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UAE Anti-Money Laundering Laws: What Businesses Need to Know
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UAE Anti-Money Laundering Laws: What Businesses Need to Know

Recent years have seen significant strides taken by the United Arab Emirates (UAE) to strengthen its legal and regulatory framework in combatting money laundering (ML), terrorism financing (TF), proliferation financing (PF) and other forms of financial crime. Recent changes to relevant laws have increased coverage of regulated entities while prompting businesses to become more familiar with their obligations.

Historically, regulated companies consisted of financial institutions, insurance companies and banks; however, due to recent amendments to anti-money laundering (AML) laws, more obligations have been extended to designated nonfinancial businesses and professions (DNFBPs), such as lawyers, accountants, real estate brokers, dealers in precious metals and corporate service providers.

To ensure compliance, new authorities have been charged with monitoring DNFBPs’ reporting and registration requirements, including lawyers and notaries registering with the Ministry of Justice as well as businesses registered with the Ministry of Economy for most other businesses. Furthermore, over the last three years, both Executive Office for Control & Non Proliferation (EOCN) and the National Anti-Money Laundering and Combatting Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) were established resulting in more frequent inspection visits as well as training sessions for businesses.

Companies operating in the UAE must now take steps to comply with AML, CTF, PF and sanctions policies. These steps include:

  • Regular risk evaluations should be undertaken, at least every year or when introducing new products and services, to create policies specific to their business and client base
  • Implement effective Know Your Customer (KYC) procedures that include an organized framework for rating client risk and collecting any necessary documentation
  • Establishing an Anti Money Laundering Reporting Officer (MLRO) or Compliance Officer can assist organizations with ensuring adherence to laws and regulations as well as communicating with relevant authorities
  • Training team members on the importance of tracking and reporting any suspicious transactions are paramount to their safety and the success of your business

As compliance operations become more sophisticated and costly, businesses should dedicate a specific budget for compliance activities. Acknowledging and fulfilling AML/CTF/PF and sanctions obligations promptly is crucial; any delays could cause increased costs and difficulties in the long run.

Businesses must embrace emerging technologies for KYC and screening purposes, particularly artificial intelligence compliance solutions that help companies reduce human errors while streamlining operations and accessing cutting-edge technologies.

Businesses operating in the UAE must take compliance obligations seriously and be cognizant of any associated risks, particularly penalties and fines that may ensue from breaches. Penalties or fines aside, breaches can have devastating repercussions for partnerships, banking relationships and the ability to access funding as well as retain clients.

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Navigating the Complex UAE Freezone Landscape
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Navigating the Complex UAE Freezone Landscape

The United Arab Emirates has become a leading international business hub. Part of what draws businesses here is its myriad Freezones. UAE has over 45 economic zones focused on specific sectors, but this may prove confusing for companies that wish to set up operations in the country.

Companies seeking Dubai free zone company formation must take several important factors into account when selecting their location. Businesses should first ensure their industry meets the infrastructure and support offered in their Freezone. They should then consider factors like transportation access and proximity to target markets as they might affect operations.

Cost is another key element, with each free zone offering different fee structures and operating expenses that must be considered when choosing their ideal Freezone location. Businesses should select an environment that fits within their budgetary constraints while providing future growth potential, and the legal and regulatory environment varies between Freezones. Thus, it is essential that businesses choose one which fits their requirements while being aware of any possible restrictions or constraints that might limit growth potential.

Networking opportunities and additional support services should also be a top priority, with some Freezones providing mentorship programs, access to funding sources, and assistance for business setup assistance.

Dubai is home to two of the oldest and most established Freezones: International Free Zone Authority (IFZA) serves a diverse set of sectors while remaining cost-effective and flexible; Dubai Multi Commodities Centre (DMCC) specialises in commodities trading and precious metals, offering world-class infrastructure and boasting an active business community.

Dubai International Financial Centre (DIFC) serves as a premier hub for finance, banking and insurance firms seeking access to Middle Eastern and South Asian markets, while Abu Dhabi Global Market (ADGM) on Al Maryah Island supports the finance, professional services, and technology industries via an English common law-based legal framework.

Businesses can successfully establish their presence in the UAE with minimal risk by opting for a business setup in Dubai free zone tailored to their individual requirements. Careful consideration is essential when selecting a free zone to navigate this complex landscape efficiently and avoid potential pitfalls. Companies seeking expansion into Middle Eastern markets or access to global hubs will find numerous benefits from UAE free zones. Professional guidance, such as that provided by IMC Group, can make all the difference in streamlining the company setup process in Dubai free zones, ensuring a smooth and successful entry into this thriving business environment.

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India and Singapore Strengthen Economic Partnership: An Examination of Trade and Investment Trends
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Dubai Real Estate: Ideal Time for Investment

Dubai’s real estate market has experienced tremendous growth over the past decade, making it an ideal investment opportunity, according to experts in the city’s property industry. Dubai has become a sought-after destination for international investors and first-time buyers looking for investment opportunities within the UAE. Experts suggest that the sector is not showing any signs of slowing down while offering valuable advice for individuals looking to enter the market.

In 2022, Dubai’s real estate market experienced an astonishing 36% expansion, with over 88,000 transactions totalling AED240 billion completed, representing 61% growth compared to 2021. Rental prices also saw an average rise of 21% since 2021, making this an excellent time to enter the purchasing market. Rental yields can range between 5-9% with no property tax burden, enhancing its attractiveness further.

Dubai’s real estate market offers several key advantages for investors. The cost per square foot is much lower than in other highly desirable cities, providing more value for money. Furthermore, relaxed visa regulations allow investors to secure residency visas when purchasing properties of certain values.

When investing, it is imperative to conduct thorough research. Carefully consider a variety of factors, such as the developer’s track record, location, and potential return on investment (ROI). Location plays an instrumental role in ROI. When selecting prime locations to invest in, it is vital to consider amenities available such as retail stores, dining options, transport links, recreational activities, healthcare facilities, and schools in their evaluation. Also, familiarize yourself with local laws and regulations related to investment and real estate ownership to avoid legal complications.

When purchasing, also consider and compare all financing options available, taking into account maintenance and additional costs such as RERA service charges.

Partnering with an agent who specialises in the area or community you are researching is invaluable, providing answers to queries and up-to-date information on its location. These representatives can answer your questions quickly while offering valuable insight. If you’re considering a new business setup in Dubai, IMC Group can provide expert guidance and tailored solutions to help you navigate the process. With their extensive knowledge and experience, IMC Group ensures a seamless transition into the thriving Dubai market.

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UAE Introduces Small Business Relief to Support SMEs and New Businesses
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UAE Introduces Small Business Relief to Support SMEs and New Businesses

The United Arab Emirates (UAE) Ministry of Finance has announced a new initiative to reduce the corporate tax burden and compliance costs of small and micro-businesses, including startups. Small Business Relief Ministerial Decision No. 73 of 2023 will be applicable to periods beginning after the 1st of June 2023 and ending on the 31st of December 2026. The relief is intended to promote the expansion and diversification of the UAE’s economy, as well as an environment conducive to investment and entrepreneurship.

Lower Tax Burden on Small Businesses

According to the Ministerial Decision, taxable persons with revenues of less than AED 3 million during the relevant tax period and all preceding tax periods will not be considered to have generated any taxable income. The revenue calculations will adhere to the UAE’s accepted accounting standards. However, Qualifying Free Zone Persons and members of Multinational Enterprise Groups (MNE Groups), which are groups of companies with operations in more than one country and consolidated group revenues exceeding AED 3.15 billion, will not be eligible for Small Business Relief.

The government of the UAE has announced a nine per cent tax on profits exceeding AED 375,000. When planning their finances and ensuring compliance with UAE tax laws, it is crucial for businesses to understand how to calculate their taxable corporate income.

Before calculating their corporate tax liability, businesses must determine their revenue according to the UAE’s accepted accounting standards. The Small Business Relief will apply to eligible small businesses with revenues below AED 3 million, and no corporate tax will be due. Profits exceeding AED 375,000 will be taxed at a rate of nine per cent for businesses with revenues exceeding AED 3 million.

Protecting Against Artificial Business Separation

The Ministerial Decision emphasizes that if the Federal Tax Authority (FTA) determines that taxable persons artificially separated their business or business activity to exceed the AED 3 million thresholds, such electing persons will be considered to have engaged in an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 of the Corporate Tax Law’s general anti-abuse rules.

Conclusion

The Small Business Relief is a significant step towards assisting SMEs and new businesses in the UAE.  To make the most of this tax relief, it is highly recommended that businesses seek the expertise of a corporate tax advisory in Dubai. IMC Group, with years of experience handling tax matters for numerous businesses in Dubai, offers exceptional advisory services tailored to the unique needs of each client.

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UAE Introduces Tax Relief Measures for Small Businesses and Government Entities
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UAE Introduces Tax Relief Measures for Small Businesses and Government Entities

The United Arab Emirates (UAE) Ministry of Finance has recently introduced several measures aimed at reducing the compliance burden for small businesses, government entities, and non-residents. These initiatives include Small Business Relief (SBR) under Article 21 of the Corporate Tax Law, Single Taxable Person (STP) treatment for government entities, and exemptions from tax registration for specific entities under Decision No. 43 of 2023. While a corporate tax advisory in Dubai can help you get the best out of the relief measures, below are the important points you need to understand.

Small Business Relief for Corporate Tax

To support small businesses and startups, the UAE Ministry of Finance has introduced SBR under Decision No. 68 of 2023, allowing eligible resident taxpayers to be treated as having no taxable income if their revenue falls below a specified threshold. To qualify for SBR, businesses must have revenues equal to or less than AED 3 million in the current and the previous tax period. The threshold applies to tax periods from June 1, 2023, to December 31, 2026. However, if a business’s revenue exceeds AED 3 million in any given tax period, SBR won’t be applicable.

Notably, certain businesses are excluded from SBR, such as qualifying free zone persons, non-resident branches of foreign companies, and group companies of MNE groups with consolidated revenues above AED 3.15 billion.

Businesses not utilizing SBR can carry forward tax losses and disallowed net interest expenses for future tax periods without SBR. Despite the relief, small businesses must still register for corporate tax with the Federal Tax Authority (FTA) and file corporate tax returns. SBR exempts eligible small businesses from Transfer Pricing Documentation requirements under Article 55.

Single Taxable Person Treatment for Government Entities

Decision No. 68 of 2023 allows government entities to treat all businesses and business activities they undertake as a Single Taxable Person (STP), reducing the compliance burden and administrative formalities. To qualify for STP status, the businesses and business activities must be conducted under a license issued by a Licensing Authority and should operate within the same Emirate for local governments.

When adding new businesses or business activities to an STP, they are directly treated as STP if the prescribed conditions are met. Notification to the FTA is required within 20 business days from the date of occurrence of such an event.

What is Corporate Tax? Why does the UAE introduce CT? When will the UAE CT regime become effective?
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The Ministry of Finance has issued Decision No. 43 of 2023, providing exemptions from tax registration for specific entities under the Taxation of Corporations and Businesses (CT Law), Federal Decree-Law No. 47 of 2022. Entities exempt from corporate tax registration include:

  • Government entities
  • Government-controlled entities
  • Persons engaged in extractive businesses or non-extractive natural resource businesses that meet the specified conditions under the CT Law
  • Non-residents deriving only state-sourced income and not having a permanent establishment (PE) in the UAE

These exemptions relieve eligible organizations from the responsibility of tax registration and filing of corporate tax returns. Non-resident entities without a PE in the UAE are neither required to obtain corporate tax registration nor file a corporate tax return if they solely earn UAE-sourced income. This decision significantly reduces the compliance burden for non-residents.

How to Calculate the Payable Corporate Tax in the UAE?

Check Your Eligibility

In the UAE, corporate tax is calculated at 9% of net profit after all deductions and adjustments are made for exempted income. Foreign taxes will be deducted from the profit in the financial statements. Taxable income is the net profit after all deductions. Only if your taxable value is greater than AED 375,000 will you be charged the 9% corporate tax.

Conclusion

The introduction of SBR, STP treatment for government entities, and tax registration exemptions under Decision No. 43 of 2023 are positive steps for the UAE, as they reduce compliance burdens and support the growth of businesses in the region. Businesses should carefully consider whether to opt in or opt out of the relief schemes based on their specific circumstances and consult with corporate tax advisory professionals in Dubai for guidance. Moreover, organizations should assess their eligibility for these exemptions, maintain appropriate records, and stay updated on any future changes in the CT Law and related regulations to ensure continued compliance with UAE tax laws.

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The Latest on UAE’s Tax Residency Rules: A Comprehensive Guide
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The Latest on UAE’s Tax Residency Rules: A Comprehensive Guide

Ministry of Finance announced Decision (no.27 of 2023), adding clarity to determine tax residency as per UAE Cabinet Decision no. 85 of 2022.

Legal entities must be established or recognized within the country to be UAE tax residents. This excludes branches of foreign entities. Companies outside the UAE can qualify if their management and control are in the UAE.

Physical presence in the UAE is a determining factor for tax residency of natural persons.

Individuals with personal and financial ties in the UAE who stay for at least 183 days within 12 consecutive months are deemed tax residents.

For UAE citizens, residents, and GCC nationals, the 90-day rule applies when they are physically present in the UAE for 90 days (or part of them) for 12 months. The latest decision clarified that owning a permanent residence is unnecessary as long as it is accessible.

The latest Ministerial decisions clarify the UAE’s 183-day rule for tax residency. Both financial and personal interests are now considered when determining tax residency. Even if a natural person stays for only 90 days, significant connections with the UAE could lead to tax residency status.

Another small detail added to determining one’s tax residency is that parts of the days will also count towards the 90-day and 183-day rules. This part significantly affects all professionals based in Dubai whose professions require substantial travel outside the Emirates.

For professionals based in Dubai who travel extensively outside the Emirates, it’s worth noting that partial days count towards the 90-day and 183-day rules. This can have a significant impact on determining their tax residency.

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Understanding UAE Corporate Tax: Exemptions, Qualifying Companies and More
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Understanding UAE Corporate Tax: Exemptions, Qualifying Companies and More

The United Arab Emirates (UAE) will introduce a Corporate Tax regime in June this year, in line with global trends for a minimum corporate tax rate. Before the new law commences, businesses must determine if they are subject to the tax and qualify for an exemption. The UAE declared its plans to establish a new Corporate Tax (CT) regime in January 2022. Subsequently, in December, Federal Decree-Law No. 47 was issued to provide a legislative framework for introducing the Federal Corporate Tax in the country.

The UAE will adopt the global minimum tax rate envisioned by the OECD, effective June 1, 2023, to enhance its appeal to businesses. The Corporate Tax regime will apply to all activities and interactions, except natural resource extraction, which will remain subject to Emirate-level corporation tax. The UAE’s new CT regime taxes businesses on their accounting net profit adjusted for specific items, with a 9% tax rate applied to taxable profits instead of gross revenue. Small businesses will receive a tax exemption on earnings up to AED 375,000 (approx. US$100,000).

Categorizations: Taxable, Exempt or Qualifying Free Zone Person?

Under the new system, businesses will be classified as Taxable, Exempt, or Qualifying Free Zone Persons (QFZP) and must determine their category and register accordingly. Some exempt entities may also need to apply for approval.

In the following section, we will examine the impact of the new CT regime on each of the three categories: Taxable, Exempt, and Qualifying Free Zone Persons (QFZP).

Taxable Person

For tax purposes, a person can be classified as either a resident or a non-resident taxable individual.

Resident person:

  • A resident individual is a legal entity incorporated or recognized in the state, including free zone persons or foreign entities managed and controlled within the state.
  • An individual who engages in a business or business activity within the state is considered a natural person for tax purposes.

Non-resident person:

  • Non-resident individuals have a nexus in the state, derive income from sources, or have a permanent establishment as per Cabinet Decision
  • For taxation purposes, a branch within the state will be considered a single taxable entity with its parent company

Exempt Person

Certain exemptions are granted automatically by a cabinet decision, while others require an application, as outlined below:

Automatically exempt:

  • The list of government entities and government-controlled entities will be specified in a cabinet decision that has not yet been published
  • Natural resource businesses are exempt from taxation by notifying UAE Ministry of Finance
  • Entities may be exempt from taxation if they are included in a Cabinet Decision (which has not yet been published) as Qualifying Public Benefit organizations

Approved by the Federal Tax Authority, an entity can be exempted:

  • Pension and social security funds that are either public or private
  • Eligible investment funds
  • UAE subsidiaries that are entirely owned and controlled by exempt entities

Qualifying free zone person (QFZP)

To be eligible for the 0% CT rate, a Qualifying Free Zone Person (QFZP) must fulfil the following requirements:

  • Ensure sufficient presence in the UAE
  • Calculates the qualifying income based on criteria defined in a forthcoming cabinet decision
  • The individual has not chosen to be liable for a 9% CT
  • Adheres to relevant transfer pricing regulations (if any)

The tax rates applicable to Qualifying Free Zone Persons meeting the specified conditions shall be as follows:

  • 0% on income that Qualifies
  • A tax rate of 9% applies to taxable income that falls outside the scope of the qualifying income definition

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DIFC Fintech Firms: Attracting Record Investment Ahead of Dubai Fintech Summit
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DIFC Fintech Firms: Attracting Record Investment Ahead of Dubai Fintech Summit

In preparation for the Dubai FinTech Summit scheduled for May 8th and 9th this year, under the patronage of His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister, Minister of Finance of the UAE, and President of the Dubai International Financial Centre, Dubai is further strengthening its global standing as a centre for FinTech and innovation.

The FinTech and innovation sector in the Middle East, Africa, and South Asia (MEASA) region is growing rapidly, and it is expected to double in market value from USD 135.9 billion in 2021 to USD 266.9 billion by 2027, according to the 2022 FinTech Report by DIFC FinTech Hive. In 2022, the investment in Dubai International Financial Center (DIFC) FC’s FinTech and innovation community surpassed USD 615 million. The number of active firms in the sector increased by 36 per cent, reaching 686. The Dubai FinTech Summit will be an ideal platform for start-ups, investors, and industry leaders to connect and tap into this opportunity as they move forward in the region and beyond.

The Summit, hosted by DIFC, the foremost international financial hub in the MEASA region, will convene 5,000 FinTech and technology experts from around the world to explore advancements and obstacles in the industry. It will also showcase all aspects affecting the future of finance, including Web 3.0, Metaverse, Blockchain, decentralised finance, regulation and policymaking, and the urgent requirement for more significant financial inclusivity. Attendees can also engage with over 100 FinTech exhibitors and participate in various panels and fireside chats.

Madinat Jumeirah in Dubai is the venue for the Dubai FinTech Summit, featuring distinguished local figures such as the UAE Minister of Economy, H.E. Abdullah Bin Touq Al Marri and H.E. Essa Kazim, Governor of DIFC. The summit’s line up of speakers comprises several notable personalities, including Bill Winters, Group Chief Executive of Standard Chartered PLC; Brad Garlinghouse, CEO of Ripple; Melissa Guzy, Co-Founder and Managing, among others; Michael Shaulov, CEO of Fireblocks, and partner at Arbor Ventures.

Dubai and DIFC are now considered global centers for innovation, recognised for their unique ecosystem and comprehensive approach to business, driving not only the future of finance but also the future economy. Currently, they are home to 60% of all FinTech companies based in the GCC. In 2021, the MENA region’s FinTech startups experienced a year-over-year funding growth of 183%, as reported by MAGNITT.

Mohammad Alblooshi, Head of DIFC Innovation Hub and FinTech Hive, highlighted the increasing impact of the FinTech sector in the region. He stated that the demand for FinTech services had grown significantly in recent years, fuelled by digital technologies and innovation across various sectors. He further emphasised that DIFC has solidified its position as the finance and innovation hub in the MEASA region by providing the most comprehensive FinTech and venture capital environments. DIFC’s vision to drive the future of finance has created attractive opportunities for start-ups, global players, and unicorns to establish a base in Dubai.

His statement continued with confidence, “The Dubai FinTech Summit, organised by DIFC, is poised to become the leading platform that captures the industry’s attention and realises our vision of positioning Dubai as the new hub for the future of FinTech and finance.”

According to Michael Shaulov, CEO of Fireblocks, a secure digital asset infrastructure company, Dubai’s accomplishments in the digital asset field in recent years have been impressive. The government’s collaborative strategy with the industry has attracted some of the most innovative and dynamic firms in the digital asset industry to the region, solidifying its position as a leading FinTech center and securing its economic future. Fireblocks is enthusiastic about participating in the Dubai FinTech Summit and discovering some of the world’s top FinTech solutions.

Luis Valdich, Managing Director at Citi Ventures, expressed his excitement about FinTech, stating that it is one of the most exciting industries in both tech and banking. The industry is being disrupted by various trends, such as digitisation, open banking, embedded finance, financial inclusion, the democratisation of investing, modernisation of the core banking stack, and the emergence of the creator and shared economies are driving economic progress globally. He looks forward to exploring these innovations further as part of the upcoming summit.

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Dubai: The Gateway to Global Expansion for Indian MSMEs
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Dubai: The Gateway to Global Expansion for Indian MSMEs

In today’s changing global economy, Micro, Small, and Medium-scale enterprises play a vital role in driving economic growth and development. Indian MSMEs, which are often considered the backbone of the Indian economy, are now seeking to set up their businesses in Dubai beyond domestic markets. Dubai has emerged as their preferred destination for global expansion.

Due to its business-friendly operating environment, transparent taxation framework, high consumer adoption rate, low customer acquisition costs, and strategic location with access to a large customer base, Dubai has become the top choice for global expansion, attracting numerous micro, small, and medium enterprises from India.

Dubai’s stability, efficient governance, and dependability make it an ideal gateway to the Middle Eastern and North African markets (MENA), which comprise over 1 billion customers. This is a key factor motivating Indian MSMEs to expand their global presence through Dubai.

The trade links between African nations and the UAE have witnessed substantial growth over the last ten years, resulting in tremendous regional development with a vision for sustained progress. Moreover, the city has untapped potential to double its exports to African nations.

The Significance of Dubai's Strategic Location in International Trade

Being centrally located, Dubai serves as a gateway not just to the Middle East but also to Europe, Africa, and Asia, making importing and exporting through land, sea, and air more convenient.

With its long coastline and the world’s largest artificial port, Jebel Ali, Dubai has become the maritime hub of the region, providing unmatched trading opportunities.

Dr Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade, stated at the World Green Economy Summit discussed the UAE’s plan to form Comprehensive Economic Partnership Agreements (CEPA) signed on February 18, 2022, with G7 countries.

From April to November 2022, the two countries witnessed a 27.5% growth in bilateral trade, with the trade value increasing to $57.8 billion from $45.3 billion in the corresponding period of the previous year. India’s exports to the UAE also saw a notable rise of $3.35 billion in value terms, showing a growth of 19.32% and reaching $20.8 billion from $17.45 billion during the same period.

Exploring the Future of Dubai-India Collaboration in the Digital Age

The launch of the Global India Collaborative (GIC) initiative at Dubai Expo 2020 aims to assist Indian MSMEs in discovering new markets and investment opportunities. Our businesses can only go global if we establish more connections between the Indian industry and the world.

Santosh Mangal, Global President of GIC, mentioned that this would aid in achieving the goal of making India a five trillion-dollar economy as Prime Minister Narendra Modi envisioned.

Business Opportunities for Start-ups in Dubai

Dubai’s visa offerings have emerged as a significant factor in attracting businesses to the city, with more relaxed laws and regulations than the other countries. The golden visa system provides long-term business visas. In contrast, the remote visa system offers additional opportunities for company formation in Dubai and operation in Dubai, even while working from outside the country. These visa options have made Dubai a desirable location for businesses, adding to the city’s reputation as a business-friendly destination.

Dubai’s appeal as an investment destination has been primarily driven by the visionary leadership of the Vice President and Prime Minister of the UAE and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, who envisions growth through innovation. This has attracted significant global players in industries that are driving the future of the global economy to invest in the city.

The Logistics Performance Index (LPI) by the World Bank, a global benchmarking tool that measures the effectiveness of a country’s trade logistics chain, ranks the UAE 11th globally and Ranked as the top destination in the Middle East and North Africa.

Dubai has established exclusive economic zones aimed at foreign enterprises, such as the well-known Dubai International Financial Centre (DIFC), where companies are granted complete ownership and an assurance of no corporate income tax or other levies for 50 years.

The prospects of Dubai as a global business destination

Presently, the city is a diverse cosmopolitan with a substantial Indian ex-pat community and is still enticing a skilled workforce with its worldwide standing and high salaries. Dubai is favoured by numerous businesses globally, including Indian MSMEs, who acknowledge its potential as a preferred destination to extend its global outreach.

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Becoming a Tax Resident in the UAE: What You Need to Know
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Becoming a Tax Resident in the UAE: What You Need to Know

The UAE government released the Cabinet Decision No. 85 of 2022 on September 2nd, 2022, to establish tax residency regulations in the country. These regulations determine when an individual or entity, such as a natural person or a juristic person like Limited Liability Companies, public joint stock companies, and foundations, may be recognized as a tax resident in the UAE. The regulations align with globally recognized standards and will be enforced from March 1, 2023.

According to Article 3 of the Cabinet Decision, a legal or juristic individual is a tax resident if:

It is founded, formed, or recognized under the country’s legislation (this does not apply to a branch registered by a foreign juristic person), or it is a tax resident under the country’s tax law.

Under Article 4, a natural person will also be deemed a tax resident if:

  • Their primary place of residence and centre of financial and personal interests are in the UAE, or

  • If they have spent 183 days or more physically present in the UAE during a consecutive 12-month period, or

  • If they have spent 90 days or more physically present in the UAE during a consecutive 12-month period, and they are either a UAE national, hold a valid residence permit in the UAE, or are a GCC national, then they must also:

    • Maintaining a permanent residence within the country
    • Engaging in employment or business activities within the country

Under the new Corporate Tax regime, UAE Tax Resident certificate legal entities may be subject to the new Corporate Tax starting from June 1, 2023, as per Federal Decree-Law number 47 of 2022 concerning the taxation of corporations and businesses. Meanwhile, foreign legal entities may also be required to pay taxes, but only under the Corporate Tax regime.

According to Article 6 of the Cabinet Decision, if an international agreement such as a tax treaty outlines tax residency conditions for a UAE Tax Resident, those provisions will remain in effect. The Ministry of Finance will issue residency certificates in the prescribed form and method for such agreements.

If individuals fall under the definitions of tax residency mentioned above, they must obtain a Tax Domicile Certificate (TDC) by applying to the Federal Tax Authority (FTA), UAE, as per Article 5 of the Decision, to avail of the benefits and reliefs available.

The FTA is responsible for providing additional information and clarification on Cabinet Decision No. 85 of 2022. Additionally, it will establish regulations to gather the necessary information required for the implementation of the Decision’s provisions. UAE government entities are obligated to collaborate with the FTA to ensure the seamless execution of the Decision.

Previously, tax residency in the UAE was based solely on international treaties, with no domestic legislation in place. Introducing local tax residency criteria provides greater clarity and specific guidelines for those who fall under its jurisdiction.

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