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How to choose and obtain a tax residence correctly

How to choose and obtain a tax residence correctly - Makebiz

Running an international business requires a thorough analysis of many factors, and one of the most unobvious is tax optimization. This is a key aspect that can significantly affect the company’s profits and financial stability. Every entrepreneur sooner or later faces the need to pay taxes, and in this process it is important to choose the right residence. The United Arab Emirates is becoming one of the most attractive options for many entrepreneurs in this regard. 

Let’s take a closer look at what you should pay attention to when choosing a place of residence in order to minimize obligations and avoid unpleasant surprises.:

1. Assess the tax burden in the countries

In some jurisdictions, rates can reach 40%-50% of income. This is especially true in highly developed countries with high levels of social security. If you decide to become a resident there, be prepared to declare not only the income earned in this region, but also the entire global income, including dividends and profits from foreign companies. It is important to remember that, if necessary, you will have to pay the difference to the local rates.

2. Study the specifics of the tax system

Some countries offer more loyal terms. For example, in the United Arab Emirates, there is no income tax for individuals, but there is a 5% VAT and a corporate tax of 9% on businesses. This means that you still need to account for different types of taxes in your financial model. Therefore, it is important to design the income structure taking into account all possible obligations.

3. Create a revenue map

Determine where your money is coming from, whether there are any tax deductions, and whether the double taxation agreement with your chosen country is working. This will help reduce the overall tax burden.

4. Evaluate the quality of life

An equally important aspect is the quality of life in the place you are considering for residency. Where will you and your family spend your time? What are the living conditions, schools, medical facilities, and housing? Evaluate how comfortable and safe you and your loved ones will be in the chosen country.

5. Checking the full fiscal picture

Find out what additional taxes may be levied, for example, on property, inheritance, or gifts. This will help you avoid unexpected costs in the future.

6. Registration of documents

In some jurisdictions, minimum investment or deposit thresholds may be set in order to obtain resident status. It is also important to evaluate the simplicity of paperwork — the simpler the process, the less time and resources you will have to spend.

One of the main factors contributing to the UAE’s popularity among businessmen on the issue of residency is its unique tax system. There is no income tax for individuals, which makes it particularly attractive for individual entrepreneurs and investors. In addition, the corporate tax rate is only 9%, which is also one of the lowest rates in the world, and VAT is 5%. Thus, the Emirates offers a combination of a low tax burden and favorable business conditions.

To become a UAE tax resident and take advantage of all the benefits, certain conditions must be met. There are three main criteria:

  • Stay in the country for more than 183 days in the last 12 months. 
  • The presence of a «center of vital and financial interests» in the country. This may include living with a family, managing a business, or assets.

To confirm your status, you must obtain an appropriate certificate (Tax Residency Certificate, TRC). It is important for interaction with banks and tax authorities of other countries, because without it the status can be ignored. To issue it, you must provide an Emirates ID, proof of residence in the UAE, statements from a local bank account, proof of income or business licenses. These documents will help to confirm your permanent residence and the presence of assets in the region.

Before starting the process, it is important to resolve the issue of immigration. To do this, you can get a regular investor visa or a Golden Visa, which grants the right to long-term residence in the UAE. There are visa programs for investors, entrepreneurs, employees, highly qualified specialists, etc. They allow you to obtain a residence permit and an Emirates ID for the possibility of legal stay in the country for at least a year. 

Choosing a tax residence is a strategically important decision for any international business. The Emirates offers unique conditions that allow you to avoid double taxation and minimize tax costs. The availability of zero personal income tax for individuals, low corporate taxes and convenient infrastructure make this country an ideal place to do business. However, in order to successfully obtain this status, it is necessary to carefully study all the requirements and prepare the necessary documents. Ultimately, choosing the right residency can significantly increase the financial efficiency of your business.

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