Introduction
The UAE has emerged as an international business destination, with foreign investors, businessmen, and large companies all migrating to this financial hub. All these expansions through investments necessitated the requirement for a Tax Residency Certificate, or TRC, in most cases to earn tax benefits on inter-border businesses. So how exactly do people manoeuvre the process? This step-by-step guide is going to portray insights into achieving a Tax Residency Certificate in UAE. It will highlight all the vital considerations related to FTA guidelines, UAEPass, and more.
What is a Tax Residency Certificate (TRC)?
An official paper published by the UAE FTA that declares the business or person named in the certificate is supposed to be taxed as a resident in the United Arab Emirates is called a Tax Residency Certificate. Business houses obtain this in order to make full use of the tax relief afforded under the agreements on double taxation with other nations. Otherwise, companies risk increased taxes and may even suffer imposed penalties on meeting international tax offices.
For entrepreneurs, the TRC is a very important document proving that their business is indeed a genuine tax resident of UAE. For that, these tax residents benefit from tax advantages as exemptions or a reduced tax rate within foreign jurisdictions.
Why Do You Need a Tax Residency Certificate?
The TRC is crucial for the following reasons:
It assists businesses to qualify for tax exemptions or reduced withholding tax on income like dividends, interest, and royalties under DTAs.
It is an essential document that proves the business operations in the UAE.
It enables the company to benefit from the Corporate Tax exemption in the UAE, as it has established various tax treaties with foreign counterparts.
Procedure for Obtaining a Tax Residency Certificate (TRC)
1. Eligibility Check: Determine Your Eligibility for a TRC
Before applying, ensure your business meets the requirements for a Tax Residency Certificate (TRC). Generally, businesses that are registered in the UAE and operate in the country may apply. Some factors may be applicable to determine your eligibility; these include the nature of commercial activities and ESR compliance.
2. Registration with the Federal Tax Authority (FTA)
First, the FTA needs to record your business. Without this, your application for a Tax Residency Certificate will not be considered. You must also have a VAT-compliant business, as well as any other taxes that may be levied, such as Excise Tax.
> Go to the FTA website and register to access the FTA portal.
> Ensure your company has a valid CAC and is up to date, as this is required in the application for the TRC.
3. Verify Your Company’s Legal Structure and Commercial Activities
To complete your application, your company must be FTA compliant, including your Economic Substance Regulations (ESR). The ESR aims at ensuring businesses undertaking a particular activity are operationally significant in the UAE, in addition to merely having their business registered here.
4. Apply for TRC using UAEPass
Once you have assured eligibility and also registered your business with the FTA, then you can go ahead and fill out the online application for TRC through the official national digital identity UAEPass. UAEPass offers businesses and residents a safe mode of authentication to sign various governmental services documents to apply for a TRC application.
>Log in with your UAEPass on the FTA portal.
>Tax Residency Certificate from the dropdown select the section fill out the application form.
5. Documents
Attach to your application the following documents prepared and uploaded:
>A copy of your company’s Commercial Activities Certificate (CAC).
>Evidence of payment of VAT (Value Added Tax) and other taxes applicable, such as Excise Tax.
>Financial statements from the previous year.
>A declaration stating that your business complies with the ESR.
6. Payment for TRC Application Fee
There is a processing fee for making an application under the TRC. Ensure the payment is fully made to ensure that there will be no delays in processing the application. It is possible to pay directly using the FTA portal.
7. Monitoring the Status of the Application
Once the FTA receives your application, it will begin processing. If you applied online, you can monitor the application status using the portal. Processing takes up to 20 business days in most cases, though this may depend on the profile of your company and compliance with the documentation requirements.
8. Obtain Your TRC
Once approved, you will receive the TRC certificate digitally, which can be used for various international tax purposes. You can download it from the FTA portal and share it with relevant tax authorities for cross-border tax benefits.
Also Read: How To Set Up a Free Zone Company With a Corporate Shareholder In The UAE
Important Considerations and Compliance
Although the process is simple, submitting an application to obtain a TRC requires utmost compliance with requirements set by FTA. Disregard to the Taxpayer Charter and statutes related to that may lead to penalties or your certificate being put on hold for a long period.
1. Maintain Your Up-to-Date Documents
A CAC number, VAT, and financial record must be available and up-to-date.
2. Regular Tax Filing
Maintain consistent tax filings, including VAT and Excise Tax returns, to demonstrate your company’s commitment to tax compliance. Regular filing is also a requirement for staying in good standing with the FTA.
3. Stay Informed with Guides and Public Clarifications
The FTA updates Guides, References & Public Clarifications regularly to clarify tax-related matters. You can avoid compliance issues by keeping abreast of the information through the FTA’s Media Centre or E-Learning modules.
4. Seek Help from a Tax Agent
Although you can do it yourself, consulting a qualified Tax Agent or tax consultant will ensure that all your paperwork is correctly prepared, saving you time and reducing the risk of errors.
Conclusion
A trading company setup in dubai is a good business opportunity if and only if you understand the market and the regulations that need to be followed. Dubai provides unrivaled opportunities for growth, whether you are starting a general trading company or an online trading company.
