Clarifying Individual Income Tax Liability In The UAE

The status of ‘tax residency’ wasn’t defined in the UAE until last year. What has changed since then with tax resident statuses is that categorical tests of residence have been laid down which may deem foreign nationals as a ‘tax resident’.

These new tax residency rules in the UAE have now kicked in, effective March 1, 2023, which clarify the exact parameters when a person shall be considered a ‘tax resident’ in the UAE. Expats either partially or completely based in the UAE should take note of the following three scenarios. You are liable for payment of Individual Income Tax in the UAE if you are classed as tax resident. This applies when:

• The individual’s usual/primary place of residence and the individual’s centre of financial and personal interests are in the UAE;
• The individual has been physically present in the UAE for a period of 183 days or more in the past 12 months (note: any 12 month period, not just January-December);
• An individual has been physically present in the UAE for 90 days or more (in the relevant 12-month year); (ii) the individual is a UAE National, a UAE resident or a GCC national and (iii) the individual has a permanent place of residence in the UAE or carries on employment/business in the UAE.

These rules are now applicable following a ministerial decision clarifying these conditions and criteria of tax residency. While the first clause refers to the primary place of residence, the third refers to the permanent place of residence. A person’s financial and personal interests will be in the UAE if the person’s interests that are the closest or of the greatest significance to the individual are in the UAE. This means that foreign individuals will be taxable as a ‘resident person’ insofar as there are engaged in a business in the UAE.

It should be noted that Individual Income Tax should not be confused with the new Corporate Income Tax regulations that become effective on June 1. Individual Income Tax and Corporate Income Tax are different things.  Non-registration and non-payment of taxes in the UAE is a serious offense and could lead to immigration refusing to permit departure from the country.

Expats required clarification and in need of the proper individual tax registration procedures may contact Maria Kotova at Dezan Shira & Associates Dubai office at dubai@dezshira.com

Related Reading

• Dubai And UAE Foreign Investors Must Prepare For New Tax Rules Effective June 1st
• UAE Sets Zero Corporate Tax Threshold At US$100,000

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