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Dubai – and the wider UAE – are renowned for their low tax regime, with no personal tax levied. It is no surprise that individuals and businesses from around the world have chosen to come to Dubai to take advantage of this.
But while there is no tax to be paid in Dubai, overseas nationals could be at risk of paying in other jurisdictions, which is why they need a Dubai tax residency certificate. Our guide explains what this is, why it is needed and how to obtain one, including:
Dubai is known for its low tax rates, but that doesn’t mean there aren’t any taxes that have to be paid. Here are what taxes businesses and individuals may have to pay.
Most businesses pay 0% corporate tax in Dubai. Only foreign banks and certain sectors pay up to 20% tax.
To be exempt from paying corporate tax, you need to have a Tax Residency Certificate, which is issued by the Ministry of Finance. To get the certificate, the business must be incorporated under Emirati law, be based in the UAE and have directors that are resident there.
Individuals living in Dubai are not taxed on their personal income. Individuals in Dubai also do not have to pay inheritance tax, gift tax or wealth tax.
In addition, the UAE has signed up to 88 double taxation treaties – meaning individuals are not taxed twice on the same earnings – and the Multilateral Instrument. But they can still be taxed in other countries, which is why individuals can need a Tax Residency Certificate.
Taxes that individuals are liable for include a municipal tax on residential property, which is 5% of the annual rental value, and VAT on some consumable goods, which is again levied at 5%.
What is a Tax Residency Certificate?
Until recently, there was also no such thing as a Tax Residency Certificate, as there are no laws in Dubai governing personal income or corporate tax.
However, this was changed so that overseas nationals and businesses could prove their tax residency in Dubai. Now, those who can prove they have spent at least 183 days in Dubai during the most recent tax year are eligible for the tax residency certificate. This means the individual can avoid paying double tax on their earnings, usually in their country of citizenship, which is a possibility for those from countries that do not have a double tax treaty with the UAE.
For businesses, obtaining a Tax Residency Certificate – sometimes also known as a Tax Domicile Certificate – can be done whether it is based in a free zone or on the mainland.
Another advantage of the Tax Residency Certificate is that it can be used to reclaim any taxes that were paid in the same year as you or the business moved to Dubai.
A Tax Residency Certificate is issued by the Ministry of Finance and is valid for one year.
It should be noted that offshore companies – sometimes called international business companies – are not eligible to apply for a Tax Residency Certificate. However, they can apply for a tax exemption certificate instead.
How can I get a Tax Residency Certificate in Dubai or the UAE?
Obtaining a Tax Residency Certificate can be done in three basic steps.
• Firstly, the applicant – business or individual – has to create an account via the Ministry of Finance’s website.
• Then, the application form must be filled in and the required documents attached to it in pdf or jpeg format. The documents required are outlined below, as they vary depending on whether it is an individual or business applying.
• Once that has been approved, then payment is required. The certificate isn’t particularly expensive – it is about AED 2,000-AE 2,500 for an individual and AED 10,000-AED 11,000 for a business.
Individual requirements for the Tax Residency Certificate in Dubai
For individuals to be eligible to apply for a Tax Residency Certificate, they must be a resident of Dubai for more than six months.
There are various documents that are required to be submitted to the Ministry of Finance, along with an application form.
Among the documents required are copies of your passport, UAE residence visa and Emirates ID. Also required are: six months of UAE bank statements; proof of income in the UAE, such as a wage slip; an immigration report and a certified copy of a tenancy agreement or title deed to a property.
Company requirements for the Tax Residency Certificate in Dubai
Companies applying for a Tax Residency Certificate in Dubai also have certain documents that must be submitted along with their application.
This includes copies of the business’ trade licence and the company director and/or manager’s passport, visa, and Emirates ID. Also required are a tenancy agreement or title deed – valid for at least three months before the application is made – evidence of a physical office space and the company’s latest financial statement, which includes UAE bank statements for the previous six months and that have the bank’s stamp on them.
If everything in the application is approved, then it usually takes two to three weeks for a tax residency certificate to be issued.
However, if there is anything incorrect on the application form, or any of the specified documents are missing, it can cause the application to be rejected, meaning it has to be resubmitted, and this lengthens the amount of time it takes to receive the tax residency certificate.
Therefore, it is always a good idea to work with specialists such as Creative Zone to ensure this is completed correctly the first time. Contact us today for a bespoke quote. www.creativezone.ae/contact-us/
Working with Creative Zone
The Dubai Tax Residency Certificate gives the holder, be it a business or an individual, numerous benefits. But as this article has outlined, there are certain complications in the process, especially for those who are not native to the UAE and might not know the systems and processes so well.
This is why it is recommended to work with specialists such as Creative Zone, who can help a business or individual navigate their way through the Tax Residency Certificate application process and ensure it is completed as quickly and smoothly as possible – and the costs of doing so are kept to a minimum.
Creative Zone has many years of experience in business setup in Dubai, and the team is skilled in ensuring a client’s business is formed as quickly as possible, and everything needed to trade legally is in place, leaving the entrepreneur free to get on with the important job of making money.
For more information and to get a personalised quote, please contact Creative Zone www.creativezone.ae/contact-us/
Prices offered by free zones are subject to change without notice. Please get in touch with Creative Zone for an updated price based on the current promotions and availability.
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