Double Taxation Agreement With the UAE: How Does It Work and What Are Its Tax Benefits?

To prevent double taxation of the same income and clarify which jurisdiction holds the taxing rights, the UAE has established comprehensive double taxation agreements (DTAs) with over 140 countries.

These treaties are particularly relevant for internationally mobile individuals and business owners who operate across borders. However, accessing the benefits of a DTA requires careful attention to the legal definitions of tax residency, the nature of income earned, and the procedural requirements for claiming relief.

In this guide, we explain how double taxation agreements with the UAE function, the types of income they cover, and how your residency status impacts eligibility. We also outline the relief mechanisms available – such as tax credits and exemptions – and the steps required to obtain a Tax Residency Certificate and apply for treaty-based relief.

What Is a Double Tax Treaty With the UAE?

A double tax treaty, also known as the double taxation avoidance agreement with the UAE or a DTA, is a treaty between the UAE and another country signed as a preventive measure to protect you from being taxed on the same type of income by both jurisdictions.

Since the UAE doesn’t currently impose tax on most types of income, the DTA’s primary purpose is to determine which contracting jurisdiction has the right to tax income from specific sources. However, if the UAE decides to levy taxes on personal income and gains in the future, the provisions of these DTAs will be used to prevent double taxation.

A DTA with the UAE also aims to provide the following benefits:

• It attracts foreign investors and diversifies income sources in the UAE by reducing taxes, which supports the economic development of the country.
• It facilitates cross-border investments and trading by removing tax barriers between countries.
• It promotes stronger economic ties with international trade partners by supporting the exchange of goods and services.
• It addresses tax issues and global changes in economic and financial systems to ensure the treaties remain relevant.

Which Taxes Can You Exclude Using a Double Taxation Avoidance Agreement With the UAE?

The UAE operates under a zero-tax regime, meaning it does not impose taxes on personal income, capital gains, rent, or inheritance. Consequently, you can’t use a double tax treaty to offset these taxes, as you only have to pay them in a country outside of the UAE in which you’re a tax resident.

However, the UAE does impose corporate tax under certain conditions, and its DTAs typically include clauses addressing the treatment of property income. As a result, the primary objective of tax treaties with the UAE is to prevent double taxation of business income.

How Does a Double Tax Treaty With the UAE Impact the Taxation of Business Income?

Business owners in the UAE are liable for a 5 % value-added tax (VAT) if their taxable supplies exceed AED 375,000 per year. They must also pay corporate tax under the UAE Corporate Tax Law if their business meets any of the following criteria:

• It earns taxable income exceeding AED 375,000 per year: The business is subject to a corporate tax rate of 9 % on income above this threshold, while income up to AED 375,000 is exempt.
• It operates in the oil and gas sector: These activities are taxed under separate emirate-level tax decrees at progressive rates of up to 55 %.
• It is a branch of a foreign bank: A flat corporate tax rate of 20 % applies.

As of 1 January 2025, the UAE also imposes a 15 % Domestic Minimum Top-Up Tax on multinational groups with annual global revenues exceeding €750 million. This applies under the OECD’s Pillar Two of the BEPS 2.0 framework and ensures a minimum level of global taxation.

If a juridical person (a legal entity) is a resident in the UAE but maintains a Permanent Establishment (PE) abroad, it may use the Foreign PE election to exclude the foreign income from corporate tax in the UAE.

For example, if a company earns $500,000 in the UAE and $1 million abroad, both amounts would normally be subject to UAE corporate tax. However, the foreign country may also tax the $1 million. The Foreign PE election allows exclusion of the foreign income from the UAE tax base, thereby avoiding double taxation.

A Foreign PE is typically an office, a factory, an overseas branch, or a dependent agent who conducts business activity on behalf of the UAE resident.

A Permanent Establishment includes both a Fixed PE – such as a physical place of business through which the business of the enterprise is wholly or partly carried on- and a Dependent Agent PE, where a person habitually concludes contracts or plays a principal role in concluding contracts on behalf of the UAE entity.

How Does a Double Taxation Avoidance Agreement With the UAE Work?

You can benefit from a double tax treaty with the UAE by claiming tax relief through the following mechanisms:

1. Tax credit and tax exemption
2. Withholding tax credit

Tax Credit and Tax Exemption

A double tax treaty with the UAE enables you to reduce corporate tax by claiming a tax credit, which allows taxes paid in one country to be credited against your tax liability in another jurisdiction. Alternatively, you may be eligible for a tax exemption, which allows you to exclude business income from tax in one jurisdiction or reduce the applicable tax rates.

The type of tax relief available will depend on the agreement between the UAE and the relevant foreign country. Generally, the tax credit method is prescribed when both countries want to maintain taxing rights on certain income, while a tax exemption is allowed when a country aims to encourage specific types of investments by making them more tax-efficient.

Withholding Tax Credit

Withholding tax (WHT) is a tax deducted at source from earnings such as income, interest, dividends, and royalties. Its purpose is to preserve tax revenue in cross-border transactions. The UAE does not impose domestic withholding tax on dividends, interest, or royalties, meaning payments made from the UAE are not subject to WHT at source under current legislation.

However, relief from foreign withholding tax may be available under a double taxation agreement (DTA). If a UAE-resident company earns income from a country that deducts WHT at source, it may be able to claim a withholding tax credit to reduce its UAE corporate tax liability. The credit amount is limited to the lower of:

• The WHT deducted under the foreign jurisdiction’s tax law, or
• The corporate tax due on the same income in the UAE.

If the foreign WHT exceeds this limit, any unused credit may be claimed as a refund from the UAE Federal Tax Authority (FTA), subject to eligibility and supporting documentation.

For example, if a UAE company transfers funds to a foreign company, the payment is recorded as a business expense.

Since the UAE does not apply WHT at the source, the foreign company will report the revenue and pay tax in its jurisdiction, but the UAE company will have no WHT to claim.

In contrast, if the UAE company earns income abroad and WHT is deducted at source in that foreign country, the UAE company can use a DTA to offset that amount against its corporate tax liability in the UAE.

How Does Your Residency Impact a Double Taxation Treaty With the UAE?

Your tax residency has a significant impact on how the UAE tax treaty applies because it determines which country has the primary right to tax your income. In most cases, you’re liable for tax on your worldwide income and gains by a jurisdiction in which you’re a tax resident. Meanwhile, non-residents are only subject to tax on income sourced within the taxing jurisdiction.

While the UAE imposes no tax on most types of income regardless of residency, its tax residents, including both individuals and legal entities, are liable for corporate tax if they fulfil certain requirements.

Non-resident individuals and companies in the UAE are only subject to corporate tax on eligible income earned within the UAE or resulting from the following:

1. A permanent establishment in the UAE: a physical location that represents a fixed place of business
2. A nexus in the UAE: a business with economic ties in the UAE

If you’re a non-resident who pays corporate tax in the UAE, and your country of residence imposes a tax on the same income, you can use a DTA to claim a tax credit or an exclusion, depending on the terms of the treaty.

If a dispute arises regarding tax residency or taxing rights under a DTA, you may initiate the Mutual Agreement Procedure (MAP).

As of June 2025, the UAE Ministry of Finance has issued guidance allowing MAP submissions through the FTA. This process enables resolution between tax authorities.

Who Is Considered a Tax Resident in the UAE?

You’re a tax resident in the UAE if you fulfil one of the following conditions:

Companies are considered UAE tax residents if they are incorporated and effectively managed in the UAE.

If you meet any of these criteria and aren’t a resident of another country, the UAE typically has the primary taxation rights on specific types of income under the double tax treaty.

If you qualify as a tax resident in the UAE and another country, the tiebreaker test is used to determine which country holds the primary taxing rights under a DTA. The test considers these factors:

1. Permanent home: You’ll be considered a resident in a country where your permanent home is located. If it’s in both countries, the next criterion is assessed.
2. Centre of vital interests: You’ll be a tax resident in a country in which you have primary personal and economic interests.
3. Habitual abode: If residency is still unresolved, your residency will be in a country in which you spend more time.
4. Nationality: If none of the criteria above provide a resolution, your tax residency will be determined based on your nationality.

Working with a financial adviser, like those available at Titan Wealth International, can provide professional guidance on determining your tax residency and efficiently utilising double tax treaties.

Which Countries Are on the UAE Double Tax Treaties List?

The UAE signed a double tax treaty with more than 130 countries. Recent additions include new treaties with Bahrain (effective 1 January 2026), Kuwait (effective in 2025), and Qatar (effective mid‑2025).

It first entered into a DTA with France in 1989, and then established treaties with major economic powers like the UK, China, and Singapore between 2000 and 2010.

The UAE also has a DTA with the following countries:

• Austria
• Malta
• Canada
• Poland
• Spain
• Switzerland

Some leading commercial centres, like the United States, have yet to sign a double taxation agreement with the UAE. However, the absence of a tax treaty does not prevent US expats from claiming tax relief under US domestic tax law.

US taxpayers may be eligible for a Foreign Tax Credit (FTC) under Internal Revenue Code Section 901, which allows them to offset taxes paid in the UAE against their US tax liability. This credit is claimed using IRS Form 1116 and applies only to income taxes paid, not to VAT or other indirect taxes.

Corporate tax paid in the UAE generally does not qualify for the FTC unless the UAE entity is treated as a pass-through entity for US tax purposes, in which case the income is allocated directly to the owner and may be considered earned income.

Eligibility for the FTC must be assessed under IRS rules, and expats should consult a qualified tax adviser to ensure compliance with both UAE and US tax obligations.

How To Apply for Tax Relief Under a Double Tax Treaty With the UAE?

To apply for tax relief under a DTA with the UAE, take the following steps:

1. Obtain a tax residency certificate
2. Identify the relevant DTA provisions
3. Provide the necessary documents

Obtain a Tax Residency Certificate

A Tax Residency Certificate (TRC) is an official document issued by the UAE Federal Tax Authority (FTA) confirming that an individual or legal entity qualifies as a tax resident in the UAE. This certificate allows eligible parties to claim benefits under a double taxation agreement (DTA).

Applications must be submitted through the FTA’s EmaraTax platform. Once submitted, the application is typically approved within 4–5 business days, and the certificate is issued within 5–7 business days thereafter.

The applicable fees for 2025 are as follows:

The documentation required depends on your status:

For Individuals:

• Passport copy.
• UAE visa and Emirates ID.
• Immigration report showing days spent in the UAE.
• Proof of UAE address (e.g. utility bill or tenancy contract).
• Recent salary certificate.
• Bank statements covering the past six months.

For Companies:

• Trade licence.
• Memorandum of Association.
• Immigration report of a company representative.
• UAE bank statements for the past six months.
• Audited financial statements and tax declarations.

Only digital copies are required; physical originals do not need to be submitted.

While individuals are currently not taxed on personal income in the UAE, obtaining a TRC is essential for proving UAE tax residency. This can be critical in preventing your home country from taxing your worldwide income and in claiming treaty-based relief.

Identify the Relevant DTA Provisions

Determine the type of tax relief that applies under your specific circumstances and assess which jurisdiction has the primary taxing rights. Although the UAE doesn’t impose tax on most types of income, its DTAs clarify which country has the primary taxing right, preventing foreign income from being taxed unfairly.

Depending on the agreement, you may be eligible for a tax credit or a tax exemption on business income subject to corporate tax in both contracting countries.

Most UAE DTAs now incorporate provisions from the OECD’s Multilateral Instrument (MLI), including the Principal Purpose Test (PPT).

This anti-avoidance rule denies treaty benefits where one of the principal purposes of a transaction or arrangement is to obtain such benefits, unless it is consistent with the object and purpose of the treaty.

Provide the Necessary Documents

Gather and provide the necessary documentation to claim tax relief (particularly on business income) under a double tax treaty. This typically includes written evidence that you paid the taxes you want to deduct (if you qualify for a tax credit), as well as a tax residency certificate obtained from the relevant tax authority.

A professional financial adviser can provide assistance in navigating the complexities of leveraging a double taxation agreement with the UAE, ensuring compliance with international tax laws.