The tax residency status in Dubai

The tax residency status in Dubai is not a feasible solution for expatriates from Poland. The United Arab Emirates has emerged as one of the world’s largest financial centers over the past decade, perceived as a location offering significant tax benefits and relaxed regulatory framework. This is sometimes interpreted as a diplomatic way of acknowledging that many activities that are deemed unacceptable in other financial hubs are still tolerated in Dubai.


This image was reinforced by discreet marketing of services by local banks, lawyers, financial advisors and accountants, implying a lack of robust anti-money laundering procedures, the absence of income tax, and limited information exchange on tax matters with foreign countries. As a result, the Emirates easily attracted both fully legitimate capital and investors facing legal issues in their home countries, leading to the UAE being grey listed by both the Financial Action Task Force and the European Union.

The grey listing did not affect Dubai’s ability to attract new investors. According to a report by Henley & Partners, a company that monitors global trends in private wealth migration and investments, it was estimated that in 2023 alone, the United Arab Emirates would attract 4,500 new millionaires who would move to Dubai or Abu Dhabi to enjoy benefits of tax free environment as one of key advantages.

However, significant changes have occurred in all of the aforementioned areas in recent years, rendering much of the information available online on this topic outdated. The assurances made to foreign investors no longer align with local regulations, which have undergone numerous modifications especially in relation to efforts to upgrade the AML status of the United Arab Emirates from grey to white list.


Tax residency of Dubai for investors from Poland


Many individuals residing in Poland utilize residency in the United Arab Emirates (like Dubai or Abu Dhabi) to access tax benefits, such as exemption from Polish regulations on controlled foreign entities or the lack of reporting to Poland by financial institutions under the Common Reporting Standard. However, given recent changes in the double taxation agreement, a shift in tax residence from Polish to Emirati should not be assumed to be effective, and it is likely that the Polish tax administration will challenge the effectiveness of changing residency to Dubai or Abu Dhabi sooner or later.

This problem arises from the definition of “resident of a Contracting State” under the Agreement between the Government of Poland and the United Arab Emirates for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital. This definition requires meeting specific criteria in both countries simultaneously, with the UAE adding an additional nationality requirement not present in agreements with other countries.

According to Article 4 of DTA for the purposes of this agreement, the term “resident of a Contracting State” means in the case of the United Arab Emirate an individual who has his domicile in the United Arab Emirates and is a national of the United Arab Emirates.

The term “and” is a conjunction that serves as an operator, requiring both conditions to be true. In other words in order, to claim tax resindency of Dubai under DTA between Poland and Emirates an individual need to have both domicile in the United Arab Emirates and be a national of the United Arab Emirates.

The wording of paragraph 1 of Article 4 was amended by the Amending Protocol and is asymmetrical. In the case of Poland he term “resident of a Contracting State” means a person who, under the laws of Poland, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes Poland and any political subdivision or local authority thereof.


Nationality Clause in Double Taxation Treaties of the United Arab Emirates


The UAE’s double taxation treaties often include a nationality clause. Similar nationality clauses can also be found in other agreements executed by the United Arab Emirates.

  1. a) Treaty with Latvia: “an individual who is a national of the United Arab Emirates, provided that the individual has a substantial presence, permanent home or habitual abode in the United Arab Emirates and that individual’s personal and economic relations are closer to the United Arab Emirates than to any other State”;
  2. b) Treaty with Portugal: “an individual who has his domicile in the United Arab Emirates and is a national of the United Arab Emirates”;
  3. c) Treaty with Spain: “an individual who has his domicile in the United Arab Emirates and is a national of the United Arab Emirates”.

It appears to be fairly common in the double taxation agreements of the United Arab Emirates that they only protect dual citizens.


What are the practical consequences for expatriates from Poland who claim residency in Dubai, which is not recognized in terms of the double taxation treaty between Poland and the UAE?


In practical terms, this means that tax authorities may seek to tax the worldwide income of individuals using Dubai or Abu Dhabi residency, and may subject companies to rules on controlled foreign entities if their beneficiaries hold residency in Dubai or Abu Dhabi.

The complexity of the issue is further highlighted by the question of where individuals, who have resided in Poland for less than 183 days per year and transferred their personal and economic interests to Dubai, truly have tax residency. Even if they transferred their main center of vital interests to the UAE, they cannot claim benefits of the DTA, and they cannot be considered tax residents of the UAE.

It is possible to argue that they are tax residents nowhere or that they are residents of Dubai but cannot apply for the benefits of the double taxation treaty. Nevertheless, authorities may assert that such individuals retain tax residency in Poland. While Poland does not have citizenship-based taxation, official recommendations suggest that citizenship should be the ultimate criterion for determining tax residency when it cannot be determined otherwise.


Claiming residency in Dubai, despite its extensive publicity, appears to be a risky choice for expats from Poland.