Double Tax

If you’re doing business in the United Arab Emirates (UAE) Double Taxation occurs when the same income is taxed by two different countries, both at the corporate and personal levels.

So what exactly does a double tax treaty in the UAE mean for your business?

Actually, some countries have signed treaties to prevent double taxation, with the UAE taking the lead in this area.

What is Double Taxation?

Double taxation taxes the exact source of income twice. This can happen in two main ways. First, payments can be taxed at both the corporate and personal levels. For example, when a corporation pays dividends to its shareholders, the earnings that provided the cash for these dividends have already been taxed at the corporate level. But the shareholders who receive these dividends also incur income-tax liabilities, leading to a situation of double taxation.

Second, double taxation can occur when two different countries tax the same income. This is a common issue you might face if you’re running an international business, where income may be taxed in the country where it’s earned and then taxed again when it’s repatriated in your business’ home country.

Tax Treaties in Preventing Double Taxation

To tackle the issue of double taxation, countries worldwide have signed hundreds of treaties for the avoidance of double taxation. In the framework of global strategic partnerships and to enhance the competitiveness of the United Arab Emirates, the Ministry is working on expanding its Double Taxation Agreements (DTA) and Bilateral Investment Treaties (BIT) network, where it concluded 193 DTAs and BITs, with the purpose of exempting or reducing taxes on investment and profits from direct and indirect taxes in addition to protecting those investments from all kinds of non-commercial risks to ensure that those profits can be transferred in a free convertible currency.

The double tax treaties with the UAE provide mechanisms for reducing or eliminating withholding taxes on dividends, interest, and royalties. These treaties also offer provisions for the resolution of disputes between taxpayers and tax authorities.

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The purpose of avoidance of double taxation agreements

• Promote the development goals of the UAE and diversify its sources of national income;
• Eliminating double taxation, additional taxes, indirect taxes, and fiscal evasion;
• Remove the difficulties relating to cross-border trade and investment flows;
• Offer full protection to taxpayers from double taxation (direct or indirect) and avoid obstructing the free flow of trade and investment and promoting development goals, in addition to diversifying sources of national income and increasing the size of investment inflows;
• Take into consideration the taxation issues and the global changes in the economic and financial sectors, new financial instruments, and mechanisms of transfer pricing;
• Encourage the exchange of goods, services and capital movements.

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List of Countries with DTTs in UAE

The UAE has a comprehensive network of DTTs from a variety of countries: Albania, Algeria, Armenia, Austria, Azerbaijan, Andorra, Belarus, Benin, Belize, Bangladesh, Bermuda, Barbados, Bosnia and Herzegovina, Belgium, Mauritius, Canada, Bulgaria, China, the Czech Republic, Egypt, Estonia, Ethiopia, Cyprus, Finland, Fiji, Georgia, Gambia, New Guinea, Germany, Greece, Hong Kong, Italy, India, Ireland, Japan, Kazakhstan, Kyrgyzstan, Kenya, Indonesia, Lebanon, Luxembourg, Latvia, Liechtenstein, Lithuania, Malaysia, Macedonia, Malta, Mongolia, Montenegro, Morocco, Mauritius, Mauritania, Mozambique, Mexico, the Netherlands, New Zealand, Nigeria, Pakistan, Philippines, Poland, Portugal, Palestine, Panama, Romania, Russia, Seychelles, Singapore, Senegal, Switzerland, Spain, Serbia, Slovenia, Slovakia, Sri Lanka, South Korea, South Africa, Sudan, Syria, Tajikistan, Thailand, Turkmenistan, Tunisia, Turkey, New Zealand, Ukraine, Uzbekistan, Uruguay, Uganda, Venezuela, Vietnam, Yemen.

If you are from any of the above countries and are planning on emigrating to Dubai, our team can help you.

What is a Double Taxation Avoidance Agreement?

The Double Tax Avoidance Agreement (DTAA) is a tax treaty made by two or more nations to assist taxpayers in avoiding double taxation on the same revenue. When a person is a resident of one country but makes money in another, a DTAA becomes relevant.

The Double Tax Avoidance Agreement (DTAA) is a tax treaty made by two or more nations to assist taxpayers in avoiding double taxation on the same revenue. When a person is a resident of one country but makes money in another, a DTAA becomes relevant.

The goal of a Double Tax Avoidance Agreement is to make the nation look more appealing to investors by offering an exemption from double taxes. This type of assistance is offered by removing income generated in a foreign country from taxation in the resident country or by providing credit for taxes paid elsewhere.

If a firm in country X (the origin country) invests in country Z (the source country) for any purpose, the question is: is it obligated to pay tax in both countries? The answer is no. The main goal of the Double Tax Avoidance Agreement (DTAA) is to guarantee that there is no tax evasion and that information is exchanged between nations. Furthermore, there is no double taxation. Such an agreement assures that the corporation will only have to pay tax in one country.

Dubai has a favorable tax structure, and international investors who opt to establish businesses in Dubai may take advantage of double tax treaties with the UAE and other nations. Connect with the Gulf Bridge specialists to learn more!