New developments in UAE tax residency

The UAE Ministry of Finance has just recently issued Ministerial Decision No. 27 of 2023 on The Implementation of Certain Provisions of Cabinet Decision No. 85 of 2022 on Determination of Tax Residency, to provide more specific guidelines on how tax residency should be determined in the UAE.

Key takeaways of the Ministerial Decision No. 27 of 2023 are as follows:

• The Decision primarily clarifies aspects of tax residency as it relates to individuals/natural persons.
• Regarding the 180 or 90 day requirement for natural persons to be in the UAE, the law allows the UAE Federal Tax Authority (“FTA”) to consider days where you are “physically present” in the UAE. Days will be calculated using full and partial days as well.
• Your primary place of residence will be in the UAE if you habitually or normally reside in the UAE.
• You will be regarded to habitually and normally reside in the UAE when you spend time in the UAE in a settled routine, and in a way that is “more than transient” compared to other jurisdictions that you are potentially present in.
• Your permanent place of residence does not necessarily need to be a property that you actually own, and could include a property that you lease, so long as it is continuously available to you to occupy with some degree of permanency and stability. Therefore, leased property can also meet the requirement of a permanent place of residence in the UAE for tax residency purposes.
• Your center of personal and financial interests will be in the UAE where your personal and economic interests that are the closest or of the greatest significance to you are in the UAE compared to that of other jurisdiction’s. In this regard, whether you have family and social relations, occupation, cultural and other activities in the UAE may also be taken into consideration.
• You may be considered to have employment in the UAE where you receive income for your labor, regardless of whether a formal employment contract is in place. However, this will specifically exclude volunteer work.

A more detailed analysis will be shared shortly on UAE Tax Residency criteria, which will have regard to Ministerial Decision No. 27 of 2023; Cabinet Decision No. 85 of 2022 as well as the recently published Corporate Income Tax Law No. 47 of 2022. At this stage, we note that this Decision provides some clear insight on how the FTA will assess UAE tax residency for natural persons.

Authored By: Zain Satardein, Aakriti Sharma