Following are the few frequently asked questions and the responses to them relating Double Taxation Avoidance Agreement (DTAA) between United Arab Emirates (UAE) and India:
Q) Where is the Dividend taxed and at what rate is it charged?
Dividend is taxed in the Country (“State”) where the recipient is resident. However, dividend may be taxed in the state where the company paying dividends is resident, but if the recipient is the beneficial owner of the dividends, the tax so charged shall not exceed 10%.
Q)What is the tax rate for the interest when it is taxed in the Country in which it arises?
Interest is taxed in the state where the recipient is resident. However, it may be taxed in the state in which it arises but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed:
- 5% of gross amount if such interest is paid on loan granted by a bank and
- 5% of gross amount in all other cases.
Q) What are the circumstances where the income may be taxed in the state where the professional services are performed?
Income derived by a resident of a state in respect of professional services shall be taxable only in that state except in the following circumstances, the income is taxed in the other state where the activities are performed:
- If he has fixed base available in other contracting state, or
- If his stay in the other state is for a period of at least 183 days in the previous year.
Q) Where is the income derived by an entertainer or Athlete is taxed?
The income derived by an entertainer or athlete is taxable in the state where the activities are performed but if the activities are supported from public funds of the state where the entertainer is a resident, then taxable in the state where he is resident.
Q) Is interest arising in a state exempt from Tax?
Interest arising in a contracting state shall be exempt from tax if it is derived and beneficially owned by Government, a political sub-division, local authority or central bank of the other state.
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