UAE unveils tax residency criteria

[khinkali]

That is only possible if you don't use any FI accounts and don't have any taxable income.

I don't deny that there could be some country that defines you as tax resident if you use FI accounts or have taxable income. I don't know what these countries are, but I'd quite like to know so that I can avoid them!

Of course departing citizens of some countries absolutely do have this risk, but again we're looking at a case where they are still tax resident somewhere, so they're not PT as I understand the term.

So to make things easier, I'll just pick two jurisdictions that I have some understanding of: Georgia and the UK. I can have bank accounts in UK, I could have family, work, property, income in UK and still not be tax resident, depending on the number of days and how many of ties I have. I can have bank accounts, family, work, property, income, etc and still not be tax resident if at no point in the current tax year, I'd spent 180 of the last 365 days on Georgian soil. I could easily be tax resident in one, both or neither of those countries.

The parts a, b and c you refer to live inside paragraph 2 that applies if I am tax resident in both countries. A PT is tax resident in neither, so paragraph 2 does not apply and neither do its sub parts. Someone should make a flowchart to help understanding of this.

I'm not sure if we're still on topic for "UAE unveils tax residency criteria", but this issue crops up quite often and I do believe that it ought to be addressed. People worry about "getting tax residency" and often fail to understand that this doesn't mean they lose their original tax residency.

 

[zzzzzz]

I don't deny that there could be some country that defines you as tax resident if you use FI accounts or have taxable income. I don't know what these countries are, but I'd quite like to know so that I can avoid them!

Of course departing citizens of some countries absolutely do have this risk, but again we're looking at a case where they are still tax resident somewhere, so they're not PT as I understand the term.

So to make things easier, I'll just pick two jurisdictions that I have some understanding of: Georgia and the UK. I can have bank accounts in UK, I could have family, work, property, income in UK and still not be tax resident, depending on the number of days and how many of ties I have. I can have bank accounts, family, work, property, income, etc and still not be tax resident if at no point in the current tax year, I'd spent 180 of the last 365 days on Georgian soil. I could easily be tax resident in one, both or neither of those countries.

The parts a, b and c you refer to live inside paragraph 2 that applies if I am tax resident in both countries. A PT is tax resident in neither, so paragraph 2 does not apply and neither do its sub parts. Someone should make a flowchart to help understanding of this.

I'm not sure if we're still on topic for "UAE unveils tax residency criteria", but this issue crops up quite often and I do believe that it ought to be addressed. People worry about "getting tax residency" and often fail to understand that this doesn't mean they lose their original tax residency.

@karishi is originally from EU, that is why I'm talking from EU perspective. From what I have seen, there are 4 types of debates/users here:
1. USA residents and citizens
2. EU residents and citizens
3. UK & ex-UK territories residents and citizens
4. everybody else

I'm talking about point 2. EU residents and citizens (Italy, Spain, Portugal, Germany, Austria, Sweden...etc.) all these countries define tax resident pretty much the same, like in the OECD model above.
If PT (EU citizen) is travelling every 3 months and using bank account details of his home country and claiming he is not tax resident anywhere, well he is tax resident of country of citizenship (no home in any country, using bank details of citizenship country, citizenship ties). Do you have a family in country of citizenship but working abroad and want to be tax non-resident? You can't, you're resident in country of citizenship (family ties).

Looks like UK has different criteria than EU. As I'm not familiar with UK tax law I can't comment about it.

 

[khinkali]

Looks like UK has different criteria than EU.

@zzzzzz I have an EU nationality. Not the ones you mention. Categories such as "EU residents and citizens" vs "UK & ex-UK territories residents and citizens" will not help with understanding of these issues. The situation does not follow your chosen boundaries.

At multiple points I have mentioned that there could be reasons to have tax residence, which would mean not being a PT. The situations that you describe are absolutely not PT people, and in those circumstances the OECD sub paragraphs can apply. Those sub paragraphs do not apply to permanent travelers, by definition.

 

[zzzzzz]

@zzzzzz I have an EU nationality. Not the ones you mention. Categories such as "EU residents and citizens" vs "UK & ex-UK territories residents and citizens" will not help with understanding of these issues. The situation does not follow your chosen boundaries.

At multiple points I have mentioned that there could be reasons to have tax residence, which would mean not being a PT. The situations that you describe are absolutely not PT people, and in those circumstances the OECD sub paragraphs can apply. Those sub paragraphs do not apply to permanent travelers, by definition.

I'm not interested in being right, but in what works. And perpetual traveler with "tax residency of nowhere" doesn't work. Maybe in tax fairytales.

 

[khinkali]

I'm not interested in being right, but in what works. And perpetual traveler with "tax residency of nowhere" doesn't work. Maybe in tax fairytales.

Perhaps it is not fair to expect you to consider the circumstances of people who are in very different circumstances from yours. I wish you the best of luck in your journey!

 

[backpacker]

That is only possible if you don't use any FI accounts and don't have any taxable income. But for that, you don't have to be perpetual, nor traveler. Otherwise you are always in a position of: country of citizenship A vs country B/C/D/E... and using OECD model described above.

This is outright wrong, as your other assessments regarding this matter. I urge you to think about the matter, consult an international tax advisor and let him explain to you the spirit of the OECD model convention.

On a side note for others: Many countries do not follow the OECD model convention. This is specifically true with regards to the "residency yes" (Art. 4).
Well worth checking it.

I'm not interested in being right, but in what works. And perpetual traveler with "tax residency of nowhere" doesn't work. Maybe in tax fairytales.

You have no clue! Get advise by a competent international tax advisor.

 

[Mike Forman]

As this discussion has multiple opinions, it is clear all these can be regarded as opinions and not facts since every situation is different and sometimes it can become complex.

Even if according to some rules you are not tax resident, tax authorities will and can still send you tax claims and take legal action, they have unlimited funding for that and they are only interested in receiving taxes in their country if they feel they are right and smell money.

As backpacker states, find always a professional tax lawyer in the jurisdictions you might have exposure and pay 1000-5000 usd to get the right advice. They will also tell you what records (rental, utility, credit card, travel to tickets,..) to keep and what's important in case you ever receive any claim.

This fee is peanuts compared to future possible tax liabilities and legal expenses.

 

[koohl]

I totally agree with @Mike Forman - you need professional advise in this area of making business. Trouble will come and you need to be prepared for it.

 

[mgs999999999]

Hi guys,

Regarding this topic and based on the article 4 point 3 of the UAE law: https://tax.gov.ae/Datafolder/Files/Legislation/Corporate Tax/Cabinet Decision 85 of 2022 - For publishing.pdf

I have the following question:

If you have a free zone company in the UAE that it is only you )meaning you employ yourself and you pay yourself a salary every month) and you stay 90 days per year in the UAE under short term agreement (Airbnb, etc) meaning that you do NOT have a 1 year leasing contract, will you be considered tax resident in the UAE? All this is under the assumption that you do not spend 183 days in another country and that the only business you have is in the UAE.

Thanks a lot in advance,

Best wishes

 

[karishi]

Hi guys,

Regarding this topic and based on the article 4 point 3 of the UAE law: https://tax.gov.ae/Datafolder/Files/Legislation/Corporate Tax/Cabinet Decision 85 of 2022 - For publishing.pdf

I have the following question:

If you have a free zone company in the UAE that it is only you )meaning you employ yourself and you pay yourself a salary every month) and you stay 90 days per year in the UAE under short term agreement (Airbnb, etc) meaning that you do NOT have a 1 year leasing contract, will you be considered tax resident in the UAE? All this is under the assumption that you do not spend 183 days in another country and that the only business you have is in the UAE.

Thanks a lot in advance,

Best wishes

they will not give you the TRC which might or might not be useful to you. If you want to make sure to have a proof that you paid your taxes in Dubai, you need the TRC, so you are better of renting something for the long term and then cancelling it or subletting it

 

[mgs999999999]

they will not give you the TRC which might or might not be useful to you. If you want to make sure to have a proof that you paid your taxes in Dubai, you need the TRC, so you are better of renting something for the long term and then cancelling it or subletting it

Thank you for your reply. Under which circumstances the TRC may not be useful?

Best wishes

 

[karishi]

Thank you for your reply. Under which circumstances the TRC may not be useful?

Best wishes

If you are living a true digital nomad lifestyle, and have no ties with your home country, and have no plans to re enter your home country, you don't exactly NEED it.
It depends on a lot of factors, your willingness to accept some risks is one of them, because if you don't pay taxes anywhere in the world, in theory you owe them to your own country as per OECD rules.
So if you are moving to Dubai from your home country and this is the first time you leave your home country, then yes, you need it at least for the first three years, making sure to be ablo to show that Dubai is your pirmary residence and center of interest: spend more day in dubai than in your home country.
If you are moving to Dubai after being an expat for 15 years, you probably don't need it, unless you plan to re enter ( as a resident ) your home country in the next 4-5 years.

 

[Cloudbanck]

I doubt the OECD has rules that say you have to pay tax in your home country, got any source for this? Im guessing you mean guidelines for tie breakers in double tax agreements - but that's only relevant when two or more countries claim you as tax resident.

Also legally there is typically no such thing as "home country", what's relevant for taxation is country of citizenship, and country where you are a tax resident, and sometimes country of domicile.

I mean you can have grown up in multiple countries with multiple citizenships, blurring the concept of home country. So you cant base law on "home country".

And if no country claims you as tax resident, you normally don't pay tax anywhere. But some countries can claim you as tax resident on flimsy ties or on not so long time spent in the country, so one has to be a bit careful with true digital nomad lifestyle.

 

[karishi]

I doubt the OECD has rules that say you have to pay tax in your home country, got any source for this? Im guessing you mean guidelines for tie breakers in double tax agreements - but that's only relevant when two or more countries claim you as tax resident.

Also legally there is typically no such thing as "home country", what's relevant for taxation is country of citizenship, and country where you are a tax resident, and sometimes country of domicile.

I mean you can have grown up in multiple countries with multiple citizenships, blurring the concept of home country. So you cant base law on "home country".

And if no country claims you as tax resident, you normally don't pay tax anywhere. But some countries can claim you as tax resident on flimsy ties or on not so long time spent in the country, so one has to be a bit careful with true digital nomad lifestyle.

I saw a link on the forums here regarding OECD's rules on the OECD website. Home country for me is the country of citizenship. And in Europe, for me the law is like that: imagine that you don't have a tax residency certificate for 6 years in which you have never gone back to your home country except for a few days. You go back to your home country. You move money back or buy a house in your home countre. You get asked where does that money comes from. You have no answers since you never paid taxes anywhere. What will your home country do? say nothing or open an investigation?

 

[Cloudbanck]

I saw a link on the forums here regarding OECD's rules on the OECD website. Home country for me is the country of citizenship. And in Europe, for me the law is like that: imagine that you don't have a tax residency certificate for 6 years in which you have never gone back to your home country except for a few days. You go back to your home country. You move money back or buy a house in your home countre. You get asked where does that money comes from. You have no answers since you never paid taxes anywhere. What will your home country do? say nothing or open an investigation?

Say you have Danish citizenship but move to Norway at age 3 and grow up in Norway (the two countries were one and the same country for a long time and have similar languages after all, united by viking king Harald Bluetooth who gave name to the wireless technology, anyway...)

In this case you are a tax resident in Norway and it's Norway that matters tax wise, not Denmark even if Denmark is your country of citizenship.

So you leave Norway at age 25 and live in the UAE for 20 years. Then you go back to Norway, and become a tax resident there. Now normally any money you earned while you were not a tax resident in Norway, arent really a issue for Norway, regardless of where you lived and if you paid tax. However, when you move back, if you are rich, tax authorities might look at your case in detail, and try to make a case for you being tax resident even while you were living abroad, or look into exceptions to tax residency, like some countries have rules that you have to pay capital gains tax or other stuff even after you move out and are not a tax resident.

But the question of source of funds, for money moved back, is more of an anti-money laundering issue than a tax issue. And assuming you had a regular job or business in the UAE, you can show where the money came from, and the fact that there was no tax isnt an issue, as long as the money was earned legally.

 

[karishi]

Say you have Danish citizenship but move to Norway at age 3 and grow up in Norway (the two countries were one and the same country for a long time and have similar languages after all, united by viking king Harald Bluetooth who gave name to the wireless technology, anyway...)

In this case you are a tax resident in Norway and it's Norway that matters tax wise, not Denmark even if Denmark is your country of citizenship.

So you leave Norway at age 25 and live in the UAE for 20 years. Then you go back to Norway, and become a tax resident there. Now normally any money you earned while you were not a tax resident in Norway, arent really a issue for Norway, regardless of where you lived and if you paid tax. However, when you move back, if you are rich, tax authorities might look at your case in detail, and try to make a case for you being tax resident even while you were living abroad, or look into exceptions to tax residency, like some countries have rules that you have to pay capital gains tax or other stuff even after you move out and are not a tax resident.

But the question of source of funds, for money moved back, is more of an anti-money laundering issue than a tax issue. And assuming you had a regular job or business in the UAE, you can show where the money came from, and the fact that there was no tax isnt an issue, as long as the money was earned legally.

Thanks for the clarification, especially on the money laundering/tax part, but one thing is if you lived in the UAE for 20 years, in my opinion, another thing is if you spent two weeks each year in the UAE and then spent time elsewhere, travelling and never triggering any residency.vIn one case you would have 20 TRC from UAE, in the second case, none.
I really have no clear answer as I have read everything and the opposite on this, but what I have often read is that you can't be "without fiscal residence", you have to have "one fiscal residence", and that fiscal residence is your country of citizenship. I am not saying that your country of citizenship magically knows that you have not paid taxes anywhere and comes knocking at your door, I am saying that your country of citizenship might at some point try to claim that since you can't prove to have been fiscally resident somewhere, then you were fiscally resident in your home country. To clarify I have never been able to verify if this is true, I have never headr of such a case, and I would be happy to have a definitive answer on this, because this is basically mi situation of the last 12 years. I always assumed that I would never be able, because it would never be safe, to spend my money outside UAE because of this, as I have no tax resdiency certificate for the past 12 years. For my home state I have been resident in Albania and now Spain but my setup was different.

 

[mgs999999999]

Thanks for the clarification, especially on the money laundering/tax part, but one thing is if you lived in the UAE for 20 years, in my opinion, another thing is if you spent two weeks each year in the UAE and then spent time elsewhere, travelling and never triggering any residency.vIn one case you would have 20 TRC from UAE, in the second case, none.
I really have no clear answer as I have read everything and the opposite on this, but what I have often read is that you can't be "without fiscal residence", you have to have "one fiscal residence", and that fiscal residence is your country of citizenship. I am not saying that your country of citizenship magically knows that you have not paid taxes anywhere and comes knocking at your door, I am saying that your country of citizenship might at some point try to claim that since you can't prove to have been fiscally resident somewhere, then you were fiscally resident in your home country. To clarify I have never been able to verify if this is true, I have never headr of such a case, and I would be happy to have a definitive answer on this, because this is basically mi situation of the last 12 years. I always assumed that I would never be able, because it would never be safe, to spend my money outside UAE because of this, as I have no tax resdiency certificate for the past 12 years. For my home state I have been resident in Albania and now Spain but my setup was different.

May I ask you what is your setup. Are you resident in Spain? That is dangerous as hell… I think the Spanish tax agency is one of the biggest mtf***** in the world

 

[karishi]

May I ask you what is your setup. Are you resident in Spain? That is dangerous as hell… I think the Spanish tax agency is one of the biggest mtf***** in the world

I am resident in Spain for my home country, but in truth all the money is in the UAE. I have nothing in Spain, no house, no bank account. I spend 4 months and a half a year in Ibiza but I have no rental agreement, everything is in black. I have permanent residence in spain since 2008 since I lived one year in Spain in that period and they gave you the permanent grren NIE, and the permanent green NIE is enough to be resident for my home country. I also have nothing in my own country. But the permanent green nie doesn't mean I am a spanish resident for the Hacienda.

 

[Cloudbanck]

Thanks for the clarification, especially on the money laundering/tax part, but one thing is if you lived in the UAE for 20 years, in my opinion, another thing is if you spent two weeks each year in the UAE and then spent time elsewhere, travelling and never triggering any residency.vIn one case you would have 20 TRC from UAE, in the second case, none.
I really have no clear answer as I have read everything and the opposite on this, but what I have often read is that you can't be "without fiscal residence", you have to have "one fiscal residence", and that fiscal residence is your country of citizenship. I am not saying that your country of citizenship magically knows that you have not paid taxes anywhere and comes knocking at your door, I am saying that your country of citizenship might at some point try to claim that since you can't prove to have been fiscally resident somewhere, then you were fiscally resident in your home country. To clarify I have never been able to verify if this is true, I have never headr of such a case, and I would be happy to have a definitive answer on this, because this is basically mi situation of the last 12 years. I always assumed that I would never be able, because it would never be safe, to spend my money outside UAE because of this, as I have no tax resdiency certificate for the past 12 years. For my home state I have been resident in Albania and now Spain but my setup was different.

Each country applies their own rules, and there is fortunately not yet a global government that could force all residents of earth to pay tax somewhere. For citizens of western high tax countries (except the USA) yes, you can be without fiscal residence. Each country checks (or takes your word for it) if you are a tax resident with them or not. And the answer can be no everywhere (or not checked in countries you have not visited and have no relation to). No country will make sure that you are a tax resident somewhere else, thats not within the remit of tax authorities, and anyway, no tax authority can keep track of the rules and laws regarding tax residency of all 200 something countries/autonomous places in the world. In many cases they have a difficult enough time just keeping up and applying their own rules.

Then we have the US where, as I assume you know, if you are a citizen you pay tax to the US regardless of where in the world you live. So the US makes sure you pay tax to them primarily, not that you pay tax somewhere (even if I think you can offset foreign tax paid).

 

[backpacker]

because if you don't pay taxes anywhere in the world, in theory you owe them to your own country as per OECD rules.

Verify before posting!
Your statement could not be any further from the truth.

I saw a link on the forums here regarding OECD's rules on the OECD website.

Did you ever click on it and read it, or did you just "saw a link"?
Sorry, but these kind of postings confuse new users. Not good!