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UAE's decision on 'tax residency' comes into effect

The resolution clarifies certain rules set out for natural persons and legal persons residing in the Emirates

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The UAE's Ministry of Finance on Wednesday issued a decision on determining tax residency for people living in the Emirates. For consideration on tax purposes, an individual’s ‘usual place of residence’ will be in the UAE if this is where he normally or habitually resides, the ministry clarified.

This was a key point in the ministerial decision no. 27 of 2023 on implementation of certain provisions of cabinet decision no. 85 of 2022 on determination of tax residency.

The decision clarifies certain rules set out in the Cabinet Decision No. 85 of 2022 on determination of tax residency for natural persons and legal persons, which was issued in September 2022. For instance, the decision states that an individual’s ‘centre of financial and personal interests’ will be in the UAE if this is where their work, personal, economic relationships or other connections are the strongest.

The resolution also specifies that all days or parts of a day in which an individual is physically present in the UAE will be counted in determining whether the 183-day or 90-day thresholds are met. In addition, according to the decision, an individual does not need to own his ‘permanent place of residence’, but such place must be continuously available to them.

“The Ministerial Decision on implementing domestic tax residency rules is important as it gives additional clarity to individuals in respect of when they are considered as tax residents under UAE taxation laws” said Younis Haji Al Khouri, Undersecretary of the Ministry of Finance.

The UAE cabinet decision No. 85 of for 2022, which came into force on Monday, provides domestic definitions and rules for determining whether an individual or a legal entity may be considered a tax resident of the UAE.

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