For businesses operating in the United Arab Emirates (UAE), understanding the tax residency certificate (TRC) is essential. This document confirms that a company is a resident of the UAE for tax purposes, and it can be critical for companies doing business with foreign countries.
In this blog, we’ll explore the ins and outs of the TRC, including how to obtain one and the benefits it can provide.
What is a Tax Residency Certificate (TRC)?
A tax residency certificate is a document issued by the Federal Tax Authority (FTA) of the UAE that confirms a company’s tax residency status. The certificate provides evidence that a company is a resident of the UAE and is subject to UAE tax laws.
Why is a TRC important for businesses?
A TRC is essential for businesses that have operations in multiple countries. Without a TRC, businesses may be subject to double taxation, where they are taxed on the same income in both the UAE and another country. By obtaining a TRC, businesses can avoid double taxation and reduce their tax liability.
In addition to avoiding double taxation, a TRC can also provide other benefits for businesses, such as:
- Avoiding Withholding Tax: Withholding tax is a tax that is deducted at the source of income. If a business does not have a TRC, it may be subject to withholding tax in other countries where it does business.
- Access to Tax Treaties: A TRC can help businesses access tax treaties between the UAE and other countries. Tax treaties can help businesses reduce their tax liability and avoid double taxation.
- Establishing Credibility: Having a TRC can help businesses establish credibility with foreign governments, banks, and other entities. It demonstrates that a business is a legitimate resident of the UAE and subject to UAE tax laws.
How to Obtain a Tax Residency Certificate (TRC)?
Obtaining a TRC is a relatively straightforward process. To obtain a TRC, businesses must:
- Register for Tax: The first step in obtaining a TRC is to register for tax with the FTA. Businesses must have a tax registration number (TRN) to apply for a TRC.
- Meet the Eligibility Criteria: To be eligible for a TRC, businesses must meet the following criteria:
- The business must be registered in the UAE
- The business must have a physical presence in the UAE
- The business must have a valid tax registration number (TRN)
- The business must have paid all due taxes and fees
- Submit the Application: Once a business meets the eligibility criteria, it can submit an application for a TRC to the FTA. The application must include the following documents:
- A copy of the business license
- A copy of the passport of the authorized signatory
- A copy of the Emirates ID of the authorized signatory
- A copy of the memorandum and articles of association (for LLCs)
- A tax residency self-declaration form
- Wait for Processing: After submitting the application, businesses must wait for the FTA to process the application. The processing time can vary, but businesses can generally expect to receive their TRC within 5-10 business days.
Obtaining a tax residency certificate can be critical for businesses operating in the UAE. It can help businesses avoid double taxation, reduce their tax liability, and establish credibility with foreign governments and other entities. By understanding the TRC and following the steps to obtain one, businesses can benefit from this important document and protect their financial interests.
If you need assistance in obtaining a TRC or any other tax-related matter, consider hiring a bookkeeper in Dubai.