The United Arab Emirates has formalised its tax‑residency rules with Cabinet Resolution No. 85, which took effect on 1 March 2023. The resolution sets clear criteria for both natural persons and legal entities, introducing a “90‑day” pathway that shortens the physical‑presence requirement for individuals who wish to be recognised as UAE tax residents.
Individual tax‑residency criteria
An individual can be deemed a UAE tax resident by meeting one of the following three tests:
- Principal place of residence – the person’s main home and the centre of their financial and personal interests are in the UAE, or other conditions prescribed by the Minister. This generally requires the individual to have established a permanent home and moved family members to the UAE.
- 183‑day rule – physical presence in the UAE for ≥ 183 days within any consecutive 12‑month period. Presence beyond this threshold automatically confers tax‑resident status.
- 90‑day rule (new option) – physical presence for ≥ 90 days within a consecutive 12‑month period provided the individual:
- Is a UAE citizen or already holds a UAE residence permit, or
- Has a permanent place of residence in the UAE, or
- Carries out a job or conducts business activities in the UAE.
The 90‑day route reduces the time needed to obtain tax‑resident status, making the UAE more accessible for high‑net‑worth individuals and expatriates who can satisfy the additional conditions.
Corporate tax‑residency criteria
A legal entity is recognised as a UAE tax resident when:
- It is incorporated, formed, or registered under UAE law (excluding foreign branches).
- Future corporate‑income‑tax legislation (still pending publication) confirms the entity’s status.
The public consultation released on 18 April 2022 indicates that a foreign‑incorporated company may also be treated as a UAE tax resident if its effective management and control are exercised from the UAE. In such cases, the entity would be subject to the UAE’s tax treaty network, and double‑tax‑avoidance agreements (DTAAs) would apply.
Practical implications
- Clarity and certainty – The resolution provides a domestic legal definition of tax residency, simplifying the issuance of tax‑resident certificates and the application of bilateral tax treaties.
- Personal income – UAE tax residents are not subject to personal income tax on worldwide earnings.
- Corporate benefits – Companies with UAE tax‑resident status can leverage DTAAs to avoid double taxation and may operate under a zero‑tax regime for qualifying income, pending the forthcoming corporate‑income‑tax rules.
- Eligibility assessment – Individuals should verify that they meet one of the three residency tests, particularly the additional conditions attached to the 90‑day option. Companies should confirm that they are incorporated in the UAE and monitor forthcoming corporate‑tax legislation to ensure compliance.
Risks and considerations
- Residency verification – Authorities may require documentation (e.g., lease agreements, employment contracts, bank statements) to prove the centre of personal or economic interests.
- Future legislation – The exact corporate‑tax framework is not yet published; companies should stay informed about the upcoming law to understand any new filing or reporting obligations.
- Treaty reliance – While DTAAs can mitigate double taxation, the specific provisions of each treaty must be examined, as residency criteria may differ across jurisdictions.
Overall, Cabinet Resolution No. 85 establishes a transparent framework for tax residency in the UAE, offering a streamlined 90‑day route for qualifying individuals and clarifying the status of companies incorporated locally. This enhances the UAE’s appeal as a low‑tax jurisdiction for both personal and corporate planning.
