The Ministry of Finance in the UAE recently issued a decision regarding the determination of tax residency for individuals residing in the Emirates. The ministry clarified that, for tax purposes, an individual’s “usual place of residence” will be considered to be in the UAE if that is where they normally or habitually reside.
The clarification regarding an individual’s “usual place of residence” is determined for tax purposes in the UAE was a significant aspect of the Ministerial Decision No. 27 of 2023, which pertains to the implementation of specific provisions outlined in Cabinet Decision No. 85 of 2022 related to the determination of tax residency.
In September 2022, the Cabinet Decision No. 85 of 2022 was issued, which outlined rules for determining tax residency for individuals and legal entities. The recent decision by the Ministry of Finance provides further clarification on these rules. For example, the decision specifies that an individual’s “centre of financial and personal interests” will be considered in the UAE if their strongest work, personal, economic relationships, or other connections are there.
Moreover, the resolution clarifies that all days or parts of days spent in the UAE will be counted towards determining the 183-day or 90-day thresholds. The decision also notes that an individual need not own a “permanent place of residence,” but it must be continuously available to them.
According to Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, “The Ministerial Decision on implementing domestic tax residency rules is important as it gives additional clarity to individuals in respect of when they are considered as tax residents under UAE taxation laws.”
The Cabinet Decision No. 85 of 2022, which became effective on 1st March 2023, will go a long way in setting the domestic definitions and guidelines for determining whether an individual is considered a tax resident of the UAE.
