UAE: FTA Publishes New Guide on Tax Residency and Tax Residency Certificate

On 18 October 2024, the UAE Federal Tax Authority (FTA) had published a new guide titled Tax Residency and Tax Residency Certificate – Tax Procedures Guide (TGPTR1).

The guide covers various aspects of tax residency, reviewing the relevant criteria under UAE tax laws and double taxation agreements (DTAs) and offering several examples.

It provides guidance on how a UAE tax resident can obtain a Tax Residency Certificate (TRC) or request the FTA’s stamp on an original TRC form issued by another jurisdiction.

One of the key aspects the guide addresses relates to the Place of Effective Management (POEM) as a criterion for determining UAE corporate tax residency.

The guide analyses the facts and circumstances that need to be considered when deciding if key management and commercial decisions, on the basis of which POEM is determined, are made in the UAE or elsewhere.

It indicates various criteria for identifying persons who make key management and commercial decisions for the company, outlining three tests: the board of directors test, the delegation of authority test, and the shareholder activity test.

The guide offers various examples of when the POEM is in the UAE (e.g., board meetings held virtually when the majority of directors are physically located in the UAE) or not (e.g., when key management and commercial decisions are made in the UAE on an occasional or one-off basis).

The guide also explains who can qualify for the TRC and the procedures to follow to obtain it.

A TRC cannot be obtained for future periods or periods exceeding 12 months.

When a TRC is needed for the current period, the FTA will review the application after three months into the period for juridical persons, as soon as the criteria to be a Tax Resident are met for natural persons, and one day into the period for Government Entities and Government Controlled Entities.

The new guide is essential for those handling corporate tax in the UAE or navigating global tax responsibilities.

Although not legally binding, it will certainly help businesses and individuals optimise their tax strategies.

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UAE: Eases Corporate Tax Compliance for Businesses

The National, 14 October 2024: The UAE’s Ministry of Finance has cancelled economic substance reporting requirements for companies with a financial year ending after 31 December 2022.

This move aims to help companies focus on compliance with the UAE corporate tax system.

The amendment to Cabinet Decision No. 57/2020 on economic substance requirements aims to enhance efficiency and tax compliance across the country, ensuring accurate application of tax legislation by all entities subject to it.

The UAE has introduced a federal corporate tax with a standard statutory rate of 9% starting from the financial year beginning on or after 1 June 2023.

It brought the income of companies exceeding Dh375,000 ($102,100) within the taxable bracket, while taxable profits below that level will be subject to a tax of 0%.

While companies are no longer required to submit economic substance notifications or reports for financial years ending after 31 December 2022, they remain responsible for fulfilling compliance obligations for previous years and paying any penalties imposed by the Federal Tax Authority (FTA).

The UAE has also announced a deadline extension for corporate tax returns and payments for some entities.

Businesses with short tax periods ending on or before 29 February 2024, can now file their returns and make payments by 31 December 2024.

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UAE: Exempts Cryptocurrencies and Virtual Assets from VAT

Khaleej Times, 7 October 2024: The UAE has introduced amendments to the Executive Regulations of Federal Decree-Law No. 8/2017 on VAT, exempting certain activities related to cryptocurrencies and virtual assets from VAT.

This move aims to establish the UAE as a hub for investment activities and support the growth of the financial sector.

The amendments, approved by the UAE Cabinet through Cabinet Decision No. 100/2024, exempt digital representations of value that can be digitally traded or converted and are intended for investment purposes from VAT. However, this exemption does not extend to digital representations of fiat currencies or financial securities.

The scope of the exemption covers transfers, conversion, keeping, and managing virtual assets, essentially encompassing cryptocurrency trading.

Additionally, the amendments provide exemptions for investment fund management services, including the management of fund operations, investments, and performance monitoring.

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UAE: Hajj Permit Requirements for Citizens

Emaratalyoum, 29 September 2024: The General Authority for Islamic Affairs, Endowments and Zakat has set three conditions for obtaining a Hajj permit for the upcoming season, as per Cabinet Decision No. 32/2018 regarding the Hajj and Umrah system.

The applicant must be a citizen of the UAE, be at least 12 years old, and must not have performed Hajj during the last 5 Hajj seasons.

Priority in granting Hajj permits will be given to those who have not previously performed Hajj, including disabled people, those with intractable diseases, the elderly, and mahrams and companions who meet the conditions, taking into account those who have priority in registration in the electronic system.

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UAE: Guidelines on Use of Internet in Schools

Emaratalyoum, 22 September 2024: A set of guidelines have been introduced on the use of information technology in government and private school premises in the UAE.

The guidelines restricted the use of the Internet in schools solely for educational purposes and within the regulations, rules, and laws. Schools have prohibited the use of information technology to receive, send, or distribute any materials that violate the applicable instructions, regulations, and laws. Schools have circulated a list of 19 prohibited violations to students and teachers to ensure a safe electronic environment in educational establishments. They emphasised ensuring all students and staff are aware of the risks of internet use and using it responsibly and safely for study purposes. Violating these instructions may lead to pupils being permanently expelled from the school.

The 19 prohibited violations for all users of school computers and internet services include using email to threaten or harass others, sending or posting disturbing images online, using the internet for any form of piracy such as music, movies, or software, sharing or using others’ passwords, violating copyright laws on downloading or copying electronic files for personal use, sharing confidential school matters or information without permission, compromising the school’s electronic systems’ security by introducing malware, using the internet for personal purposes, visiting unauthorised websites, distributing inaccurate, offensive, or defamatory information, using inappropriate threatening language in communications, damaging devices or software, intentionally causing harm to someone’s work or program, engaging in cyberbullying, impersonating others online, plagiarising work, accessing pornographic or hate-promoting websites, disclosing personal information without permission, visiting social media sites without permission, and using someone else’s information and work without permission.

The electronic safety policy outlines acceptable internet uses for students, including using web browsers for educational purposes, research, and gathering information from various websites and databases; using the internet to share documents and tasks that promote collaborative work; maintaining the confidentiality of personal usernames and passwords; not sharing passwords with anyone; not attempting to access, modify, or change anyone else’s username, password, files, or data; sharing emails only with known and parent/teacher-approved individuals. There is also a prohibition on bringing mobile phones to school (which will be monitored by surveillance cameras). The internet can also be used for online tests or tasks approved or recommended by teachers; studying curriculum content online and performing related tasks as assigned by teachers; working on projects or lesson presentations; preparing global circulars, invitations, and booklets for community service or other school activities with teacher approval; accessing exam sites and practice papers; responsibly accessing social media sites for educational purposes only under teacher guidance. Pupils should also always use appropriate language in all digital communications through emails and social networks, and take care of all digital devices used.

Permitted uses of the Internet for teachers include adhering to responsible and effective Internet use, using the Internet only for school-related purposes, using email for school-related matters only, and participating in all activities that enhance and improve the employee’s professional aspect, including online research and training.

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