Can a UAE Free Zone get a Tax Residency Certificate

The United Arab Emirates (UAE) is renowned for its business-friendly environment, and its Free Zones have been a major draw for companies looking to establish a presence in the region. With numerous Free Zones offering attractive benefits like tax exemptions, streamlined regulations, and world-class infrastructure, it's no wonder that many businesses have flocked to these hubs. However, as the UAE continues to evolve its tax landscape, one crucial aspect that Free Zone companies must navigate is the Tax Residency Certificate (TRC). In this blog post, we'll delve into the world of TRCs and explore the essential question:

Can a UAE Free Zone company obtain a Tax Residency Certificate? Understanding TRC eligibility is vital for Free Zone businesses, as it can significantly impact their tax obligations, compliance requirements, and overall operations. Let's dive in and uncover the intricacies of TRCs for UAE Free Zone companies.

Eligibility Criteria for Free Zone Companies to Obtain a TRC

Have a valid trade license issued by the relevant Free Zone authority

1. Maintain a physical presence in the UAE, such as an office or warehouse

2. Demonstrate economic substance by conducting genuine business activities in the UAE

3. Compliance with UAE Tax Laws: Comply with UAE tax laws and regulations, including:

• Filing tax returns
• Meeting Value-Added Tax (VAT) requirements
• Meeting Excise Tax requirements

4. Have a minimum level of operational expenditure in the UAE

5. Employ skilled personnel in the UAE

6. Have a clear management structure in place

Free Zone Specifics

• List of Free Zones that allow TRC issuance (e.g. Dubai Airport Free Zone, Dubai Silicon Oasis)
• List of Free Zones with restrictions or special requirements (e.g. Jebel Ali Free Zone, Dubai Multi Commodities Centre)

Application Process for TRC as a Free Zone Company

Step 1: Gathering all Mandatory Documents

• Valid Trade License
• Memorandum of Association (MOA)
• Articles of Association (AOA)
• Certificate of Incorporation
• Passport Copies of Shareholders and Directors
• Utility Bills, Such as Electricity, Water, or Internet Bills, which Reflect Physical Presence

Step 2: Fill the Application Form for TRC

• Obtain the application form for TRC from the concerned Free Zone authority. Alternatively, one can download it from the website of the Federal Tax Authority – FTA.
• The form shall be filled in with precision and completeness.

Step 3: Application Submission

• The application form, accompanied by all other documents, shall be submitted to the concerned Free Zone authority or to the FTA.
• Pay the fees between AED 2,000 and AED 5,000.

Step 4: Processing

• Wait for approximately 2-4 weeks to let the application be processed by the Free Zone authority or the FTA.
• Any additional information may be required to be furnished if asked.

Step 5: Obtain the TRC

• If approved, obtain the TRC that will be valid for a period ranging from 1 to 3 years.
• Renewal before it expires.

Other Requirement

• Some Free Zones may require additional documents or information.
• The company must be able to demonstrate economic substance and compliance with UAE tax laws and regulations.

Benefits of Obtaining a TRC for Free Zone Companies

• Tax Benefits: Access to double taxation avoidance agreements (DTAAs) and reduced withholding tax rates
• Compliance: Demonstrates compliance with UAE tax laws and regulations
• Credibility: Enhances company credibility and reputation
• Access to Government Services: Facilitates access to government services and tenders
• Simplified Procedures: Streamlines procedures for opening bank accounts and obtaining visas

Implications of Not Having a TRC

• It may lead to higher tax liabilities and penalties
• Non-compliance with UAE tax laws and regulations
• It may damage company reputation and credibility
• Limited access to government services and tenders
• May face operational challenges, such as opening bank accounts and obtaining visas
• Lead  penalties and fines for non-compliance

Conclusion

In conclusion, securing a Tax Residency Certificate (TRC) is essential for UAE Free Zone companies to fully benefit from tax treaties, maintain compliance with UAE regulations, and strengthen their business operations. Without a TRC, companies may face higher tax liabilities, limited access to government services, and potential reputational risks. Reyson Badger specializes in assisting businesses through the TRC application process, ensuring that all eligibility criteria are met and that your company remains in good standing with the UAE's tax authorities. By partnering with Reyson Badger, you can confidently navigate the complexities of obtaining a TRC, enabling your business to thrive in the competitive UAE market.