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UAE’s new tax measures of no avail to Indian diaspora

The new rules provide more ways to become a tax resident but can not override the 183-day residency requirement set in the India-UAE tax treaty

Photo by Saj Shafique / Unsplash

New taxation rules issued by the United Arab Emirates’ Ministry of Finance were‌ introduced earlier this year and contrary to the belief that these rules will benefit the Indian diaspora, experts are now maintaining that it does not hold promise for‌‌ everyone.

Those with a UAE resident visa become tax residents of the country. However, if‌‌ these individuals want to avoid paying taxes in their home country as well as in the‌‌ UAE, a Taxation Residence Certificate (TRC) needs to be acquired.

India and UAE signed a double tax treaty in 1992. According to the agreement, an‌‌ individual should reside in the UAE for 183 days in a year to become a UAE tax‌‌ resident. However, according to the latest rules for TRC to be issued, and tax benefits to be availed, more criteria have been specified.

• Having primary place of residence and center of financial and personal interests in‌‌ the UAE (irrespective of the number of days spent in the UAE),

• Having a permanent place of residence and/or employment alternatively business in the UAE and being physically present for a minimum of 90 days during a year. (This only applies to UAE and GCC nationals or any other person holding a valid‌‌ residency permit in the UAE.)

• Meeting conditions and criteria determined by a decision from the Minister.

According to the UAE Cabinet’s norms, a non-resident can be classified as a tax resident if they meet at least one of the above criteria. However, the Indian diaspora will have to ensure that they're fulfilling the requirement of 183 days specified in the bilateral tax treaty as the new rules do not override the specifications in the treaty.

As per information from the Embassy of India, Abu Dhabi, 30 percent of UAE residents are expatriates and resident Indian Nationals were estimated to be 3.5 million in 2021. While most of these individuals were employed, 10% of the population was made up of dependent family members.