are considered as tax residents under UAE taxation laws. The guidelines provide a framework for determining tax residency status based on an individual’s physical presence in the UAE, the availability of their permanent place of residence, and their center of financial and personal interests.
The guidelines state that all days, or parts of a day, in which an individual is physically present in the UAE will be counted in deciding whether the 183-day or 90-day thresholds are met. This means that even if an individual spends a few hours in the country, it will be counted as a day towards their total days of physical presence in the UAE. The new guidelines clarify the ambiguity surrounding the number of days an individual needs to spend in the country to qualify as a tax resident.
Another important aspect of the guidelines is that an individual does not need to own their permanent place of residence, but such a place must be continuously available to them. This means that individuals who do not own a property in the UAE but rent it can still qualify as tax residents if they meet the other criteria. The guidelines also clarify that an individual’s usual place of residence will be in the UAE if this is where he or she normally or habitually resides. This means that individuals who spend most of their time in the UAE will be considered tax residents.
Moreover, an individual’s center of financial and personal interests will be in the UAE if this is where their work, personal, economic relationships or other connections are the strongest. This means that individuals who have a significant presence in the country in terms of their business, employment, and other financial and personal interests will be considered tax residents.
The latest Ministerial Decision clarifies certain rules set out in Cabinet Decision No. 85 of 2022 on Determination of Tax Residency for natural persons and legal persons, which was issued in September last year. The guidelines are expected to bring more clarity to the UAE’s taxation system and help individuals understand their tax residency status.
In conclusion, the UAE Ministry of Finance’s new guidelines on determining tax residency for residents in the country offer more clarity on the criteria for tax residency status. The guidelines clarify the number of days an individual needs to spend in the country, the availability of their permanent place of residence, and their center of financial and personal interests. These guidelines are expected to help individuals understand their tax residency status and make informed decisions regarding their tax obligations in the UAE.
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