Understanding UAE Tax Residency Rules for Expats

The United Arab Emirates (UAE) has long been a favourite destination for expats, offering a tax-friendly environment, strong economy, and vibrant opportunities for personal and professional growth.

However, until recently, many expats have faced challenges in proving their tax residency in the UAE. Their home countries often questioned whether they truly relocated or spent enough time in the UAE, making accessing benefits like double taxation agreements (DTAs) difficult.

Recognising these challenges, the UAE government introduced Cabinet Decision No. 85 of 2022, effective from 1 March 2023. These new tax residency rules align with international standards, bringing clarity to what it means to be a tax resident in the UAE.

This post will help you understand the updated tax residency criteria for individuals and legal entities, how they align with global standards, and how to obtain a tax residency certificate.

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Why Were the New Residency Rules Introduced for Expats?

The UAE introduced new tax residency rules to address the growing needs of its diverse expat population and align its tax policies with global standards. 

These changes aim to provide clarity, simplify processes, and ensure expats and businesses can fully benefit from the UAE’s favourable tax system. Here’s why these new rules were necessary:

• Address challenges in proving tax residency: Many expats struggled to prove their tax residency in their home countries. The absence of clear criteria often led to questions about whether they had genuinely moved or spent enough time in the UAE. This created hurdles in claiming benefits under double taxation agreements (DTAs).
• Modernise the tax system: The UAE’s tax system needed updates to meet international standards. Introducing structured rules for tax residency ensures that the country remains a reliable and transparent destination for expats and businesses.
• Facilitate compliance with DTAs: The UAE has agreements with over 130 countries to prevent double taxation and promote trade and investment. The new rules clarify how expats and businesses can establish tax residency and benefit from these agreements.
• Prepare for corporate income tax: With corporate income tax introduced in June 2023, the new residency rules ensure a smooth transition for businesses by clearly defining their tax obligations within the UAE.
• Encourage economic activity: By recognising individuals and entities with significant ties to the UAE as tax residents, the government promotes economic participation and strengthens the country’s position as a global business hub.

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UAE Tax Residency for Individuals

The new UAE tax residency rules clearly define how individuals can qualify as tax residents. These updated criteria make it easier for expats to establish their tax residency status, ensuring compliance and access to benefits like double taxation agreements. Here are the key ways individuals can qualify:

1. Spend 90 Days or More in the UAE in a Year

If you are a UAE national, a resident, or a citizen of a Gulf Cooperation Council (GCC) country and have been physically present in the UAE for 90 days or more within 12 consecutive months, you can qualify as a tax resident if you meet one of the following criteria:

• You have a permanent home in the UAE.
• You work or run a business in the UAE.

2. Spend 183 Days or More in the UAE in a Year

Staying in the UAE for at least 183 days in a 12-month period automatically qualifies you as a tax resident. This ensures individuals who spend significant time in the UAE are recognised for their economic ties.

3. Have Your Main Residence and Financial Interests in the UAE

If your primary home is in the UAE and you manage your financial matters from here, you qualify as a tax resident. This criterion focuses on the individual's substantial ties to the country.

Key Highlights of the New Rules

• The number of days spent in the UAE is important but not the only factor. The rules now examine the overall situation, including economic and personal ties.
• The criteria ensure that individuals with strong connections to the UAE and those actively contributing to its economy are recognised as tax residents.

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UAE Tax Residency for Legal Entities

The new UAE tax residency rules also clarify how legal entities qualify as tax residents. These criteria ensure businesses operating in the UAE can establish their tax residency status, align with international standards, and enjoy the benefits of the country’s supportive tax framework. 

A legal entity is considered a UAE tax resident if it meets any of the following conditions:

• Incorporated, formed, or recognised under UAE law: If a company is set up or registered in the UAE according to its legal framework, it qualifies as a tax resident. This includes businesses established under free zones or mainland regulations.
  
  
• Managed and controlled from the UAE: If the primary decision-making and key business activities take place in the UAE, the entity qualifies as a tax resident. This ensures that businesses with significant operational presence in the UAE are recognised.

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UAE Tax Residence Under Double Taxation Agreements (DTAs)

Double Taxation Agreements (DTAs) are crucial for individuals and businesses seeking to avoid being taxed twice on the same income. The UAE has signed DTAs with over 130 countries, making it an attractive destination for expats and businesses. 

Here are the key features of DTAs in the UAE:

• Avoid double taxation: DTAs ensure that the same income is not taxed twice by the UAE and another country, reducing the overall tax burden for expats and businesses.
• Promote trade and investment: These agreements encourage cross-border business by providing a clear framework for taxing income generated in two countries.
• Clarify tax residency: DTAs refer to the UAE’s national laws to determine whether an individual or entity qualifies as a tax resident. The new rules simplify this process and ensure consistency.

3 Steps to Benefit from DTAs

1. Establish tax residency: Start by ensuring you meet the criteria outlined in the UAE’s tax residency rules. This includes factors like spending the required number of days in the UAE or operating your business under UAE laws, as detailed in the sections above.
   
   
2. Apply for a tax residency certificate: Once tax residency is established, you can apply for a tax residency certificate through the UAE’s Federal Tax Authority (FTA) portal. This certificate is essential for claiming DTA benefits.
   
   
3. Follow the DTA terms: Some DTAs include specific conditions for tax residency. In such cases, you must follow those provisions to qualify for the agreement’s benefits.

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UAE Tax Residency Certificates: What You Need to Know

A tax residency certificate is an official document issued by the UAE’s Federal Tax Authority (FTA) to confirm an individual’s or entity’s tax residency status. 

The updated tax residency rules make the process of obtaining this certificate more straightforward. Here’s everything you need to know:

Who Can Apply for a Tax Residency Certificate?

You can apply for a tax residency certificate if you meet the UAE’s updated tax residency criteria, including:

• Individuals who meet the required physical presence and residency conditions.
• Legal entities that are incorporated, formed, or managed in the UAE.

How to Obtain a Tax Residency Certificate?

1. Establish your tax residency: Ensure you meet the criteria outlined in the UAE’s tax residency rules.
   
   
2. Submit your application through the FTA portal: Use the Federal Tax Authority’s online portal to apply for the certificate. Be prepared to provide:
   
   • Personal or business information.
   • Supporting documents, such as proof of residency, business registration, or relevant agreements.
     
     
3. Comply with information requests: The FTA may request additional details from UAE government agencies to verify your application.
   
   
4. Receive your certificate: Once approved, the FTA will issue the certificate, which you can use to claim DTA benefits.

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How Alaan Helps Businesses Simplify Tax Residency Processes

At Alaan, we provide businesses with the tools they need to streamline expense management, simplify financial tracking, and ensure compliance with regulatory requirements.

For business owners—especially expats—navigating these new rules can feel complex, but our platform simplifies the process with robust financial solutions.

Here’s how Alaan supports businesses:

• Track UAE-based business expenses: Use Alaan corporate cards to track local expenses like office rent, operational costs, and vendor payments. This creates a transparent record of financial activity tied to your business operations.
• Custom spend categories and controls: Categorise expenses (e.g., salaries, marketing, or VAT-compliant purchases) for accurate tracking and easier financial reporting.
• Real-time financial visibility: Our platform gives you instant insights into all business transactions, helping you prove active economic ties and operational presence in the UAE.
• Automate receipt management: Upload receipts seamlessly through Alaan’s app or Chrome extension. Our AI verifies receipts, matches them to transactions, and ensures compliance with VAT requirements.
• VAT tracking and compliance: Alaan extracts VAT details from receipts and flags issues like missing TRNs or incorrect amounts, ensuring your financial records meet regulatory standards.
• Integrated accounting: Sync all expense data with popular accounting software like Xero, QuickBooks, and Oracle NetSuite. This eliminates manual data entry and keeps your books ready for audits and residency documentation.

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Conclusion

The updated UAE tax residency rules mark a significant step forward in simplifying the tax landscape for businesses and expat business owners.

By providing clear criteria for tax residency, these rules ensure compliance with international standards and make it easier to access the benefits of the UAE’s extensive network of double taxation agreements (DTAs).

At Alaan, we are committed to supporting businesses with tools that simplify expense management, ensure VAT compliance, and provide accurate financial insights. Our platform is designed to help businesses stay organised, streamline financial processes, and maintain compliance with regulatory requirements.

Take control of your business finances and navigate tax residency with ease. Book a free demo today and discover how Alaan can empower your business.