Benefiting from Dubai’s Double Tax Treaties

Summary: As Dubai is a 'no tax' emirate its double taxation treaties are actually designed to make it an even more attractive destination and prospect for those individuals and companies who originate from countries with aggressive taxation policies.

As Dubai is a ‘no tax’ emirate its double taxation treaties are actually designed to make it an even more attractive destination and prospect for those individuals and companies who originate from countries with aggressive taxation policies.

The treaties are in place to further reduce any potential taxation burdens being levied against foreign companies and citizens operating in the UAE and Dubai who remit their profits abroad.

Double taxation agreements exist between the UAE and Algeria, China, Egypt, Finland, France, Germany, India, Indonesia, Italy, Jordan, Kuwait, Malaysia, Malta, Pakistan, Poland, Romania, Singapore, South Korea, Sudan, Syria, Turkey and Yemen.

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Setting Up in Dubai: Business Investor’s Guide

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Benefiting from Dubai’s Double Tax Treaties - Continued

Each treaty agrees that the profits a company earns from shares, dividends, interest, royalties or fees will only be taxable in the ‘contracting state’ in which the profit has been earned - and there is no restriction stating that such income must be taxed at any give level to qualify for this benefit.

This means that such profits earned in Dubai may not be taxed at all as corporate income tax is not levied in the UAE!

Simply put, dividend income paid by a company in Dubai to a company which has a double taxation treaty with the UAE may not necessarily be taxable in the hands of the foreign parent corporation even though it has not been taxed in Dubai either as it will be considered to have been taxed at 0% in Dubai.

But before you all get too excited, unfortunately not all international or foreign companies in the UAE are so fortunate!

Some of the more taxation hungry and repressive nations globally have anti-avoidance legislation in place which puts paid to these benefits.  Such legislation can either set minimum taxation levels for a company’s profits, or else the legislation can set out lists of low-taxation countries which don’t actually qualify under their tax treaties.

This means that it is important for foreign corporations and international businesses interested in establishing themselves in Dubai to study and understand the tax legislation of each of Dubai’s treaty partners as well as getting to grips with the exact text of the UAE’s double taxation treaties before accepting anything about the potential tax treatment of income flows that originate in Dubai.

Dubai and the UAE are doing everything they can to attract foreign investment, but unfortunately many other countries globally are doing everything they can to restrict freedom and stop free trade in an attempt to hold on to as much taxation as they can!

But don’t be put off!  There are a lot of ways to make the most of the offshore opportunities available in Dubai and other tax havens around the world, it is simply important to get the right information and advice - relevant to your personal circumstances and requirements. 

We offer a free information and advice service.

If you have need for specific information or would like us to put you in touch with specialist offshore taxation and financial advisers in your location just let us know exactly how we can help you.

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