Page 21 - Premier Brains Global -Doing Business in UAE (Low Res)

DOING BUSINESS in UAE

can often be credited against taxes paid
Double Tax Treaties (DTTs) in their home country, depending on the
specific provisions of the relevant treaty and
the laws in their home country.
One of the main perks of the UAE’s Double
Double Tax Treaties (DTTs) are agreements
Tax Treaty (DTT) is that you won’t be taxed
between two countries that tackle the issue
twice on the same income. This is especially
of double taxation on both passive and
beneficial for UAE residents earning income
active income. The main aim of these treaties
in another country that has a DTT with the
is to decide which country has the right to
UAE. It’s done through tax credits, where
tax an individual or business’s earnings
taxes paid in one country can be offset
when they invest abroad. This is especially
against tax liabilities in the other. This is
relevant for countries like the UAE, which
particularly advantageous for multinational
has many foreign investors. By setting clear
companies operating in the UAE’s free zones
taxation rules, DTTs help prevent conflicts
and for UAE nationals or residents earning
and encourage foreign investment.
income abroad.
The United Arab Emirates (UAE) has entered
DTTs also offer the potential for lower
into double-tax treaties with various
withholding taxes. Withholding tax is a tax
countries to prevent double taxation and
deducted at source on income such as
promote trade and investment. These
dividends, interest, and royalties. DTTs often
treaties determine the tax obligations of
stipulate reduced withholding tax rates
individuals and businesses concerning their
compared to standard rates under domestic
income earned in the UAE and the other
law. DTTs can provide certain tax exemptions.
treaty country. The UAE has double tax
For example, some DTT may exempt certain
treaties with countries such as the United
types of income from tax altogether or
Kingdom, France, Germany, India, China,
provide reduced tax rates for specific
and many others. These treaties provide:
payment types. This can include income
from air transport and shipping, income
• Provisions for allocating taxing rights
from immovable property, and income from
between the two countries.
personal services. The availability of specific
• Eliminating double taxation.
exemptions will depend on the terms of the
• Exchanging information between tax
individual DTT.
authorities.
The UAE Ministry is working on expanding
The double tax treaties with the UAE
its Double Taxation Agreements (DTA) and
generally follow the model provided by the
Bilateral Investments Treaties (BIT) network.
Organisation for Economic Cooperation and
The MOF concluded 193 DTAs and BITs, with
Development (OECD).
the aim of eliminating double taxation,
additional taxes and indirect taxes and
The DTTs that the UAE has signed cover
fiscal evasion.
various income types, including dividends,
This promotes the UAE’s development goals
royalties, interests, revenues from
and diversifies its sources of national income
immovable property, and personal services.
They also offer ways to eliminate double
taxation, reduced tax rates, tax reductions
for investments, and exemptions for certain
types of taxes.

For foreign companies, taxes paid in UAE
21