What is Double Taxation Avoidance Agreement (DTAA)?

Paying tax on the same income in two different countries can be a big burden for many people, especially for international investors and expatriates. This situation is known as double taxation. To help avoid this, countries around the world sign agreements called Double Taxation Avoidance Agreements (DTAA).

These agreements make sure that individuals and businesses don’t have to pay tax twice on the same income. The UAE has signed DTAAs with many countries to support global trade, attract foreign investment, and show its strong commitment to fair and transparent tax practices.

What is DTAA (Double Taxation Avoidance Agreement)?

A Double Taxation Avoidance Agreement (DTAA) is a treaty between two or more countries designed to prevent individuals and businesses from being taxed twice on the same income. This situation often arises when income is earned in one country (the source country) and the taxpayer resides in another (the residence country).

DTAAs establish clear guidelines to determine which country has the right to tax specific types of income, thereby eliminating or reducing the burden of double taxation.

How DTAA Works Globally?

Globally, DTAAs play a crucial role in facilitating international trade and investment by providing tax clarity and reducing the risk of double taxation. These agreements typically follow models like the OECD Model Tax Convention or the UN Model Double Taxation Convention, which outline standardised provisions for taxing rights and relief mechanisms. By doing so, DTAAs help in avoiding tax disputes and encourage cross-border economic activities.

Key Principles & Benefits of DTAA

Understanding the key principles of a DTAA helps individuals and businesses know how these agreements work and how they can benefit from them.

1. Tax Residency

Determines where an individual or entity is considered a resident for tax purposes. In cases where a person qualifies as a resident in both countries, DTAAs provide “tie-breaker” rules to establish a single country of residence for tax purposes.

2. Source of Income

Identifies the country where the income originates. DTAAs specify which country has taxing rights over various types of income, such as salaries, dividends, interest, and royalties.

3. Elimination of Double Taxation

DTAAs employ methods like:

• Exemption Method: Where income is taxed in only one country and exempted in the other.

• Credit Method: Where the resident country taxes the income but provides a credit for the tax paid in the source country.

4. Reduced Withholding Tax Rates

DTAAs often stipulate lower tax rates on cross-border payments like dividends, interest, and royalties, making international transactions more tax-efficient.

5. Mutual Agreement Procedure

Provides a mechanism for resolving disputes arising from the interpretation or application of the treaty, ensuring that taxpayers are not subjected to double taxation.

6. Exchange of Information

Facilitates the sharing of tax-related information between countries to prevent tax evasion and ensure compliance.

UAE’s Network of Double Taxation Agreements

The UAE has established an extensive network of Double Taxation Avoidance Agreements (DTAAs) to promote international trade, attract foreign investment, and prevent the double taxation of income. As of 2025, the UAE has signed DTAAs with over 140 countries, covering most of its major trade and investment partners, such as:

• India
• United Kingdom
• Germany
• France
• United States
• China
• Singapore
• Malaysia
• Japan
• Canada
• Saudi Arabia
• Qatar

Sectors Benefiting the Most from DTAA

Several sectors in the UAE significantly benefit from the DTAA network, including:

1. Finance and Banking

Reduced withholding taxes on interest and dividends enhance the attractiveness of the UAE as a financial hub.

2. Oil and Gas

Energy companies benefit from clear tax frameworks, reducing the risk of double taxation on international operations.

3. Shipping and Logistics

DTAAs provide tax relief for shipping companies operating across borders, promoting the UAE’s position as a global logistics centre.

4. Aviation

Air transport firms benefit from tax exemptions or reductions, supporting the UAE’s aviation industry’s growth.

5. Technology and Telecommunications

Tech companies enjoy favourable tax treatments on royalties and service fees, encouraging innovation and investment.

How DTAA Works in the UAE

Understanding how the Double Taxation Avoidance Agreement (DTAA) operates within the UAE is essential for individuals and businesses engaged in international activities.

1. Tax Residency Certificate

To benefit from the provisions of a DTAA, one must establish tax residency in the UAE. This is achieved by obtaining a Tax Residency Certificate (TRC) from the UAE’s Federal Tax Authority (FTA). The TRC serves as official proof of residency and is a prerequisite for claiming DTAA benefits.

2. Eligibility Criteria

• Individuals: Must meet specific conditions, such as spending a certain number of days in the UAE or having their primary residence and financial interests in the country.

• Companies: Entities incorporated in the UAE or those effectively managed and controlled within the UAE are considered tax residents and can apply for a TRC.

3. Application Process

1. Applications are submitted through the FTA’s Emara Tax portal.
2. Applicants must provide necessary documentation, including financial statements and proof of residency.
3. The TRC is typically issued for a specific tax period and must be renewed annually.

Methods of Avoiding Double Taxation in UAE

DTAAs employ two primary methods to prevent the same income from being taxed in both countries:

1. Exemption Method

Under this approach, income is taxed in only one of the two countries involved.

For example, if a UAE resident earns income in a country with which the UAE has a DTAA, and the agreement specifies the exemption method, that income may be taxed only in the UAE and exempted in the other country.

2. Tax Credit Method

Here, the income is taxed in both countries, but the resident country (e.g., the UAE) provides a credit for the tax paid in the source country, reducing the overall tax liability.

For Example,

XYZ LLC, a company incorporated and managed in the UAE, provides consulting services to clients in Country Y, which has a DTAA with the UAE. Under the exemption method, the income from Country Y may be taxed only in the UAE, with Country Y exempting it. If the tax credit method applies, XYZ LLC would pay tax in both countries but claim a credit in the UAE for taxes paid in Country Y, minimising double taxation.

How to Claim DTAA Benefits in the UAE?

To leverage the benefits of the UAE’s DTAAs, individuals and companies must establish their tax residency in the UAE by obtaining a Tax Residency Certificate (TRC).

Eligibility for DTAA Benefits in the UAE:

• Individuals: Must have resided in the UAE for at least 183 days during the relevant financial year.
• Companies: Must be established in the UAE and have completed at least one year of operation.
• Ineligible Entities: Branches of foreign companies and offshore companies are not eligible to obtain a TRC, as they are not considered established in the UAE.

Documents Required for TRC Application:

For Individuals: 

• Copy of passport
• Copy of UAE residence visa
• Copy of Emirates ID
• Certified copy of residential lease agreement or tenancy contract
• Entry and exit report from the Federal Authority for Identity and Citizenship
• Salary certificate or proof of income

For Companies: 

• Copy of trade license
• Memorandum of Association or equivalent
• Copies of passports, Emirates IDs, and residence visas
• Certified copy of audited financial statements for the relevant year
• Certified copy of the company’s lease agreement
• Six months of corporate bank statements

Steps to Apply for DTAA Benefits in UAE:

1. Create an Account: Register on the UAE Federal Tax Authority’s (FTA) EmaraTax portal.
2. Prepare Documentation: Gather all necessary documents before applying.
3. Submit Application: Complete the TRC application form on the EmaraTax portal and upload the required documents.
4. Pay Fees: Upon approval, pay the applicable fees through the portal.
5. Receive Certificate: The TRC will be issued and can be downloaded from the portal.

Avoid Double Taxation the Easy Way with Shuraa Tax

Double Taxation Avoidance Agreement helps expats and businesses in the UAE avoid paying taxes twice on the same income. It’s a great benefit for those earning income in more than one country, giving them financial relief and more clarity on their tax responsibilities.

But claiming DTAA benefits can get confusing without proper guidance. That’s why Shuraa Tax and Business Consultants are here to help. Our experts will guide you in getting your Tax Residency Certificate, explain the terms of the agreement clearly, and handle the paperwork for you. With Shuraa, you can enjoy the benefits of DTAA without any hassle.

Frequently Asked Questions

1. What is DTAA and how does it help in the UAE?

DTAA stands for Double Taxation Avoidance Agreement. It helps UAE residents avoid paying tax on the same income in both the UAE and their home country, depending on the treaty terms.

2. Can I avoid taxes in my home country if I live in the UAE?

In many cases, yes. If your home country has a DTAA with the UAE and you qualify as a UAE tax resident, you may be able to reduce or avoid paying tax back home.

3. Do freelancers in the UAE get DTAA benefits?

Yes, freelancers who live in the UAE and hold a valid residency visa can apply for DTAA benefits if they meet the eligibility requirements and get a Tax Residency Certificate.

4. How long does it take to get a Tax Residency Certificate in the UAE?

It usually takes around 4 to 5 working days after submitting all required documents and fees to receive the certificate.