UAE Double Taxation Treaties and Agreements – A Complete Guide

Looking forward to doing business in UAE but don’t want to pay double taxes? If you plan to do business in the UAE, you may wonder about the tax implications of businesses operating there. Fortunately, the government has signed several Double Taxation Treaties in UAE with other countries allowing for the avoidance of double taxation on income earned in both countries. These agreements are vital for promoting cross-border investment and trade while providing taxpayers with certainty by introducing clear rules for taxation.

In this article, we'll explore UAE Double Taxation Treaties and Agreements, how they work, and how they can benefit businesses and individuals in the UAE while benefiting UAE's economy.

Double Taxation Agreements in UAE

UAE Double Taxation Agreements (DTAs) promote international trade and investment. The UAE has signed several DTAs with other countries to ensure that individuals and companies do not pay tax twice on the same income.

Double Taxation Agreements also aim to provide certainty for taxpayers by establishing clear rules for taxation. It also promotes the UAE's developmental goal and enhances its national income source. The UAE Double Taxation Treaties network helps promote cross-border investment and trade, which is essential for the country's economic growth and development.

UAE Tax Relief and Treaties

With the core purpose of taking its development goals to the next level, the UAE government concludes 137 DTA with most of its trade associates. The UAE has signed Double Taxation Treaties with over 100 countries, including major economies such as the United States, China, and the United Kingdom. The agreement is also aimed at providing taxpayers with the certainty of doing business in the UAE and achieving constant success.

By eliminating the double taxation burden, companies can now focus on expanding their operations and increasing profitability. UAE's Double Taxation Treaty ensures a fair tax system and benefits all private and public companies, investment firms, and UAE residents.

Avoidance of Double Taxation in UAE

There may be a situation when two different states or countries consider a citizen to be resident in each one. In such a situation, there is always a possibility of international juridical double taxation imposed by both countries/states. However, this can only be avoided if there is a tax treaty signed between the two countries.

The UAE has introduced an extensive network of tax treaties with more than 100 countries. As a rule, the UAE adopted the multilateral convention to implement tax treaty-related measures in order to promote profit shifting and prevent base erosion as well as enable individuals and businesses to avoid double taxation in both countries.

The UAE also undertook some other significant measures in the past couple of years mainly to practice the minimum standards that identify and prevent inappropriate tax practices and treaty dispute resolution. These agreements also help strengthen the stature of the UAE as a global trade and commerce hub in the worldwide business landscape.

Reasons and Purpose for Double Taxation Agreements

• Enhance the economic growth and development visions of the UAE and diversify its major sources of national income for long term
• Ensuring business-friendly policies for investors and entrepreneurs by eliminating additional taxes, double taxation, indirect taxes, and fiscal evasion
• Remove the complexities and difficulties related to cross-border business and trade for a smooth foreign investment flow
• Whether direct or indirect, offer full protection to taxpayers from additional and double taxation in the country
• Take into account the taxation issues while keeping a close eye on global changes within the business landscape and introducing the latest financial instruments and the mechanisms of transfer pricing
• Promote the exchange of goods and services as well as capital movements
• Provide for the exchange of information between the treaty countries' tax authorities, which helps prevent tax evasion and fraud

Benefits of Double Taxation Agreements

• The UAE's double taxation agreements offer several benefits to businesses and individuals operating in the UAE. Firstly, they help eliminate the double taxation of income earned in both countries enabling investors to grow their businesses, generate higher profits, and maximize their wealth.
• Secondly, these agreements reduce the withholding tax rate on income, including dividends, interest, and royalties. This results in significant cost savings for businesses operating in multiple countries.
• Thirdly, double taxation agreements help prevent tax evasion and encourage transparency in tax systems, ultimately promoting economic growth and development. Overall, these agreements contribute to a more conducive business environment in the UAE.

Incomes Covered by Tax Treaties in UAE

UAE's double taxation treaties and agreements generally cover income from various sources, including

• dividends,
• interests,
• royalties,
• capital gains,
• and employment income.

UAE's double taxation treaties with various countries ensure that individuals and businesses are not taxed twice on the same income.

 For example,

• The UAE-US Double Tax Treaty exempts US citizens and companies from paying tax on income earned in the UAE.
• Similarly, the UAE-India Double Taxation Avoidance Agreement ensures that Indian residents in the UAE are not taxed on the same income in both countries.

The tax treaties clarify how income will be taxed and by which country, reducing the uncertainty for businesses and individuals operating internationally. They also encourage cross-border investments and trade by offering tax incentives, thus boosting the economy of both countries. Additionally, these agreements ensure that individuals and businesses do not fall under the jurisdiction of both countries, avoiding legal complications and confusion.

It is crucial for businesses and individuals operating internationally to understand the provisions of double taxation treaties in the UAE. Seeking the advice of a professional business consultancy like Avyanco can help you navigate the complex tax system and ensure compliance with tax laws in both countries.

How Avyanco Helps You Avoid Double Taxation with Tax Residency Certificate

As a trusted business consultancy, Avyanco helps entrepreneurs set up their businesses in the UAE and guides them on UAE's Double Taxation Treaties and Double Taxation Agreements.

With our in-depth knowledge and experience, our business consultants advise our clients on the most suitable treaty or agreement that applies to their business activities, ensuring they don't pay taxes twice on the same income.

By availing their services, individuals and businesses can benefit from tax savings while ensuring compliance with UAE tax laws. Team Avyanco is equipped to handle the entire process from start to finish, including preparing and filing the necessary paperwork for obtaining tax residency certificates, which helps to avail the benefits of these treaties and agreements.

Moreover, we offer support and assistance throughout the process, making it hassle-free and straightforward for our clients. In conclusion, by engaging with Avyanco's experts, individuals and businesses can save time and money and ensure compliance with UAE's tax laws while availing the benefits of Double Taxation Treaties and Agreements.

AUTHOR PROFILE

Jashvant Prajapati, founder and CEO of Avyanco Group of Companies; Business Setup Consultancy, Avyanco Tax and Accounting LLC, and Avyanco Auditing LLC. He keeps a varied portfolio with core expertise in investment management, corporate structuring, commercial law, business consultancy, lead management, business planning and market research. Aspire to help potential entrepreneurs and investors to come ahead and form their companies in highly emerging economies like UAE.