Interplay between Double Taxation Treaties and Withholding Taxes

Interplay between Double Taxation Treaties

Interplay between Double Taxation Treaties and Withholding Taxes

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%.

Contact Us

Markus Susilo
Markus Susilo
Partner- Payroll and Indirect Tax
Alessandro Valente
Alessandro Valente
Director - International Tax Service & Transfer Pricing