Tax Residency in the United Arab Emirates
1. Criteria for Determining Tax Residency in the UAE
According to Article 2 of the UAE Income Tax Law, an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in the UAE for more than 183 days in a calendar year.
- Maintaining a permanent home in the UAE.
- Having a center of vital interests in the UAE, such as family, business, or social ties.
For entities, tax residency is determined based on their place of incorporation or management and control. A company is considered a UAE tax resident if it is incorporated in the UAE or if its management and control is exercised in the UAE.
2. Impact of International Tax Treaties on Tax Residency
The UAE has entered into several double taxation agreements (DTAs) with other countries to prevent double taxation and promote cross-border trade and investment. These DTAs may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For example, under the UAE-UK DTA, an individual is considered a resident of the UAE if they have a permanent home in the UAE or if their center of vital interests is in the UAE. However, if an individual is considered a resident of both the UAE and the UK under their respective domestic laws, the DTA provides tie-breaker rules to determine their tax residency.
Conclusion
The criteria for determining tax residency in the UAE are designed to ensure that individuals and entities with significant ties to the country are subject to taxation on their worldwide income. International tax treaties may modify or provide exceptions to these criteria, reflecting the UAE's commitment to preventing double taxation and promoting cross-border economic activities.
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