Taxes are an inevitable part of everyone’s life. Taxes are paid usually on the income source of an entity but many a time what happens is that income taxes are required to be paid by an entity twice on the same source of income. This usually occurs in international trades of investments made in two different countries.
To avoid such situations where taxes are paid twice for the same source of income, many countries have Double Taxation Avoidance Agreements with different countries. These treaties are for the benefit of the expatriates and residents who are living in the country and making an income. This takes into account the duration for which the person is outside his home country as well as the duration for which the income is generated.
Impact of Double Taxation Avoidance Agreement on the Expatriates in UAE
The United Arab Emirates have signed Double Taxation Avoidance Agreements with more than 117 countries around the world so that the expatriates living in the country face no problem. The Double Taxation Avoidance Agreements provide various benefits to the people of the United Arab Emirates such as the following:
- Double Taxation Avoidance Agreement provides the rights of taxation to the expatriates and also provides for better tax management.
- The Double Taxation Avoidance Agreement make sure that all the businesses in the country are not taxed more than once.
- The Double Taxation Avoidance Agreements allow for easy exchange of information as well as ensures each other’s co-operation in order to combat tax evasion
- The double Taxation Avoidance Agreement aims to provide a globalized network that assists to resolve tax-related issues in between two countries.
These are some of the benefits of the Double Taxation Avoidance Agreement to both the countries as well as the expatriate entities.
Prerequisites to be Fulfilled
There are certain prerequisites that need to be fulfilled for the Double Taxation Avoidance Agreement to work. These are:
- First and foremost, in order for the Double Taxation Avoidance Agreement to be applicable, the entity must have a second residence which should be outside the United Arab Emirates.
- This individual should be living in the United Arab Emirates for a period of 183 days. However, this need not be a continued stay in the country.
- The companies which have an international shareholding are an exception to the taxes levied for the jurisdiction of shareholders.
- Any company which has been in the United Arab Emirates for more than a year can take advantage of the Double Taxation Avoidance Agreements by applying for a Tax Residence Certificate.
These are the four prerequisites that need to be fulfilled by a company in order to take complete advantage of the Double Taxation Avoidance Agreements.
Multilateral Agreements of United Arab Emirates
The United Arab Emirates has signed a Multilateral Instrument which allows the country to amend the current treaties as per the prevailing requirements. This Multilateral Agreement decision needs to comply with the global framework of double taxation avoidance and the regulations of the Base Profit Erosion Shifting (also known as BEPS).
One of the other sept taken by the government of the United Arab Emirates is the introduction of Economic Substance Regulation (ESR) in the country which will help the business in the avoidance of double taxation and will help the business in submitting the correct taxes.
To know more about double taxation or how it can affect your company feel free to contact the expert professionals at JAXA Chartered Accountants. JAXA is an ISO certified Chartered Accounting firm and will ensure that the business does not have to face any problem in the future.
JAXA also provides services related to Economic Substance Regulation and many other financial services such as Accounting Services, Auditing Services, Vat and Tax related services and many more services. To know more about these services, feel free to Contact Us. We will be glad to assist you in your business journey.