UAE unveils tax residency criteria

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Konstanz

Entrepreneur
AFAIK it is based on residence. For example interactive broker doesn't ask you for a tax residence certificate, but for a proof of residence certificate like an Ejari. The "assumption" so far has been that resident -> tax resident in UAE for the banks. As other have suggested that might change, but so far it has been this way. I mean when you open a bank account in the UAE they don't even ask you for a proof of residence, a PO BOX is enough
Not the case. Regulation of CRS is based on tax residence. But I imagine UAE banks are not really compliant with that requirements at the moment. Once they start doing real compliance this will change
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
What is the difference from now?I mean, right now AFAIK if you are not a tax resident but you are a resident, you don't get reported.

The difference is you need to be tax resident. A person can have multiple tax residencies while resident in Dubai. As is the case with people who own homes in Dubai and still move between jurisdictions. For example spending most of year in Dubai but spending just 30 days in your home in UK will make you also tax resident in UK. Hence you need to tell bank in Self Certification form you are tax resident in UAE and UK and allow reporting to occur.

So living somewhere does not make you solely tax resident in that country. The banks have to establish your tax situation by requiring you to i.e Self Certify your status or use indica to determine this. Hence UAE i.e fines its banks for not following CRS rules or are not compliant as @Konstanz says.

 

karishi

Active Member
Not the case. Regulation of CRS is based on tax residence. But I imagine UAE banks are not really compliant with that requirements at the moment. Once they start doing real compliance this will change
It has always been a gray area, let's say that things are different, I think depending if you do an account with a pure UAE bank, like EMirates NBD or CBD, or if you do it with a branch of a european bank, like HSBC UAE. The second one will be stricter in compliance. In any case nothing discussed in the article does anything to dissipate the gray area, and it relaxes terms to get a tax certificate. But people have a wrong idea about the UAE, I have had a freelancer permit for two years now and nobody in the UAE has clear how it works. Is it a company?Can I work with the permit outside of the UAE as a freelancer?Should I have two separate bank accounts, one for the freelance entity and one for me as a person?Could I have a salary from the freelance entity to my person and ask for a credit card?I've been asking these questions for two years and nobody really knows. Let's not even talk about the remote working visa.
 

Fred

Dubai Expat
Mentor Group Gold
Elite Member
Commercial Service
Entrepreneur
So my understanding is that we are making confusion between tax residency and residency. AFAIK if you are a resident in the UAE the bank will not report you by CRS. To be clear, to open a bank account you just need a residence visa and an emirates ID, so in case they could onnly report you to your country of citizenship through the passport linked to the EID. I've not read anywhere that the rule that you are a resident if you enter every six months will change. Being a resident is different from being a tax resident, and in my opinion here they relaxed the rules for tax residency. Basically having a house, living there for 3 months and then renting it on airbnb might be enough to qualify you as a Fiscal Resident, down from 180 days. At that point you just need to avoid triggering residency anywhere else and you are ok . I have no idea what banks will do, probably depends on a bank by bank basis, I hope that before reporting anything they will contact you.
That's correct and how it's working in practice without getting lost in theory !
 

karishi

Active Member
So living somewhere does not make you solely tax resident in that country. The banks have to establish your tax situation by requiring you to i.e Self Certify your status or use indica to determine this. Hence UAE i.e fines its banks for not following CRS rules or are not compliant as @Konstanz says.

And how do you self certify? What is indica? Where you spend your money?I mean what indication could they have that you are not living in the UAE? I totally know and agree with what you are saying, but is it happening?
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
And how do you self certify?

The bank should give you a self certification form where they cannot determine your tax residency themselves. Read the below to get up to speed.


What is indica?

See the below


I mean what indication could they have that you are not living in the UAE?

See above link.

I totally know and agree with what you are saying, but is it happening?

In the case of UAE I guess not hence the fines for failing to adhere to CRS rules. But most importantly it should be occuring. But UAE banks and to be honest a few other banks around world have poor guidance on how to enact CRS properly from their local regulator.
 

Konstanz

Entrepreneur
They will just send CRS reports to your passport country just to be compliant in view of regulator. You can never rely that you will not be reported
 

JackAlabama

Entrepreneur
AFAIK it is based on residence. For example interactive broker doesn't ask you for a tax residence certificate, but for a proof of residence certificate like an Ejari. The "assumption" so far has been that resident -> tax resident in UAE for the banks. As other have suggested that might change, but so far it has been this way. I mean when you open a bank account in the UAE they don't even ask you for a proof of residence, a PO BOX is enough
That is the case in many places for resident personal banking.
 

karishi

Active Member
They will just send CRS reports to your passport country just to be compliant in view of regulator. You can never rely that you will not be reported
well obviously I have not been resident in my passport country for the past 12 years as I have residency in a third country, which is not UAE and I have no ties whatsoever with my passport country.

The bank should give you a self certification form where they cannot determine your tax residency themselves. Read the below to get up to speed.




See the below




See above link.



In the case of UAE I guess not hence the fines for failing to adhere to CRS rules. But most importantly it should be occuring. But UAE banks and to be honest a few other banks around world have poor guidance on how to enact CRS properly from their local regulator.
Regarding the self certification, it states:
Most banks will ask you to complete a CRS Self Certification form. It’ll ask for details of your residential address and your citizenship. Crucially it’ll ask for your tax ID number for the country where you’re a tax payer. - I have sent the bank an Ejari ( which of course I cancelled after one month ), they know my citizenship by the EID and they know that I am a Emirati Resident because I opened the account as an emirati resident. They know I have a company because they asked me to provide payments and contracts from the company which was sending money and I also received this year money from a UAE contract from a UAE company. So I think that kind of clarifies that part.
Regarding the indicia, that looks like it's kind of easy to avoid, I mean Money from the company in San vincent goes to UAE, money from UAE either stays in UAE or goes to interctive brokers account opened with UAE documents and EJARI. No money from UAE bank is ever sent outside of course.
 
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backpacker

Entrepreneur
well obviously I have not been resident in my passport country for the past 12 years as I have residency in a third country, which is not UAE and I have no ties whatsoever with my passport country.


Regarding the self certification, it states:
Most banks will ask you to complete a CRS Self Certification form. It’ll ask for details of your residential address and your citizenship. Crucially it’ll ask for your tax ID number for the country where you’re a tax payer. - I have sent the bank an Ejari ( which of course I cancelled after one month ), they know my citizenship by the EID and they know that I am a Emirati Resident because I opened the account as an emirati resident. They know I have a company because they asked me to provide payments and contracts from the company which was sending money and I also received this year money from a UAE contract from a UAE company. So I think that kind of clarifies that part.
Regarding the indicia, that looks like it's kind of easy to avoid, I mean Money from the company in San vincent goes to UAE, money from UAE either stays in UAE or goes to interctive brokers account opened with UAE documents and EJARI. No money from UAE bank is ever sent outside of course.
This link answers many questions -> Tax residency - Organisation for Economic Co-operation and Development
 

Spinat

Corporate Services
Mentor Group Gold
Elite Member
Guys you made me laugh when we see in daily business that the immigration is run on Windows95 - believe me one thing - it's much less behind here then people can even imagine.
That means you say that they don't have to worry about that for now?
 

karishi

Active Member
That means you say that they don't have to worry about that for now?
You should always be prepared for the worst case scenario, as things always change. Never ever assume you will not be reported, so prepare for that, make sure that the country where you are reported either doesn't care or it's a place where you have nothing. Take wise for example, they were not reporting and now they started reporting. How will they do it?Nobody knows. And every story is different, if you are a high income generator ( and so a high tax payer ) in your home country and you move to dubai, be sure to do it properly, as the tax agency will surely come after you, they are not idiots. Having said that, a country which says that to be more tax compliant reduces the requirements to get a tax certificate...and still doesn't touch the elephant in the room, which is the fact that you are "resident" simply by entering the country every six months, well, it speaks for itself. Also in the UAE there are lots of announcements, but then it's how they enforce them that matters. I mean it could be anything, it could be that they start reporting residents which are not tax residents, or it could be that notthing changes. as I wrote above, after 2 and a half year after they introduced it, nobody exactly knows how a Freelance permit work. They announced corporate tax for 2023, nobody knows how it will be implemented and how it will work.
 

Fred

Dubai Expat
Mentor Group Gold
Elite Member
Commercial Service
Entrepreneur
That means you say that they don't have to worry about that for now?
100% - no one gets reported!

If this change it's the end as majority of clients we see don't intend to live full time in Dubai - couple of months yes but not the whole year.

Make the math and undertand the gap between written law and law enforcement and what's actually a Business from the GoV and not.

Put yourself a couple of hours in some Address Hotel Lobby and listen the conversations - gives me always a smile and shows that when something like @karishi mentions happens the UAE is swimming without water.

I just report back what we see in reality here.
 

karishi

Active Member
100% - no one gets reported!

If this change it's the end as majority of clients we see don't intend to live full time in Dubai - couple of months yes but not the whole year.

Make the math and undertand the gap between written law and law enforcement and what's actually a Business from the GoV and not.

Put yourself a couple of hours in some Address Hotel Lobby and listen the conversations - gives me always a smile and shows that when something like @karishi mentions happens the UAE is swimming without water.

I just report back what we see in reality here.
yeah but it's the same I see and hear whhen I'm in Dubai. and I think that if they plan to change approach on reporting they will make it very clear as it would be a gigantic pivot from what it's now. Anyway the three months rule for a tax certificate is pretty tempting.
 

azb1

Entrepreneur
IMO,
If you cut all tie with your home country....and travel the world, using Dubai residency....
Open one bank account in Emirate NBD, One HSBC EXPAT account and one IBKR brokerage account...and enjoy life.....

If I am not wrong , You do no required any Tax certificate in this setup... just Need Utility bill and Passport ...nobody asking Tax residency Certificate in this setup.......
Am I right ?
or I am making some mistake ?

1)Emirate NBD
2)HSBC expat
3)IBKR brokerage account

can anybody can confirm validity of this setup ?

Thanks
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
If I am not wrong , You do no required any Tax certificate in this setup... just Need Utility bill and Passport ...nobody asking Tax residency Certificate in this setup.......
Am I right ?
or I am making some mistake ?

If there is a foreign tax agency asking you for Tax residency certificate then you have bigger issues to worry about as your probably under investigation.

can anybody can confirm validity of this setup ?

Not sure who this setup is for. Is it against a challenge by your home country tax office? Most people once they de-register from their home country, cut ties and exit correctly their home country are not going to have any problems or bother with you.

100% - no one gets reported!

If this change it's the end as majority of clients we see don't intend to live full time in Dubai - couple of months yes but not the whole year.

Make the math and undertand the gap between written law and law enforcement and what's actually a Business from the GoV and not.

Unfortunately the UAE does not decide who gets reported and do not call the shots in this situation. They have to follow OECD rules and guidance on who gets reported otherwise they will be in violation of what they signed up to and will suffer much bigger consequences. The central bank fines on local banks have shown they are enforcing OECD CRS rules and addressing shortfalls and they will be forced to continue to do so for below reason. The fact they also changed tax residency rules for 2023 for what is considered tax resident also speaks of who is in control of events here.

The UAE is one of over a dozen countries listed by the OECD as having high risk CBI/RBI schemes that can be used to circumvent CRS. Hence their financial institutions are required under CRS to conduct extra due diligence whether they like it or not. Again failure to do so would not go well for UAE especially in current climate.


---- quote start

How can CBI/RBI schemes be misused to circumvent CRS reporting?

CBI/RBI schemes can be misused to undermine the CRS due diligence procedures. This may lead to inaccurate or incomplete reporting under the CRS, in particular when not all jurisdictions of tax residence are disclosed to the Financial Institution. Such a scenario could arise where an individual does not actually or not only reside in the CBI/RBI jurisdiction, but claims to be resident for tax purposes only in such jurisdiction and provides his Financial Institution with supporting documentation issued under the CBI/RBI scheme, for example a certificate of residence, ID card or passport.


What should Financial Institutions do?

Under Section VII of the CRS, a Financial Institution may not rely on a self-certification or Documentary Evidence if the Financial Institution knows or has reason to know, that the self-certification or Documentary Evidence is incorrect or unreliable. The same applies with respect to Pre-existing High-Value Accounts where a relationship manager has actual knowledge that the self-certification or Documentary Evidence is incorrect or unreliable.

In making the determination whether a Financial Institution has reason to know that a self-certification or Documentary Evidence is incorrect or unreliable, it should take into account all relevant information available to the Financial Institution, including the results of the OECD's CBI/RBI risk analysis. As a result, where, taking into account all relevant information, the facts and circumstances would lead the Financial Institution to have doubts as to the tax residency(ies) of an Account Holder or Controlling Person, it should take appropriate measures to ascertain the tax residency(ies) of such persons.

To the extent that the doubt is related to the fact that the Account Holder or Controlling Person is claiming residence in a jurisdiction offering a potentially high-risk CBI/RBI scheme, FIs may consider raising further questions, including:

  • Did you obtain residence rights under an CBI/RBI scheme?
  • Do you hold residence rights in any other jurisdiction(s)?
  • Have you spent more than 90 days in any other jurisdiction(s) during the previous year?
  • In which jurisdiction(s) have you filed personal income tax returns during the previous year?
The responses to the above questions should assist Financial Institutions in ascertaining whether the provided self-certification or Documentary Evidence is incorrect or unreliable.

---- quote end
 

karishi

Active Member
The UAE is one of over a dozen countries listed by the OECD as having high risk CBI/RBI schemes that can be used to circumvent CRS. Hence their financial institutions are required under CRS to conduct extra due diligence whether they like it or not. Again failure to do so would not go well for UAE especially in current climate.
I understand this, but the weird thing is that they actually relaxed the rules for tax residency. I mean 90 days + property for a tax certidicate is much better than the previous 180 days.
And they also added the other point:
"The individual’s usual or principal place of residence is in the UAE and the centre of their financial and personal interests are in the UAE or other conditions prescribed by the minister; or"
which leaves plenty of discretionary room and which was not present earlier. I think the earlier wording was that under exceptional circumstances you could get a certificate with less than 180 days if the minister wanted.
I mean as I wrote above, nobody should ever assume not to get reported, you should always be prepared for the worst possible outcome and always assume that things can change, look at wise.
An besides reporting, people should also care about what could trigger an investigation by tax agencies, returning to your home country and moving funds there does trigger an investigation usually. Buying a house in a EU country might trigger an investigation. I mean even if you get a tax certificate in Dubai with the 90 days rule you could end up being tax resident in another country, it all depends from what is your business

IMO,
If you cut all tie with your home country....and travel the world, using Dubai residency....
Open one bank account in Emirate NBD, One HSBC EXPAT account and one IBKR brokerage account...and enjoy life.....

If I am not wrong , You do no required any Tax certificate in this setup... just Need Utility bill and Passport ...nobody asking Tax residency Certificate in this setup.......
Am I right ?
or I am making some mistake ?

1)Emirate NBD
2)HSBC expat
3)IBKR brokerage account

can anybody can confirm validity of this setup ?

Thanks
I would not bank with HSBC, I would stick to UAE banks. UAE branches of european banks tend to report you more often. In any case if you exit your country properly, this setup works. Just remember that without a tax certificate, that money is mostly spendable in the UAE. I am a digital nomad, I live as a perpetual traveller, but bear in mind that this is something you have to do more or less for life. That means no wife, no kids, which is fine for me, never wanted a family, but if at some point you plan to settle down, you have to do that properly too. You will need 3-4 years of tax certificates from Dubai to show that the money come from your work and not from money laundering when you spend that money in the country where you will live with your family. So think about that too
 
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JackAlabama

Entrepreneur
I understand this, but the weird thing is that they actually relaxed the rules for tax residency. I mean 90 days + property for a tax certidicate is much better than the previous 180 days.
And they also added the other point:
"The individual’s usual or principal place of residence is in the UAE and the centre of their financial and personal interests are in the UAE or other conditions prescribed by the minister; or"
which leaves plenty of discretionary room and which was not present earlier. I think the earlier wording was that under exceptional circumstances you could get a certificate with less than 180 days if the minister wanted.
I mean as I wrote above, nobody should ever assume not to get reported, you should always be prepared for the worst possible outcome and always assume that things can change, look at wise.
An besides reporting, people should also care about what could trigger an investigation by tax agencies, returning to your home country and moving funds there does trigger an investigation usually. Buying a house in a EU country might trigger an investigation. I mean even if you get a tax certificate in Dubai with the 90 days rule you could end up being tax resident in another country, it all depends from what is your business


I would not bank with HSBC, I would stick to UAE banks. UAE branches of european banks tend to report you more often. In any case if you exit your country properly, this setup works. Just remember that without a tax certificate, that money is mostly spendable in the UAE. I am a digital nomad, I live as a perpetual traveller, but bear in mind that this is something you have to do more or less for life. That means no wife, no kids, which is fine for me, never wanted a family, but if at some point you plan to settle down, you have to do that properly too. You will need 3-4 years of tax certificates from Dubai to show that the money come from your work and not from money laundering when you spend that money in the country where you will live with your family. So think about that too
That depends on the country you intend going to. Such a magical tax certificate won't do much per se. It is always the whole set of circumstances.
Also you cannot live 3/4 in european home and claim youre tax resident in Dubai just by showing this magical paper.
 

karishi

Active Member
That depends on the country you intend going to. Such a magical tax certificate won't do much per se. It is always the whole set of circumstances.
Also you cannot live 3/4 in european home and claim youre tax resident in Dubai just by showing this magical paper.
that's clear. But if you do not trigger residency rules in any other country you are clean and your money is clean ( of course there are excpetions, I'm basing this assumption on the fact that you work for companies either in Dubai or in other states which are not the states where you spend 4 months ). 4 months in one EU state and 4 months in another.
 
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