Tax residence and the United Arab Emirates, a challenge so it seems. What is the problem?
Knowing where you are a tax resident is crucial for your tax return. A starting point often skipped, always addressed by us. The outcome of what we think is the tax residence is not always the desired outcome.
How does it work?
Most tax treaties state in article 4 of the tax treaty that a person is a tax resident in the country where this person lives. However, if the wife and children live in another country, the other country could be your tax residence. Or if you moves away, but your wife lives in the house you bought and is regarded the Box 1 house (tax deduction reasons), you probably have remained a Dutch tax resident.
The moment you have houses in more countries, your relationship(s) are not formal, then the address of your dentist becomes important. Or the address in your navigation of the car under ‘home’. Facts and circumstances determine your fiscal residence.
Tax residence and the United Arab Emirates How does that work in Dubai or the United Arab Emirates?
Totally different. Again, there is the article 4. However, this is a totally different article than any other article of the tax treaties we know. The Dutch part is still the same. If you work, live and stay in the Netherlands, you are a Dutch tax resident.
The UAE part is slightly different, you can only be a UAE tax resident if you are a UAE national! And only if you are a UAE national with a fixed base in the UAE and economic tights with UAE.
Moving to Dubai for work
We frequently receive information requests about persons moving to Dubai for work. Often the partner stays in the Netherlands, or in case of no partner, the house owned by this person remains his fixed place of living in the Netherlands.
The house and the partner separately are already a debate whether the residence has moved to Dubai. The person needing to be a UAE national will be decisive. If you still have connections with the Netherlands, but you no longer want to be subject to Dutch tax, but UAE tax instead: get your UAE nationality.
Be careful what you wish for, paying the UAE tax rate is nice, but no longer being able to enter the EU due to no longer holding an EU nationality can cause more issues than tax alone.
Double taxation relief
For those who do move to Dubai to work, a Dutch tax return is still to be filed. Dubai income is part of that Dutch tax return. A double taxation relief can be applied. Then again, in a year where you have both Dutch income and Dubai income you learn that the double taxation relief can be a lousy relief.
Tax is exciting
We think tax is exciting! The UAE tax treaty being different on a rather crucial part is not everybody excited about. How attractive the Emirates can be, we learn that the summer is simply too hot. You will come back probably to the Netherlands where is your house. That has impact on you claiming not to be a Dutch tax resident as well. A fact and circumstance story you need to understand well.