UAE Tax Treaties

Benefits of UAE Double Taxation Treaties

Different countries of the world operate under different jurisdictions and their residents – companies and physical persons - have to comply with the laws of the state. The UAE is known all over the world for its lenient taxation system. The UAE free trade zones are exempt from taxes, including corporate income, withholding tax, etc..

The world we live in today is dynamic and changing rapidly. It gives entrepreneurs an opportunity to have businesses around the globe. Nowadays, it is possible to launch a company in one country while still residing in another country or making business over such company in other country. This leads us to a question: How to avoid double taxation?

What is a double taxation treaty?

A tax treaty is an agreement signed by two countries in order to avoid double taxation. It allows businessmen to pay taxes at a reduced rate or be completely exempt from them.

The UAE has signed double taxation treaties with a number of countries. Now we are going to discuss the UAE tax treaties in more details.

List of UAE Double Taxation Treaties

The UAE has signed double taxation treaties with 63 countries of the world. This list includes 9 Arab countries, many European and Latin American states. UAE tax treaties guarantee the avoidance of double taxation. The first UAE double taxation treaty was signed in 1989. It was an agreement with France.

Canada UAE tax treaty was signed in 2002 in Abu Dhabi. It covers taxes on income and capital. According to UAE Canada tax treaty, withholding tax is limited to 15% for most dividend payments and to 10% for interest payment.

The first India UAE tax treaty was signed in 1989. Two more India UAE tax treaties were signed in 1993 and 2007. India UAE double taxation avoidance agreement covers income from air transport, short-term investment and taxes on income and capital.

The UAE US tax treaty has not been yet signed but is being extensively discussed. Both countries would like to conclude an agreement. Thus, the signing of a US UAE tax treaty remains a question of time. Meanwhile, they are operating under Foreign Account Tax Compliance Act known as FATCA.

The main benefit of the United Arab Emirates tax treaties is the availability of the legal framework for the avoidance of double taxation. UAE double taxation treaties enable residents and non-residents of the UAE to enjoy the advantages of the UAE taxation system, in particular, the exemption of taxes in the country’s free trade zones.