UAE Releases Tax Residency Framework
The United Arab Emirates (UAE) has taken a step towards a more globally compliant tax framework by revealing a set of new tax residency requirements forming part of the legislation there. The UAE is home to over 15,000 Australian expats, many of whom are based Dubai and Abu Dhabi, and as the world continues to become more connected and mobile, we expect that this figure will continue to increase over time.
Since 1971, the UAE comprises a federation of six emirates, which includes Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain and Fujairah. Abu Dhabi is home to many Australian expats in the energy sector, whilst Dubai is more diversified in terms of industries of employment.
Before we get into the new tax residency framework, let’s consider the current and future tax rates in the UAE, which outlines why the region is often attractive to both corporates and individuals.
Up until earlier this year, many corporates enjoyed a nil tax rate on their profits, however on the 31st January 2022, the UAE Government has announced some changes here. The Ministry of Finance announced that the new tax rates would be as follows:
- Income up to AED 375,000 (~A$159,200) taxed at 0%
- Income above AED 375,000 taxed at 9%
- A different rate for large multinationals generating global revenues in excess of AED 3.15bn, however this rate is yet to be announced.
Whilst these rates are higher than zero, they are still highly attractive when compared to global rates, and provides a gateway to the region for many companies.
Personal income tax rates are nil in the region, which makes it clear to understand the financial motivation for many Australian expats to relocate here. With the rising costs of rents in Singapore, and changes in Hong Kong, Dubai and the region may be explored more closely by many Australian expats.
Changes to Tax Residency Framework
The UAE Government has revealed an updated framework for both corporates, or entities, and individuals in the region in terms of determining their tax residency. This certainly provides Australian expats, and others, with some clarity on how they can determine their tax residency in the region, which is particularly critical given that there currently isn’t a Double Tax Agreement with a tie-breaker test between UAE and Australia. We know that this has been causing some stress amongst Australian expats, particularly with the proposed tax residency changes in Australia.
Under the new framework, a legal person (entity or establishment) would be considered to be a tax resident of the UAE if:
- The entity was established or registered as required by UAE laws excluding branches of foreign nationals persons; or
- It is treated as a tax resident under applicable UAE tax law based on the Federal corporate income tax legislation.
Under the framework, an individual would be considered to be a tax resident of the UAE if:
- Their usual or principal place of residence is in the UAE and it is the centre of their financial and personal interests; or
- They have been physically present in the UAE for 183 days or more in the last 12 months; or
- They have been physically present in the UAE for 90 days or more over the 12 month period and is a UAE citizen, resident or GCC national with a permanent place of residence in the UAE or has a job or business in the UAE.
If you have any concerns about how these changes could impact you, or would simply like to discuss and review your overall personal finances, please reach out to me and book in a complimentary discussion here.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
To learn more about how we may be able to help you, please contact us:
✆ +65 8282 5702
Click here to book a complimentary consultation: Book Your Meeting Here
General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.
Like this article? Pay it forward and share it with your network with the links below.