Tax residence refers to the legal and physical base on which tax is computed as per a country’s tax laws. However, Tax Residency relates more in an international cross-border context than to domestic tax laws in the GCC; specifically, to the lawful avoidance of double taxation in two countries under the Double Tax Avoidance Agreement (DTAA) treaties between countries. This is a major concern area especially for multinational businesses with operations across multiple tax jurisdictions. These companies can avail of applicable DTAAs that the respective GCC countries have with other countries. Tax Residency is applicable to both individuals and companies.
Residency is legally established by a Tax Residency Certificate (TRC). The TRC is an official certificate or document issued by the tax authority of a country to tax resident entities and individuals fulfilling the set residency criteria as per the residency regulations under the country’s domestic income tax laws. TRC – or Tax Domicile Certificate as it is known in some countries such as the UAE – is a prerequisite for claiming any benefits of lower or no taxation in the source or residence country vis-a-vis the DTAA.
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