FTA to issue tax residency certificates

The tax residency certificate is issued to eligible government entities, companies and individuals who are looking to benefit from double taxation avoidance agreements signed between the UAE and other countries. Getty ImagesShow less

Tax residency and commercial activities certificates will now be issued through the Federal Tax Authority of the UAE, the FTA said on Wednesday.

Applications for the certificates can be made through the FTA's e-services portal from November 14, the authority added.

Tax residency certificates are issued to eligible government entities, companies and individuals looking to benefit from double taxation avoidance agreements signed between the UAE and other countries, while the commercial activities certificate enables applicants to refund VAT paid in advance outside of the UAE.

The certificates were previously issued by the Ministry of Finance. The move, in coordination with the Ministry of Finance, is in line with Cabinet Decision No. 65 of 2020 on Fees for Services provided by the FTA issued in October 2020.

“Both tax residency and commercial activities certificates allow investors in the UAE, including companies and individuals, to benefit from double taxation avoidance agreements to which the state is a party, with the aim of preventing duplication, in addition to recovering VAT imposed on Emirati businesses in various countries in the event they were registered with the authority,” Khalid Ali Al Bustani, director-general of the FTA, said.

He added that a joint working group made the necessary arrangements to ensure a smooth transfer of the certificates from the ministry to the FTA.

The UAE's international tax framework provides important protections and benefits for companies and expatriates.

Double taxation avoidance agreements allocate taxing rights and ensure individuals and businesses are only taxed once. They clarify how certain types of income, such as dividends, property income and pensions, should be taxed, and lay out rules on non-discrimination to prevent different treatment based on factors such as nationality or residency.

This will help the FTA to enforce tax compliance on businesses

The UAE has double taxation avoidance treaties with 117 countries, including the UK, India, Egypt, Germany and Japan. In May 2018, the UAE signed a double taxation avoidance agreement with Saudi Arabia, the first in the GCC.

"This will help the FTA to enforce tax compliance on businesses while also expediting the refund process through direct dialogue with foreign tax authorities," Anurag Chaturvedi, managing partner of tax consultancy Chartered House, told The National.

“[The] tax residency certificate allows [you] to avoid a range of taxes, including withholding tax, apart from providing refund for VAT incurred by a business in countries the UAE has established a reciprocal arrangement with. At present, 22 countries allow VAT refund under a reciprocal arrangement with the UAE.”