Introduction
In today’s increasingly interconnected world, avenues for generating income across multiple countries are more numerous than ever, and unsurprisingly, so are the avenues for taxation. So, if you ever find yourself worrying about being taxed twice on your transactions outside the UAE, the Tax Residency Certificate, otherwise known as TRC, is your solution. First, though, let’s understand what the TRC is and what its purpose is.
What is a Tax Residency Certificate (TRC)?
As is the case with most sovereign nations of the world, the UAE has also issued a Tax Residency Certificate (TRC). The TRC is a document made to confirm an individual or business entity’s legal tax status. Such a confirmation is essential because countries like the UAE have signed Double Tax Avoidance Agreements (DTAAs) with other countries with whom they have sound economic ties. This helps to avoid double taxation for its citizens.
Also Read: TDS on Rental Income for NRIs
Additionally, The UAE, having a very straightforward domestic tax residency regime, also gets to ensure that its citizens are subject to fair and equitable taxation via this document. This can lead to important benefits such as claiming tax relief by eliminating or reducing tax withholding on foreign-earned income.
Who Needs a TRC in the UAE?
As it’s an important legal document, all individuals and corporate entities residing/having operations on a long-term basis in the UAE can avail of a Tax Residency Certificate. In doing so, these individuals/entities get to benefit from the various advantages relating to taxation and compliance offered by the TRC. However, it is important to note that one must meet the eligibility criteria set by the Federal Tax Authority (FTA) to avail of a Tax Residency Certificate.
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Eligibility Criteria for TRC in the UAE
To obtain a TRC in the UAE, the eligibility criteria differ from a natural person (a regular citizen) to a legal person (for instance, a corporate entity).
For Individuals (Natural Persons):
The applicant must be a resident of the UAE for at least 183 days.
The applicant must possess a salary certificate or showcase proof of source of income.
The applicant must have proof of residence in the UAE (which can include an Emirates ID and Residence Visa OR a passport copy and entry and exit report.
For Businesses (Legal Persons):
The applicant must have been established for a period of at least one year.
The applicant must have their financial accounts audited or prepared by an accredited audit firm and certified and stamped by the same.
The submitted audit report must concern the past year in which the tax certificate was requested.
Documents Required for TRC Application
For Individuals:
Passport
Valid Residence Permit
Emirates ID (provided that the name on the ID is matching the name in the application)
Proof of permanent place of residence
Proof of source of income - Salary certificate (if self-employed, provide a trade license and share certificate. Otherwise, if you rely on income generated from owned properties, provide a lease agreement if the property is leased. Or, if retired, provide a letter stating to the FTA that you are relying on your savings, funds, bonds, etc.
A bank statement issued by a local bank covering six months within the financial year of the initial application request.
For Businesses:
Trade license
Memorandum of association
Proof of authorisation
Copy of financial audit report
Certified lease agreement/ownership proof for the office
A bank statement issued by a local bank covering six months within the financial year of the initial application request.
How to Apply for a TRC in the UAE & Processing Time
You can apply for a Tax Residency Certificate online or via a licensed tax advisor. The application process typically takes 4-5 days and will carry a validity of 1 year starting from the date of issuance. Additionally, if you request a hard copy of the certificate, it will take another 5 days from the date of request.
Cost of Application
The cost of application for the TRC can vary from person to person because it depends on their tax registration status with the UAE and whether they are classified under the “natural person” category or the “legal person” category. However, the submission cost remains the same for all at 50 AED.
For all tax registrants, the application processing cost is 500 AED
For non-tax registrant natural persons, the application processing cost is 1000 AED
For non-tax registrant legal persons, the application processing cost is 1750 AED
Benefits of Acquiring a Tax Residency Certificate
The first and foremost benefit of acquiring a tax residency certificate lies in the tax advantages an individual/entity can access, thanks to over 80 tax treaties the UAE has signed with other nations to promote economic ties. The primary advantage of this lies in being able to avoid double taxation on income generated across multiple countries under the DTAA agreement. Other tax advantages include reduced tax rates, tax reliefs, and tax exemptions available for certain types of income.
Another essential benefit of having a TRC is ensuring compliance with international tax laws and regulations and confirming tax residency within the UAE.
How to Apply for a Tax Residency Certificate in India?
If applying online, you can follow the below-provided guide for an easy and streamlined application process:
Step 1: Register on the Portal
Visit the FTA (Federal Tax Authority) website and create a tax certificate account by clicking on “Create new account”. Fill in all the information on the login page to create an account. The details include name, email address, user name, country code, PO box, address, and password, followed by security code.
Step 2: Complete Application
Log in with the user ID and password and click on “Create Tax Residency Certificate” from the dashboard. If you are already a “Registered Taxpayer” in eServices, click on “Yes”. Else, click on “No” to proceed.
If you click on “Yes”, you need to provide the TRN number and the registered email ID in eServices for the verification of the eServices account. Upon verification, you are navigated to the page for application of a Tax Residency Certificate. Details are auto-filled as per the selected TRN.
If you click on “No”, you are required to fill out the online Tax Residency Certificate application form.
It is important to select the type of certificate (for a natural person/legal person) and the start date of the financial year before filling in the application form.
Verify all the details filled out in the application and read the terms and conditions before submission. You can click on “Submit” if you have the documents handy for upload or click on “Save as draft” for later use.
Step 3: Upload the Documents
Attach and upload all the required documents as per the list. Go through the list of documents mentioned on the FTA (Federal Tax Authority) website and keep them scanned beforehand for quick completion of the application process.
Step 4: Make a Payment
The Tax Residency Certificate request application can be submitted for approval after paying the application submission fee displayed on the page. As you click on “Pay”, you are directed to a payment gateway (eDhiram) for submission of the fee payment.
Step 5: Application Submission
Submit the application for a Tax Residency Certificate and wait for the approval from the FTA.
Step 6: Application Review
Upon verification of application, FTA gives approval for issuance of Tax Residency Certificate. If any additional information or documents are required, the FTA will contact you before giving approval.
Step 7: Issuance of Tax Residency Certificate
A tax residency certificate will be issued within five business days of the submission of an application and fee payment.
Conclusion
While it may initially seem daunting to register and avail of a Tax Residency Certificate while being in the UAE, the value of this document is not to be underestimated. Providing key taxation & compliance benefits for the user, TRC can prove to be a critical tool in helping you manage your wealth across 80 different borders.
Thanks to the efficient and streamlined process set up by the UAE Federal Tax Government, individuals/entities can complete the process online or via a licensed tax advisor and have the certificate ready within days. However, individuals must ensure that they readily meet the eligibility criteria and possess the required documents for a quick and easy process.
