The UAE Ministry of Finance issued a comprehensive guide that breaks down the process for acquiring a Tax Residency Certificate (TRC) under Double Taxation Agreements (DTAs). The Tax Residency Certificate (TRC) is an official document issued by the Federal Tax Authority (FTA) to verify the tax residency status of an individual or business in the UAE, enabling them to avail tax relief benefits as per the applicable Double Tax Agreement (DTA). To avail of the tax benefit, businesses must first establish their tax residency status in the UAE. Obtaining a Tax Residency Certificate requires meeting certain criteria and providing adequate documentation to prove tax residence status in the UAE. Moreover, the process may differ depending on whether the applicant is a natural person (an individual) or a legal person (a business entity). In this article, we will focus on the practical implementation of corporate tax rules for natural persons in small businesses.
Identification of Natural Persons for Tax Residency Certificate
The initial step involves identifying natural persons holding substantial ownership or managerial roles within the company. Typically, these individuals include the shareholders, directors, partners, or managers of the business. These natural persons are the ones who need to apply for a TRC through the FTA, as they are the ones who represent the business and its interests in the UAE and abroad.
Centre of Financial and Personal Interests for Tax Residency Certificate
The final and most important step is to prove the centre of personal and financial interests of the natural person. This is the most essential and complex factor in determining the tax residency status of a natural person in the UAE according to the Cabinet Decision.
Application Protocols and Tax Residency Certificate Format
Once the natural person has established their tax residency in the UAE based on the above criteria, they can proceed to apply for a Tax Residency Certificate through the FTA. The directive from the UAE Ministry of Finance provides a detailed guide on the application protocols and the TRC format. The application protocols specify the format and information required for submitting a TRC application. The applicant must fill out an online application form on the FTA website, providing personal and business details, as well as the name of the DTA and the other country involved. The applicant must also upload supporting documents, such as the passport, the resident visa, the Emirates ID, the commercial license, the bank statement, the rental contract, and any other relevant evidence to prove their tax residency in the UAE². The applicant must pay a fee of AED 2,000 for each TRC application.
Read more: Corporate Tax Registration in UAE
Sample Format of Tax Residency Certificate
The TRC format defines the structure and content of the TRC issued by the FTA. The TRC is a one-page document that contains the following information:
- Application number and date
- Name of applicant
- Nationality, passport number, resident visa number, and Emirates ID number (if applicable)
- Commercial license Issued by competent authority (if required)
- Number of Tax Registration for Corporate Tax (if required)
- Name of the DTA and the other country
- Certification by the FTA
The directive also features a sample TRC, illustrating the appearance and layout of the document². The sample TRC serves as a reference point for the applicants, helping them understand the TRC content and format².
The directive from the UAE Ministry of Finance is a comprehensive and helpful document that clarifies the process and requirements for obtaining a TRC for natural persons in small businesses. For the natural person having a small business in UAE, the Tax Residency Certificate (TRC) is an important document to avail the tax benefits under the Double Tax treaties and other business agreements. The directive outlines the practical implementation of corporate tax rules, explaining the identification of natural persons, the determination of their usual place of residence, and the assessment of their centre of financial and personal interests. The directive also guides the application protocols and the TRC format, facilitating a smooth and efficient TRC issuance process. By following the directive, natural persons in small businesses can establish their tax residency in the UAE and obtain a TRC with ease. For more details contact our Tax Consultant in Dubai.