India-UAE DTAA Agreement: What Is It and Why Does It Matter?
The India-United Arab Emirates Double Taxation Avoidance Agreement (DTAA) is a bilateral agreement between the two countries that aims to prevent double taxation on income earned by individuals and companies in both countries. This agreement was signed in 1992 and has undergone several amendments since then.
Why is the India-UAE DTAA Agreement important?
The DTAA agreement is crucial for individuals and companies doing business in both India and the UAE. It helps to avoid the duplication of taxes on income earned in both countries, which could otherwise lead to a substantial tax burden.
Under the agreement, individuals and companies who are residents of one of the countries can enjoy tax benefits in the other country. For instance, if a company based in the UAE has a subsidiary in India, the agreement ensures that the company is not taxed twice on the same income.
The DTAA agreement also provides for the exchange of information between the two countries. This helps in preventing tax evasion and money laundering and ensures that individuals and companies pay the correct amount of tax in both countries.
What Does the India-UAE DTAA Agreement Cover?
The India-UAE DTAA agreement covers various areas of taxation such as:
1. Income from employment: The agreement covers income earned from employment in both countries, including salaries, wages, and other remuneration.
2. Dividends: It stipulates that dividends paid by companies resident in one country to residents of the other country shall not be taxed at a rate exceeding 15%.
3. Interest: The agreement specifies that interest income earned by residents of one country in the other country shall be taxed at a rate not exceeding 12%.
4. Capital gains: The agreement outlines the tax treatment of capital gains and provides for the prevention of tax evasion through the transfer of assets.
5. Royalties: It provides for tax exemptions on royalties paid for the use of patents, trademarks, and other intellectual property rights.
Conclusion
The India-UAE DTAA agreement is a significant development in the bilateral relationship between the two countries. It helps in promoting trade and investment and eliminating the double taxation of income. The agreement provides a framework for cooperation between India and the UAE on tax matters, which is essential for the growth of businesses and individuals in both countries.