A tiebreaker clause is a provision in a DoubleTaxTreaty (DTT) that serves as the criteria to ascertain an individual’s tax residency when one has, for instance, places of residence in both countries, or economic interests in both countries, or spends time in both countries. Sometimes, this matter becomes a challenge for such individuals and both countries consider the person to be a resident for tax purposes. The tiebreaker clause applies tests to that individual’s circumstances by asking questions such as:
1. What is the person’s primary place of abode? This, for example becomes evident by owning a residential property.
2. Where does the person spend most part of the year? Many countries’ tax laws consider an individual to be a tax resident of that country if he lives for more than half a year or 183 days.
3. Which is the place of the person’s vital economic interests? This become clearer by looking at the domicile of the company owned by the person or the fixed place of business of the person, etc.
UAE has no salary tax. However, since it is a low business tax country, many individuals residing in high tax jurisdictions are evaluating the option of becoming tax-residents of the UAE using tiebreaker clauses in DTTs entered between the countries of their origin and the UAE.
The Tax team of SZ Chartered Accountants is seasoned in providing rigorously researched and well tested advice that can enable such individuals to become tax-residents of the UAE, thereby enabling them to get out of the dragnet of hefty taxes in their home countries.
You can reach out to us at support@szca.ae or call us at +971 54 306 1683 for such business queries.
