What is a declaration of tax residence and tax residency certificate?
The declaration of tax residence or the tax residency certificate is a certificate issued by a relevant authority to confirm the country of tax residence for a company or any legal entity. It is also called as a tax domicile certificate.
This is issued by the Federal Tax Authority (FTA) in UAE. This certificate is issued to a company registered in the UAE or to an individual residing in UAE for declaration of residency. Once issued, this certificate has a validity of one year and after expiry, it needs to be renewed.
The main advantage of doing business in the UAE is that a UAE tax certificate can be obtained by registering the company in free zones. The TRC is issued to a resident company operating in the country whether it is in a free zone or on the main land. This gives them the advantage of benefits from a double taxation avoidance agreement.
Offshore companies (International Business Companies) cannot be benefitted from this. They cannot receive a Tax Declaration Certificate. They receive a tax exemption certificate instead.
Double Taxation Avoidance Agreement-
Double taxation is the situation in which two countries implement tax on the same individual over the same income base. UAE has entered into agreement with around 100 or more countries to scrap the double taxation on an individual. This is called as double taxation avoidance agreement. Earlier, in the UAE the authority to issue a TRC was under Ministry of Finance, but now it is being done by Federal Tax Authority (FTA).
The reasons why this certificate is issued are: –
- TRC Helps to avoid payment of taxes in 2 or more countries.
- It acts as proof that the applicant is residing in the UAE.
- Cross border trade and investments are easier through it.
- It Helps in economic diversification.
- It Helps in the overall development of the UAE.
Therefore, having several benefits, the tax residency certificate is an extremely important document for an expatriate working in UAE. With several benefits that it gives that is mentioned above, one must go for it in order to save double taxation.
Why declaration of tax residence is important?
It helps in knowing which country a person is a tax resident of. It’s mandatory mainly for those who earn income from more than one country. It ensures that the laws are obeyed by the individuals and one should not face any legal consequences.
If a person does not provide a declaration of residency, then he is liable to pay tax for all the countries they operate in. failure to do so may result in tax avoidance and hence impose legal actions on that individual.
Being a tax resident of one country may not exempt an individual from taxes in other countries. Some countries do tax an individual’s income irrespective of their tax residence.
How to make declaration of tax residence?
The application for a tax residency certificate is quite simple. It can be done by any individual or can be done by any agent like us. We have well-equipped staff who can guide you through the process and hence can ease out your job. Within a short span, the certificate will be delivered to you. The process involves the following steps-
- Creation of an account on the FTA portal
- Completing the application form
- Required documents to be uploaded in JPEG or PDF format
- If the documents are in place after verification, the remaining fee is to be paid via the online payment method
- After payment, the certificate is sent through an express courier
Documents needed for declaration of tax residency: –
For UAE citizens– emirates ID copy, passport copy, residency proof copy, income source, bank statement, and immigration report of residency is required.
For expatriates- trade license copy, authorized signatory’s passport, authorized signatory’s emirates ID, certified tenancy contract, the financial statement issued by an auditor, official bank statement, MOA or any relevant document is required.
Once the documents are received, eligibility is checked and the application process can begin.
How long does the process of obtaining a tax residency certificate takes?
The application once made goes to pre-approval status and this takes around 4-5 days. Once the approval is given it takes around 5 working days to get it issued.
To apply for tax residency certificate an individual must have stayed in the UAE for at least 180 days. Non-resident individuals cannot apply for a tax residency certificate.
At Notary Public Dubai, have direct access to government departments and ministries of the UAE. Help you acquire your tax residency certificate as an individual or as a company in the UAE.