UAE legislates tax residence rules for first time

The Government of the United Arab Emirates has adopted a Cabinet of Ministers resolution, which for the first time legislates the criteria for tax residency in the country. Until now, there has been no legal definition of tax residency in the UAE.

In the event of disputes, tax residence was determined by the income tax treaty concluded with other jurisdictions and the criteria established by the UAE Federal Tax Service. The regulation will come into force on March 1, 2023.

Individuals will be considered UAE tax residents if:

lived in the country for at least 183 consecutive days during the year;
their habitual or principal place of residence, as well as the center of financial and personal interests, is in the Emirates;

have citizenship or a residence permit in the UAE and spend more than 90 consecutive days in the country during the year;
citizens of the countries of the Cooperation Council for the Arab States of the Gulf who have a permanent residence in the country, conduct business in the territory of the Emirates and stayed in the UAE for 90 consecutive days or more during the year.

Corporate entities will be considered tax residents of the UAE if:

they were established or recognized in the Emirates, with the exception of a branch of a foreign company;
are considered tax residents in accordance with the current tax legislation of the country, for example, now a foreign company is recognized as a tax resident if it is managed from the UAE.

Where there is an existing international tax treaty that establishes different criteria for tax residency, the UAE will apply the provisions of that treaty.