Understanding the Double Taxation Avoidance Agreement (DTAA) in the UAE

Double Taxation Avoidance Agreement (DTAA) in the UAE – A Comprehensive Guide

The United Arab Emirates (UAE) has become a global business hub, attracting investors, entrepreneurs, and professionals from around the world. However, one common concern for international taxpayers is the risk of being taxed twice —once in their home country and again in the UAE.

To address this, the UAE has signed Double Taxation Avoidance Agreements (DTAAs) with over 130 countries worldwide. These agreements ensure that income earned in the UAE is not taxed twice and promotes cross-border trade and investment.

What Is a Double Taxation Avoidance Agreement (DTAA)?

A Double Taxation Avoidance Agreement (DTAA) is a bilateral treaty between two countries aimed at preventing double taxation of income earned across borders.

These agreements define:

Which country has the right to tax specific types of income
The applicable tax rates on various income streams (e.g., salary, dividends, interest, royalties)
Procedures for claiming tax credits or exemptions in the taxpayer’s home country

Dedicated to promoting fair and transparent international taxation, DTAAs are essential tools for expatriates, freelancers, and multinational companies.

Why Does the UAE Need DTAAs?

Despite having no personal income tax and historically no corporate income tax (until 2023), the UAE still plays a crucial role in international taxation due to its status as a global business center.

Here's why DTAAs matter in the UAE:

Avoids Double Taxation : Ensures you're not taxed twice on the same income.
Reduces Withholding Taxes : Lowers the rate of tax withheld at source on payments like dividends, interest, and royalties.
Encourages Foreign Investment : Makes the UAE more attractive to international businesses and professionals.
Provides Legal Certainty : Clarifies tax obligations and rights under international law.
Supports Global Compliance : Helps meet reporting requirements under international frameworks like OECD CRS (Common Reporting Standard) .

UAE’s DTAA Network – Key Partners

The UAE has signed DTAAs with more than 130 countries , including:

United Kingdom
India
United States (Tax Information Exchange Agreement)
Canada
Germany
France
China
Russia
Australia
South Africa

Each agreement may vary slightly depending on the economic relationship and mutual negotiations between the UAE and the partner country.

You can check the full list of UAE DTAAs on the website of the Federal Tax Authority (FTA) .

Types of Income Covered Under UAE DTAAs

Most UAE DTAAs cover the following categories of income:

Income Type	Covered Under DTAA
Employment Income	Yes
Business Profits	Yes
Dividends	Yes
Interest	Yes
Royalties	Yes
Capital Gains	Yes (in most cases)
Pensions	Yes
Director’s Fees	Yes
Real Estate Income	Yes

How to Claim Benefits Under a DTAA in the UAE

If you’re eligible under a DTAA, here’s how to claim tax relief:

Step 1: Confirm Eligibility

Ensure that:

You are a resident of a country that has a DTAA with the UAE.
Your income falls under a category covered by the agreement.

Step 2: Obtain Tax Residency Certificate (TRC)

From your home country’s tax authority. This certificate proves your tax residency and is required to claim DTAA benefits in the UAE.

Step 3: Submit Required Documents

Depending on the type of income, submit:

TRC
Passport copy
Proof of residence
Employment or service contract
Bank statements or income proof

Step 4: Apply for DTAA Relief

Submit the documents to the UAE Federal Tax Authority (FTA) or through your employer if you're an employee.

Step 5: Benefit From Lower Tax Rates or Exemption

Once approved, you’ll either pay reduced withholding tax or be exempt from UAE tax , depending on the terms of the agreement.

Example: DTAA Between UAE and India

An Indian national working in Dubai earns a salary. Under the UAE-India DTAA:

Salary income is generally taxed only in the country of residence (India).
The UAE cannot impose income tax unless services are rendered in the UAE.
If UAE tax is paid, it can be credited against the Indian tax liability.

This ensures the individual pays tax once—either in India or the UAE—but not both.

Key Provisions Commonly Found in UAE DTAAs

Provision	Explanation
Permanent Establishment (PE)	Defines when a foreign company is liable to tax in the UAE based on physical presence.
Withholding Tax Rates	Specifies reduced tax rates on dividends, interest, and royalties.
Exchange of Information	Allows tax authorities to share financial data for compliance purposes.
Mutual Agreement Procedure (MAP)	Offers a dispute resolution mechanism for cross-border tax issues.
Non-Discrimination Clause	Prevents unfair treatment of taxpayers based on nationality.

DTAA vs. UAE Corporate Tax Law (Post-2023)

With the introduction of federal corporate tax (CT) in the UAE starting June 2023, DTAAs have become even more relevant for multinational corporations.

Corporate taxpayers should consider DTAAs when:

Structuring regional headquarters
Planning intercompany transactions
Managing cross-border investments
Applying for tax credits in their home country

It's important to consult a tax advisor to optimize your structure and benefit from DTAA provisions.

Conclusion

The UAE’s extensive Double Taxation Avoidance Agreement (DTAA) network plays a vital role in supporting international trade, investment, and talent mobility. Whether you're an expatriate, freelancer, or business owner, understanding and leveraging DTAAs can help you minimize tax liabilities , avoid double taxation , and ensure compliance with both UAE and international tax laws.