Dubai has a tempting taxation regime and foreign financiers who choose to open companies in Dubai also profit from the double tax treaties signed between UAE and other states, with the purpose of avoiding double taxation for enterprises that have working offices in Dubai and overseas. As a foreign investor, it is useful to know if there are any double tax avoidance treaties between UAE and your state. Our accountants in Dubai can give you full and proper information about the double taxation treaties signed by the UAE.
Table of Contents
Double taxation treaties in Dubai and the UAE
The first double taxation avoidance treaty was signed between the United Arab Emirates and France. Since then, the Emirates have signed 60 double taxation treaties with states around the world. The list of double taxation agreements contains: Armenia, Algeria, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Canada Bulgaria, China, the Czech Republic, Egypt, Cyprus Finland, France, Georgia, Germany, Greece, Italy, India, Ireland, Kazakhstan, Indonesia, Korea, Lebanon, Luxembourg, Malaysia, Malta, Mauritius, Mongolia, Morocco, Mozambique, the Netherlands, New Zealand, Philippines, Pakistan, Portugal, Poland, Romania, Seychelles, Singapore, Spain, Sri Lanka, Sudan, Syria, Thailand, Turkey, Tajikistan, Tunisia, New Zealand, Uzbekistan, Ukraine, Vietnam, Venezuela, and Yemen.
The content of Dubai’s double tax treaties
Most of Dubai’s treaties for the avoidance of double taxation contain requirements about the following issues:
- the taxation of income of individuals and enterprises, as most treaties cover the revenue taxes concerning the contracting countries;
- reduced tax rates for specific types of revenues;
- procedures of removal of double taxation which are frequently dissimilar for each nation;
- exemptions for the taxes imposed on air transportation and shipping;
- tax cutbacks for investments made by the governments of the contracting countries.
What are the incomes covered by the double tax treaties?
Companies from the above-mentioned countries are protected by the double taxation treaties signed by UAE that comprise the following provisions:
- There are reduced tax rates imposed for incomes like capital gains.
- Profits generated by air transportation and shipping companies are protected by DTTs.
- He investments made by the governments of the contracting states can benefit from tax reductions.
- Personal services and the revenues involved benefit from the same protection offered by these treaties.
Having an accounting firm that takes care of these matters in the company will ease the financial operations, particularly when it comes to reporting and declarations. This is where our accountants in Dubai can provide support.
We propose the services of our audit firm in Dubai if you want to know the financial situation of the company you own. The audit is an obligation given by law, so you must align yourself with the requirements in this regard. On the other hand, you will know the opinion of the auditor regarding the financial aspects and the risks that can intervene in the smooth running of a company. Special measures can be implemented with the help of our experts.
How are foreign companies taxed in Dubai?
There are a few tax considerations to be aware of, even if Dubai is known as a tax-free city. For instance, companies established in Dubai are subject to a 9% corporate income tax for profits exceeding AED 375,000 starting with 2023. As for other types of companies, these are exempt from taxation on interests and dividends and from withholding taxes. The double taxation conventions also refer to the companies incorporated in Dubai’s free trade zones meaning that there are no taxes inflicted on the revenues of such companies. However, it is important to pay attention to the new taxes imposed, such as the VAT and the excise tax. The VAT rate of 5% is the standard tax imposed in most of the goods and services meant for sale purposes. VAT exemptions are offered in sectors like transportation, textiles, food, education, and healthcare. Moreover, companies dealing with the import of alcoholic drinks must pay a tax rate of 50%.
For more details about the taxation of foreign companies in Dubai, do not hesitate to talk to our Dubai accountants, especially if you want to set up a company in this city.
Information about UAE – China DTT
The taxation of income and the avoidance of paying the taxes twice are stipulated by the double taxation agreement signed by China and UAE. All revenue sources (salaries, self-employment, pensions, capital gains) are protected by this important treaty. Moreover, the credit method is applicable to Chinese companies with establishments in Dubai. Tax exemptions apply to dividends, royalties, capital gains and other sources of revenues in Dubai.
UAE – Austria DTT
The agreement between UAE and Austria is applicable to the corporate and income taxes of companies with establishments in Dubai. The same treaty mentions the profits resulted from the real estate sector, dividends, royalties, and interests, plus the revenues from the operations of ships and aircraft in Dubai. In the case of wages, salaries, pensions and related incomes, the provisions of the double tax treaties signed by UAE with Austria mention that such revenues are protected from the double taxation. Additional information is provided by our team of accountants in Dubai who can handle the tax requirements for your company.
What are the tax minimization methods in Dubai?
Even though the tax regime is appealing to international investors in Dubai, there are cases where the tax minimization methods are preferred financial tools which can help entrepreneurs coordinate better the investments in the firm. As an example in this sense, a charity can be a suitable option especially because specific tax deductions apply. There are numerous entrepreneurs who use the services of an experienced tax planner who can offer a proper retirement plan and other tax minimization tools like making investments in mutual funds. Technological equipment, office supplies, gifts, travel expenses can be deductible and also effective tax minimization tools for the firm. An accounting firm in Dubai can provide in-depth assistance and support, proposing the needed tax minimization tools that suit most of the needs in your company. The same team is at your disposal with information about the double taxation agreements signed by UAE with countries worldwide.
Tax advantages in Dubai
Dubai is still considered a tax haven, even if the authorities change the tax structure since 2018. The excise tax and the VAT are two important taxes which recently were implemented in the UAE. If your business is subject to such taxes, the profits of the firm might be covered by the provisions of the double taxation agreements signed by UAE. All the details about these significant conventions can be entirely explained by our team of accountants in Dubai who are at your disposal at any time.
All double taxation agreements are made so that Dubai has a superior global relation with its economic associates.
Extra info about Dubai’s double taxation treaties
Foreign investors should know that the levies paid in Dubai can be solicited in the home state of the foreign business as a credit in contrast to the tax paid in the UAE, depending on the supplies of the double taxation treaty and the applicable rules in the native republic.
Our team of accounting specialists in Dubai can offer proper information about every double taxation treaties or other taxes, so please feel free to contact us.