Interplay between Double Taxation Treaties
1. Introduction
- Most Double Taxation Treaties (DTTs) reduce or eliminate the amount of tax required to be withheld with respect to tax resident of a treaty country.
- This article examines the significant role that DTTs play in the realm of WHT
2. WHT provisions in the UAE
- Applies on specified UAE sourced income of non-residents.
- No WHT on payments to residents.
- WHT rate - 0% or a higher rate (to be prescribed).
- WHT paid outside the UAE eligible for tax credit.
- DTT will prevail over UAE domestic tax law.
3. Key Impacted Transaction
- Royalties
- Dividend distribution
- Income from real estate investments
4. Key aspects of DTTs
- Existence of DTT with the UAE
- Determination of residential status under DTT
- Elimination or reduction of WHT rates
- Preventing double taxation
- Tax credit or exemption
5. UAE Sourced Income
- Services
- Interest payments
- Capital gain
6. Key Takeaways
- Certain UAE-sourced income earned by non-residents will be liable for WHT in the UAE.
- The current WHT rate is 0%.
- There are no compliance obligations in respect of WHT as the WHT rate is 0%.
