Tax residency: why days alone are not decisive

There are rumours circulating in the media that the UAE may take a more flexible approach to tax residency in light of the disruption caused by the current political conflict. In particular, individuals who have left the UAE temporarily may not be held as strictly to the usual minimum day-count requirements when assessing residency status. Whilst nothing has been formally announced, it wouldn’t be surprising, as the UAE has a track record of applying practical, real-world judgment in exceptional situations.

So, what does this mean in practice?

At present, there are two main routes to being treated as tax resident in the UAE. The first is the domestic “90-day” test. Under this route, an individual may qualify as a UAE tax resident if they spend at least 90 days in the country within a 12-month period, provided they also meet certain additional criteria, such as having a permanent place of residence, employment, or business ties in the UAE.

The second is the more widely recognised “183-day” test, which reflects international norms. An individual who spends 183 days or more in the UAE during a relevant period will generally be regarded as tax resident without needing to rely on further connecting factors.

The issue arising in the current environment is that individuals who would ordinarily satisfy one of these thresholds may now fall short due to temporary relocation prompted by geopolitical instability. The reported shift in approach suggests that the UAE authorities may take a more lenient view in such cases, particularly where there is clear evidence that the individual’s absence is involuntary or temporary in nature.

However, even if an individual does not strictly meet the day-count tests and in the absence of a formal announcement regarding a general relaxation, this does not necessarily mean UAE tax residency is lost altogether. Article 4 of the relevant UAE tax resolutions determining tax residence states that an individual may be treated as tax resident where their usual or main place of residence, and their centre of financial and personal interests, are in the UAE.

In practical terms, this means that even where the 90-day or 183-day thresholds are not met, it may still be possible to establish UAE tax residency - particularly where there is strong supporting evidence of substantive ties to the UAE. The concept of “centre of financial and personal interests” is central to this analysis and requires consideration of where an individual’s life is effectively based, including:

• the location of their primary residence

• where their family is situated

• where their principal business or employment activities are carried on

• the location of their key investments and banking relationships

• the jurisdiction in which their day-to-day affairs are centred

Where these factors point clearly to the UAE, there may be a strong basis for asserting UAE tax residency even if the individual has not met the relevant day thresholds in a particular year. This is also relevant in the context of applying for a UAE Tax Residency Certificate (TRC). In practice, the UAE authorities adopt a holistic approach and accept a range of supporting evidence demonstrating an individual’s ongoing ties to the UAE. This may include bank statements, title deeds or tenancy agreements, utility bills, and evidence of employment or business activity within the UAE.

While satisfying the day-count tests remains the clearest and lowest-risk method of establishing residency, it may not always be possible in circumstances where travel has been disrupted. In such cases, the ability to demonstrate that the UAE remains the individual’s main place of residence and centre of financial and personal interests becomes critical. Affected individuals should therefore actively assess and, where necessary, strengthen their ties to the UAE. This includes considering whether the UAE continues to represent their main place of residence and the centre of their financial and personal interests, and ensuring that these connections are clearly evidenced.

‍How can Sanctuary help?

We are assisting a number of clients in reviewing their residency position in light of these developments. This includes assessing the strength of their UAE ties, identifying any potential risks from a UK or other jurisdiction perspective, and supporting applications for TRCs. If your circumstances have changed recently, a proactive review can help ensure your position is robust and properly evidenced.

Visit our Tax & Advisory service page to learn more about our tax & residency advisory, or contact us for a bespoke consultation via the contact form or email us at: hello@sanctuary.ae.