If you are a business or an individual conducting operations or earning income in the United Kingdom (UK) and the United Arab Emirates (UAE), you may be wondering about the existence of a double taxation agreement between the two countries. Double taxation refers to the situation where the same income is taxed twice, first in the country where it was earned and second in the country of residence.
The good news is that there is a double taxation agreement in place between the UK and the UAE. The agreement was signed in Abu Dhabi on 12 April 2016 and came into force on 1 January 2017.
The agreement aims to eliminate double taxation on income and capital gains and to prevent tax evasion by establishing clear guidelines on the taxation of cross-border income. The agreement covers:
1. Income tax
The agreement clarifies the rules on which country has the right to tax different types of income, such as business profits, dividends, interest, and royalties. It also provides relief from double taxation by allowing taxpayers to claim a credit for taxes paid in the other country.
2. Capital gains tax
The agreement provides rules on the taxation of gains from the sale of assets, such as shares and real estate. It generally allows the country of residence to tax capital gains, while the country where the asset is located can tax gains from real estate.
3. Other taxes
The agreement also covers other taxes, such as inheritance and gift taxes, and provides relief from double taxation on these taxes.
It is important to note that the double taxation agreement between the UK and the UAE only applies to taxes covered by the agreement. Other taxes, such as value-added tax (VAT), are not covered by the agreement and are subject to the domestic tax laws of each country.
In conclusion, the existence of a double taxation agreement between the UK and the UAE is good news for businesses and individuals conducting operations or earning income in both countries. The agreement provides clarity on the taxation of cross-border income and aims to prevent tax evasion. However, it is important to seek professional advice to ensure that you are complying with the tax laws of both countries and taking advantage of any available tax benefits.