What Is Double Taxation Avoidance Agreement (DTAA)?

Running a business across borders is exciting, but paying tax on the same income in two different countries? That can be a costly and frustrating issue for businesses and professionals alike. This is where Double Taxation Avoidance Agreements (DTAA) come in — and the UAE has taken major steps to protect its residents and business community through these agreements.

To support global trade, attract investors, and build a tax-friendly environment, the UAE has signed DTAA treaties with many countries around the world. These agreements help ensure that income is taxed only once, either in the UAE or the foreign country, not both.

How Does DTAA Work?

Double taxation happens when the same income is taxed by two different countries — typically where the income is earned (source country) and where the person or business resides (residence country). This can lead to unnecessary tax burdens and limit international growth.

Through DTAA, countries agree on rules to:

• Share tax information securely
• Decide which country has the right to tax certain incomes
• Prevent tax evasion and over-taxation

If you or your business is based in the UAE, DTAA ensures that your income isn’t unfairly taxed in other countries where you may have clients, contracts, or investments.

How DTAA Boosts Business Growth in the UAE

The UAE is already known for its low tax environment — with no personal income tax and a minimal corporate tax structure. When combined with DTAA benefits, this creates a strong case for investors and international businesses to set up in the country.

Here’s how DTAA strengthens UAE’s business appeal:

• No double taxationmeans you keep more of your earnings
• Smoother global trade and investment flows
• Increased confidenceamong international partners and stakeholders
• Enhanced compliancewith international tax rules

Whether you’re a startup, an SME, or a multinational business, DTAA adds an extra layer of financial advantage.

 Objectives of DTAs

The UAE’s DTAs are designed to:

• Eliminate or reduce double taxation for businesses and individuals.
• Encourage foreign direct investment by making taxation predictable.
• Ensure fair tax treatment and promote economic partnerships.
• Prevent tax evasion and ensure transparency.
• Keep up with global developments like digital taxation and transfer pricing.

Benefits for Stakeholders

For Businesses:

• Reduced taxes on income such as royalties, interest, and dividends.
• Smooth cross-border operations and profit repatriation.
• Clear legal protections for investors from unfair treatment.

For Investors:

• Assurances against arbitrary taxation or expropriation.
• Legal recourse through international arbitration.
• Stronger confidence in UAE as a long-term investment destination.

Al Khazraji Auditing supports your company in understanding your eligible benefits under each DTA and ensures proper documentation and compliance to help you claim tax relief effectively.

How to Avail DTAA Benefits in the UAE

To enjoy the benefits under a DTAA, you must first prove your tax residency in the UAE. This is done by obtaining a Tax Residency Certificate (TRC) from the UAE Ministry of Finance.

✅ Basic Requirements:

For Individuals:

• Emirates ID
• Passport and UAE residence visa copies
• Valid tenancy contract
• Utility bills
• UAE bank statements

For Businesses:

• Valid trade license
• Audited financial statements
• Business bank statements
• Evidence of active operations in the UAE
• Proof of economic activity (invoices, contracts, office rental, etc.)

Once you’ve secured your TRC, you’ll need to review the DTAA provisions between the UAE and the foreign country from which your income is earned. Then, submit your TRC and other supporting documents to the foreign tax authority to claim tax relief.

How NRIs Can Benefit DTAA

With globalization, many individuals and businesses earn income across borders. However, this can lead to a major problem—getting taxed twice on the same income (once in India and again in the foreign country). To solve this, countries sign Double Taxation Avoidance Agreements (DTAA). These treaties help NRIs (Non-Resident Indians) and businesses avoid paying excessive taxes while encouraging international trade and investments.

. Benefits of DTAA for NRIs and Businesses

• No Double Taxation:Pay tax only in one country, not both.
• Lower Tax Burden:Reduced tax rates on income like dividends, interest, and capital gains.
• Business Growth:Encourages global business operations without heavy tax penalties.
• Less Tax Evasion:Clear rules discourage illegal tax practices.

 DTAA Tax Rates by Country (Examples)

Different countries have different tax rates under DTAA. Here are some common ones:

 How to Determine If DTAA Applies

• Your income is taxed in both India and another country.
• You or your business is a non-residentin one country.
• Check if your country has a DTAA with India.

7. How to Apply DTAA
8. Identify Income Type(salary, rent, dividends, etc.).
9. Check DTAA Rulesfor your country.
10. Choose the Better Option– Pay tax as per Indian law or DTAA (whichever saves more).
11. If You Have a Permanent Business Setup (PE)– Normal tax rules apply.
12. Methods to Claim DTAA Benefits

There are three ways to avoid double taxation:

1. Deduction Method– Subtract foreign tax paid from taxable income.
2. Exemption Method– Income taxed only in one country.
3. Tax Credit Method– Foreign tax paid is adjusted against Indian tax.

Example:

• You earn ₹20 lakhsas dividends in the US (25% tax withheld).
• Under DTAA, you pay only 15% in the USand claim credit in India for the same.

9. How to Claim DTAA Benefits in India

Step 1: Get a Tax Residency Certificate (TRC) from the UAE Ministry of Finance.

• For Individuals:Emirates ID, passport, visa, bank statements, utility bills.
• For Businesses:Trade license, audited financials, proof of UAE operations.

Step 2: Check DTAA rules for your income type.
Step 3: Submit TRC to the foreign tax authority.
Step 4: Claim tax benefits in your return (credit/exemption).

10. What Type of Income Is Covered by DTAA?

• Salary from work in India
• Rental income from property
• Capital gains (stocks, real estate)
• Interest from bank deposits
• Fees for services in India

11. Section 89A: DTAA & Retirement Income

• Introduced in 2021to help NRIs with foreign retirement funds.
• If your retirement account is in a notified country, you get tax relief.

12. Key Legal Principles of DTAA

DTAA Tax Rates (Examples)

(Rates vary based on income type and treaty terms.)

How to Claim DTAA Benefits?

Step 1: Get a Tax Residency Certificate (TRC) from UAE

• For Individuals:Passport, Emirates ID, visa, bank statements, utility bills.
• For Businesses:Trade license, audited financials, proof of UAE operations.

Step 2: Check DTAA Rules for Your Income

• Salaries, rent, dividends, capital gains – each has different tax rules under DTAA.

Step 3: Submit Documents & Claim Relief

• File tax returns in both countries(if needed).
• Use tax credit/exemptionto avoid double taxation.

3 Ways to Avoid Double Taxation

1️⃣ Exemption Method – Income taxed in only one country.
2️⃣ Tax Credit Method – Pay tax abroad, get credit in home country.
3️⃣ Deduction Method – Reduce taxable income by foreign taxes paid.

Example:

• Dividend Income (₹20 Lakhs)in the US (25% tax withheld).
• Under India-US DTAA, only 15% tax appliesin the US.
• Claim creditin India for taxes paid in the US.

Who Needs DTAA?

✔ NRIs earning income in India (rent, dividends, capital gains).
✔ Expats in UAE with foreign income.
✔ Businesses operating across India & UAE.

Why Professional Support Matters

Understanding DTAA can be complicated, especially when dealing with different tax rules and requirements from various countries. That’s where Al Khazraji Auditing LLC comes in.

Our experienced team helps businesses:

• Determine DTAA eligibility
• Apply for a TRC correctly and efficiently
• Navigate the legal details of each DTAA treaty
• Ensure proper documentation for submission
• Claim the right tax benefits with no delays

We serve companies across the UAE who want to stay tax compliant and reduce international tax exposure.

DTAA helps NRIs and businesses save taxes legally while promoting global investments. However, rules can be complex—getting professional tax advice ensures you maximize benefits and stay compliant.

14. How Al Khazraji Auditing LLC Can Help

At Al Khazraji Auditing LLC, we specialize in:
✔ Applying for TRC (Tax Residency Certificate) smoothly.
✔ Understanding DTAA clauses to reduce your tax burden.
✔ Ensuring compliance with UAE and international tax laws.
✔ Personalized advisory for NRIs, expats, and businesses in the UAE.

Why Choose Us?

• Experienced tax consultantsfamiliar with UAE-India DTAA.
• End-to-end support– from documentation to tax filing.

Exchange of Tax Information Framework

The UAE joined the Global Forum on Transparency and Exchange of Information in 2010 to promote open data sharing between countries for tax purposes.

This commitment includes:

• Ensuring accurate and accessible tax data is available.
• Setting up systems to securely exchange this data between countries.
• Avoiding tax evasion and money laundering.

Countries are ranked based on their transparency, and the UAE currently holds a White List status, meaning it complies fully with international standards.

At Al Khazraji Auditing LLC, we help businesses stay updated and prepared for audits or document requests from foreign tax authorities under these agreements.

Legal Framework Supporting Exchange

The UAE has implemented a solid legal structure that allows it to collect and share tax-related information. This includes:

• Avoidance of Double Taxation Agreements
• Exchange of Tax Information Treaties
• Mutual Administrative Assistance Treaties
• Cabinet Resolution No. 17 (2012)— grants MoF power to obtain tax-related data from businesses across the UAE, including free zones.

Our consultants at Al Khazraji Auditing ensure your company’s records are maintained correctly and meet the required standards for any legal or compliance checks.

 UAE’s BITs for Investment Protection

To protect international investments, the UAE has signed over 106 Bilateral Investment Treaties (BITs). These treaties offer investors:

• Protection from non-commercial risks like expropriation.
• Free movement of capital and returns.
• National and most-favored-nation treatment.
• Fair compensation and international dispute resolution options.

Al Khazraji Auditing provides advisory services to help you structure your international investments within these frameworks, reducing exposure to legal and tax risks.

Training & Knowledge Sharing

As part of its global leadership, the UAE also acts as a regional training center for international tax standards. The country regularly partners with the OECD to host workshops for businesses, government agencies, and tax professionals.

 How Al Khazraji Auditing Can Help?

We simplify DTAA compliance for NRIs & businesses in the UAE:

🔹 TRC Application Support – Fast & hassle-free.
🔹 DTAA Tax Planning – Maximize savings legally.
🔹 Audit & Accounting – Ensure compliance with UAE/India tax laws.
🔹 Personalized Advisory – Tailored solutions for your tax needs.

📞 Need help with DTAA? Contact us today for expert guidance!

DTAA is a powerful tool for NRIs & global businesses to cut tax costs and stay compliant. However, rules can be complex—professional advice ensures you claim benefits correctly without errors.

 The UAE’s strong network of Double Taxation Agreements and transparent tax exchange systems make it an ideal destination for businesses aiming for global expansion.

At Al Khazraji Auditing LLC, we simplify complex international tax laws for you. Whether you’re setting up a new company, dealing with foreign investments, or claiming tax treaty benefits, our expert team is here to assist. 🚀 Let Al Khazraji Auditing handle your tax & audit needs—so you can focus on growing your business!