How Double Taxation Treaties Can Benefit Companies in the UAE

Running a business across borders sounds exciting. But there’s one problem that can hurt a company’s profits badly: double taxation. This happens when the same income gets taxed in two countries; once in the country where the income is earned and again in the country where the company is based.

This is where double taxation treaties (DTTs) come in. The UAE has signed more than 135 tax treaties with countries around the world. These agreements are designed to protect companies from paying taxes twice on the same income.

Let Tax Gian, one of the finest tax agents in the UAE, guide you on how these treaties work and how companies in the UAE can benefit. 

Why Does the UAE Attract Global Businesses?

The UAE has made it easier for companies to conduct international business by signing tax treaties with countries such as India, Germany, the UK, France, Canada, and many others. These agreements reduce or even remove tax obligations in foreign countries. They cover income types like:

• Dividends
• Interest
• Royalties
• Capital gains
• Business profits

Companies based in the UAE benefit from lower tax rates abroad and pay little or no tax in the UAE.

Which Companies Can Benefit?

To benefit from these treaties, a company must be a tax resident in the UAE. This means:

• The company is over 1 year old.
• It is registered in mainland UAE, a free zone, or is a holding company.
• It must maintain real business activities, like having an office, staff, and a bank account in the UAE.

Once the company meets the conditions, it can apply for a Tax Residency Certificate (TRC) through the Federal Tax Authority (FTA). This certificate helps foreign tax offices verify your UAE residency and apply the treaty benefits.

Types of Income That Qualify

Here’s how tax treaties reduce foreign taxes on various income types:

• Dividends: If your UAE company earns dividends from a foreign subsidiary, the tax treaty can cut down the withholding tax from, say, 20% to 10%.
• Interest: Earnings from foreign interest payments may qualify for lower taxes under the treaty.
• Royalties: If your company owns intellectual property and earns royalties abroad, you can benefit from reduced rates; sometimes as low as 5%.
• Capital Gains: Some treaties allow you to avoid taxes on capital gains from selling assets in the source country.
• Business Profits: If you don’t have a permanent establishment in the foreign country, your profits may only be taxed in the UAE.

Gain comprehensive knowledge about the matter from tax agents in Dubai.

Real Examples That Show the Value

1. Multinational UAE-Based Company

A company in the UAE with operations in India can receive dividends from its Indian branch. Normally, India charges 20% tax. But with the UAE-India treaty, this drops to 10%. That’s a major saving.

2. Freelancers Working Remotely

A freelancer based in the UAE working for clients in the UK and India may face withholding taxes from those countries. By showing a UAE TRC, the freelancer can ask for lower rates or a complete exemption.

3. Investors with Property Abroad

A UAE resident who owns property in Europe may benefit from treaty rules. They might avoid capital gains taxes when selling the property or get credit for taxes already paid abroad.

How to Claim Treaty Benefits?

Step 1: Apply for a TRC
Submit your application to the FTA with proof of business activity, bank statements, office lease, and audited accounts. Take help from a tax agent in Dubai in this process.

Step 2: Understand the Treaty
Review the relevant tax treaty with the country in which you do business. Know which income types are covered and how much tax you can save.

Step 3: Share Documents with the Foreign Tax Authority
Some countries need extra forms, like India’s Form 10F. Submit them early to avoid automatic tax deductions.

Tips to Maximise Your Savings

• Plan early: Before signing deals, check if treaty benefits apply.
• Stay compliant: Keep records, maintain a UAE presence, and renew your TRC every year.
• Take assistance fromtax agents in the UAE: It’s always a wise choice to consider the expert’s help. He assists you to prepare documents and handle foreign tax authorities properly.

Why Choose Tax Gian?

With the help of our knowledgeable experts, companies operating in the UAE can leverage tax treaties to achieve real financial benefits. Our tax agents help you understand what you should know and act correctly when it comes to taxes around the globe. Get in touch with our experts today and get all of your queries answered.