The Government offers various incentives such as Tax Residency to attract foreign investors to UAE. Especially, from Germany, Italy, the UK, and the rest of Europe. Foreigners can easily start a business in the UAE and settle down in the country.

Tax Residency in UAE helps investors from foreign countries to avail the benefit of Double Taxation. UAE has signed the Double Taxation avoidance agreement with more than 137 countries. Obtaining a Tax Residence Certificate in UAE will help foreign investors to save tax on their incomes earned in UAE. They need not pay taxes for it in their home country.

This article explains the benefits of Tax Residence Certificate (TRC) in the UAE for foreign companies and individuals. Also, how it will help save tax in their home country by leveraging the Double Taxation benefits.

What is a Tax Residence Certificate in UAE?

The Tax Residence Certificate (TRC) is a legal document in UAE that allows residents in UAE to avoid double taxation. They need not pay taxes in their home country for the income earned in UAE. 

TRC Certificate is issued by the UAE Federal Tax Authority (FTA) to a company or individual in UAE. They must have a permanent establishment and be operating from the UAE for 1 year or more. 

Tax Residence Certificate offers transparency and demonstrates accountability. Also, it helps in complying with the tax laws of the country. 

Individuals and companies can pay taxes in only one country. They can pay either in their Country of residence or where the income is generated.

There are no or minimal taxes in UAE. It is beneficial for individuals from high-tax-paying countries to settle in UAE. They can set up a company and operate it from UAE.

What Does Tax Residency Status in UAE mean?

The Tax Residency status allows a UAE tax resident to be exempted from paying double taxation. Being a Tax Resident in UAE allows an individual or company to not pay taxes in their home country for the income earned in UAE.

There are certain conditions the company/individual must meet to qualify for the Tax Residency Status such as:

• Having a permanent establishment in UAE that is fully operational with staff, assets, and business transactions

• Has spent at least 90 (as per the new tax residence law amendment)or 183 consecutive days in UAE

• Have a company operating in UAE for 1 year

• Is a resident of UAE for 1 year or more (for individuals)

International companies as well as individuals can benefit from the tax residency rules in UAE. The Country has a 9% Corporate Tax that will be effective from 1 June 2023 for all companies that have a taxable income of AED 375,000 and above. There are few exemptions for Free Zone companies depending on their nature of doing business.

To know more read about: Corporate Tax in UAE

What are the benefits for a Foreign Company in obtaining a TRC in UAE?

There is a significant benefit for Foreign Companies in obtaining a TRC in UAE. Having a branch/subsidiary company or a new company in UAE is beneficial for foreign investors and individuals. Especially, from countries such as Germany, the UK, Italy, and the rest of Europe, and more.

For Example, a company operating in the UK is liable for a 25% corporate tax. Alternatively, in UAE the rate of corporate tax is only 9%. So, a foreign company branch operating in UAE is subject to 9% corporate tax only for their income earned in UAE.

Also, by obtaining the UAE Tax Residence Certificate, the company will be free from Double Taxation in their home country. They can avail the benefits of the Double Taxation Avoidance Agreement (DTAA) that the UAE has with more than 137 countries. 

Additionally, the company can repatriate its branch profits without any double taxation. Hence, having a branch office or a company in UAE is an effective way to save taxes. Especially, for investors operating in other high-tax-paying countries.

To know more read about Double Taxation Avoidance Agreement.

How Aurion will Assist you?

Aurion has a team of Tax Consultants who are well-versed in the latest Tax Laws in the country. Investors from the UK, Italy, Germany, and, the rest of Europe can avail of the tax consultation from Aurion. They can choose the best tax-saving solution for themselves.

We provide complete help in setting up a company for you in UAE. The team will choose the right Free Trade Zone, educate about business and tax laws in UAE, and more. Foreign investors will have many queries before opening their branch/subsidiary company in UAE.

Connect with our expert business consultants to know more about the tax residence certificate (TRC). Also, Avail of the special discount packages for setting up a company in UAE at the lowest cost.

You might also be interested in reading these articles, ‘Why UAE is a Perfect Choice for Investors from Europe?‘ and Reverse migration from the UK, US, and Canada to the UAE – What to Know?

The post How Tax Residency in UAE can help Investors from Germany, Italy, the UK, and the Rest of Europe? appeared first on AURION.

UAE has signed a Double Taxation Agreement with more than 137 countries around the world.

Double Taxation Avoidance Agreement – Highlights

Being part of the international tax framework and adhering to the OECD (Organisation for Economic Co-operation and Development) regulations, the DTAA treaty provides protection and benefits for companies registered in UAE.

Double Taxation Avoidance Agreement allocates taxing right and ensure individuals and businesses are only taxed once.  The agreements also provide relief from foreign taxation and certain foreign tax compliances of other countries.

The Double Taxation treaties allow for the exchange of information and cooperation between countries to address tax evasion and provide a globalized framework to resolve any tax-related issues between countries.

What impact do UAE expatriates and Company Have from DTAA?

For expatriates’ double taxation agreement come into play when they have a second residence outside of UAE. Also, the individual is living in UAE for more than 183 days (need not be a continuous stay). Companies that consist of international shareholding, it is not subjected to a tax of jurisdiction of the shareholders.

Companies with more than 1 year of establishment in UAE can avail of the benefits of Double Taxation by applying for the Tax Residence Certificate.

Things to Lookout – Tax Reforms in the UAE

UAE has a strategic partnership with the OECD and part of the inclusive framework on ‘Base Erosion and Profit Shifting (BEPS). It refers to strategies used by large global companies as part of tax avoidance strategies.

Companies shift profits from higher-tax jurisdictions to a lower-tax jurisdiction. Thereby, eroding the tax base of higher -tax jurisdiction.

UAE has created regulations and treaties based on the consensus of international tax rules to protect tax bases while offering increased benefits for residents of UAE.

Multilateral Agreements of UAE with Other Nations

UAE has signed a Multilateral Instrument that makes it easier to amend the existing treaties accordingly to comply with the international framework of double taxation avoidance and Base Profit Erosion and Profit Shifting (BEPS) regulations.

To be further transparent and compliant with international taxation standards, UAE introduced the Economic Substance regulations.

Companies in certain relevant sectors residing in UAE and exchanging business transactions with foreign connected entities are subjected to an Economic Substance Regulation Test and filing of sufficient information about the business operations in UAE to the authorities.

Double Taxation Agreement & UAE’s Commitment

Double Taxation Agreement aims to exempt or reduce tax on investment and profits from direct and indirect taxes. Also helps in profit repatriation to other currencies without any tax regulations.

UAE has signed almost 137 DTAs with its trade partners to avoid double taxation for the inevstors who conduct business in UAE legally. DTA is aims at free trade and eliminate the chances of double taxation on the tax payer having company operations in UAE.

DTA supports free flow of trade between economies and cross-borders. It helps UAE to diversify the income source and increase investment inflow. Also, exchaning tax information helps in acheiving transparency and protection of national economy.

By complying to the DTA, the stature of UAE as a global financial and trade hub is strong. Also UAE plays an active role in supporting Double Taxation. It helps in strengthening international cooperation and comply with international regulations.

UAE Ultimate Beneficial Ownership Regulations

A legislative change aimed to improve corporate transparency is issued by the UAE Cabinet. It is a framework for reporting and registering beneficial interests, ultimate beneficial owners, and shadow directors.

All UAE Companies (Onshore and Offshore – excluding those registered in the DIFC or ADGM) must comply with their reporting obligations under the UBO regulations.

Companies must prepare the following details to comply with the UBO regulations.

1. A UBO Register

UBO is a natural person who ultimately owns or controls or has the right to vote with a minimum of 25% shareholding of the company.

In the absence of a natural person satisfying the condition, any natural person who exercises control over the company can be the UBO.

2. Register of Nominee Directors/Managers

Details of directors/managers acting under the instructions of a third party.

3. Shareholder/Partner Register

Include the number of ownership interests held by each partner/shareholder and their voting rights, date of acquisition of interests.

Any change in the information provided must be notified to the relevant authority within 15 days of such change. All registers must always be completed and up to date to avoid administrative fines.

MLI Synthesized Text of the India-UAE DTAA

The Multilateral Convention to Implement Tax Treaty Related Measures to prevent Base Erosion and Profit Shifting (MLI) is an outcome of the BEPS action plan of the IECD Inclusive framework.

BEPS framework offers a solution for governments to plug loopholes in international tax treaties by introducing favorable bilateral tax treaties worldwide.

What is Synthesized Text?

“Synthesized Text” is a document consisting of the consolidated text of the provisions of a Double Taxation Avoidance Agreement (DTAA) and the Multilateral Instrument (MLI).

The Synthesised Text is not a source of law or cannot be used for legal purposes, it is a few procedural amendments to be followed to ensure double taxation is avoided for residents living outside their home country.

Amendments in the Synthesised Text for India -UAE DTAA

The Synthesised text for the application of the India – UAE DTAA is edited on a common agreement by UAE and India to protect the interests of both parties. The amendments in the synthesized text have been developed on the lines of the OECD Guidance and DTAA regulations. 

The amended text will cover the regulations of tax savings strategies and the right way of evading double taxation in the home country by a foreign investor.

To know more about Double Taxation and apply for a Tax Residence Certificate in UAE or How Tax Residency in UAE can help Investors from Europe, connect with our expert team right away!

Contact: Aurion Business Consultants

The post Double Taxation Avoidance Agreement (DTAA) and its Benefits to Expats Residing in UAE appeared first on AURION.