Tax Residency Certificate- TRC

A Tax Residency Certificate (TRC) in the UAE is a document issued by the UAE Federal Tax Authority (FTA) that confirms an individual or business is considered a tax resident of the UAE for tax purposes. This certificate is commonly used to benefit from double tax treaties that the UAE has with other countries, allowing businesses or individuals to avoid being taxed on the same income in both the UAE and another country.

Who Can Apply for a Tax Residency Certificate (TRC)?
Individuals:
  • UAE citizens.
  • UAE residents holding valid Emirates IDs.
  • Must have lived in the UAE for at least 183 days in a calendar year.
Businesses:
  • Companies incorporated and doing business in the UAE, including those operating in free zones or on the mainland.
  • Must demonstrate economic substance (i.e., physical office presence, employees, etc.).
  • Must be registered for VAT and have a valid trade license.
Eligibility Criteria for Obtaining a Tax Residency Certificate (TRC)?

To be eligible for a TRC, individuals or businesses must meet the following conditions:

For Individuals:
  • Minimum stay: Must be a UAE resident for 183 days or more in the UAE.
  • Proof of residency: Valid Emirates ID and residence visa.
  • Proof of physical presence in the UAE (such as rental contracts, utility bills, etc.).
For Businesses:
  • The company should have a valid trade license issued by the UAE government.
  • Should be able to prove its presence in the UAE by having office premises, staff, and substantial business activity (economic substance).
  • The company must not be involved in activities that do not meet the Economic Substance Regulations (ESR).
Benefits of a Tax Residency Certificate (TRC)?
Double Taxation Relief
A TRC allows individuals or businesses to take advantage of double taxation agreements (DTAs) that the UAE has with many countries. This prevents the same income from being taxed in both the UAE and another country.
Reduced Withholding Taxes
Certain treaties reduce or eliminate withholding taxes on dividends, royalties, and interest paid between countries, lowering the overall tax burden for businesses.
Proving Residency
The TRC serves as official proof that you are a tax resident of the UAE, which is important when dealing with foreign tax authorities.
Common Use Cases for TRC
  • Tax Avoidance: To avoid double taxation on income or capital gains.
  • Dividends and Royalties: For businesses receiving income from foreign investments or royalties, where the TRC can help reduce with holding taxes.
  • Foreign Investments: To attract foreign investment by proving the business is not subject to high taxes.
  • Tax Treaty Benefits: To benefit from lower tax rates based on the tax treaties between the UAE and the foreign country.
Key Points to Remember
  • The TRC is issued by the Federal Tax Authority (FTA), not by free zones or local authorities
  • The UAE does not impose income tax on individuals or corporations, but businesses must meet the Economic Substance Regulations (ESR) to qualify for TRC benefits.
  • Personal TRCs are usually easier to obtain if you meet the residency criteria (183 days).
  • Corporate TRCs require that the business demonstrates sufficient physical presence and activity in the UAE, especially under ESR guidelines.