MD 27/2023 — How the tax residency tests apply to individuals

Factual summary

Explains the terms used in the natural-person residency tests of Cabinet Decision No. 85 of 2022. It defines the usual or primary place of residence and the centre of financial and personal interests, sets how days of presence are counted for the 183-day and 90-day tests (calendar days, part days count, days need not be consecutive), and allows the FTA to disregard days spent in the UAE because of exceptional circumstances. It also defines a Permanent Place of Residence and when a person carries on employment in the UAE.

What it means in practice Professional insight

Who: individuals relying on UAE tax residency, and their advisers. What to check: the day count in the relevant 12 months, any days that may be excluded as exceptional circumstances, and evidence of a permanent home or employment in the UAE.

Key provisions

• Art. 2(1) A natural person's usual or primary place of residence is in the State if the State is where he habitually or normally resides, that is, where he spends most of his time compared with any other jurisdiction as part of his settled routine, in a way that is more than transient (Art. 2(2)).
• Art. 2(3) The centre of financial and personal interests is in the State if his personal and economic interests are closest or of greatest significance there, taking into account his occupation, family and social relations, cultural or other activities, place of business and the place from which his property is administered (Art. 2(4)).
• Art. 3 A day is a calendar day and a month a calendar month; every day or part of a day of physical presence counts, and the days need not be consecutive for the 183-day or 90-day period within the relevant consecutive 12-month period.
• Art. 4 The Authority may disregard days of presence due to exceptional circumstances: an event beyond the person's control, occurring while he is already in the State, that he could not reasonably have predicted or prevented and that prevents him from leaving as planned.
• Art. 5 A Permanent Place of Residence is a furnished house, apartment, room or other dwelling continuously available to the person, with a continuous right of occupation at all times and not just occasionally; it may be owned, rented or otherwise occupied.
• Art. 6 A natural person carries on employment in the State under a contract with an employer incorporated, formed or recognised in the State for remuneration paid by the employer in the State, or in a continuing relationship where all or substantially all of his labour income comes from one party for work performed in the State; full-time or part-time work counts, a voluntary role without a contract does not.
• Art. 8 Effective from 1 March 2023.