What is the purpose of having an Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with UAE by India (DTAA) between UAE and India?

• In the Present Era of cross border transactions across the globe, the effect of Taxation is one of the important considerations for any Trade and Investment decisions in another countries.
• Where a taxpayer is resident in one country and but has source of income situated in another country, it gives rise to possible double taxation.
• DTAA lays down rules for taxation of the income by the Source country and the residence country.
• The Provisions of DTAA are compared with domestic law, assessee can opt for anyone which is beneficial to him.

This treaty was entered into by UAE and India with an aim to promote their economic relations and prevent tax evasion.

This DTAA agreement shall apply to persons who are residents of one or both of the Contracting States (UAE or India).

1. Income Tax, Corporation Tax and Wealth Tax in UAE
2. Income Tax and Wealth Tax in India

Following is the summary of the DTAA between UAE and India with respect to the income from immovable properties and Business profits:

Income derived from Immovable property is taxed in the country in which the property is situated whether from direct use, letting or use in any other form.

1. Generally, the profits of an enterprise situated in a country shall be taxable only in that country. If that enterprise carries on business in other country through a Permanent Establishment (PE) situated therein, the profits of an enterprise may be taxed in the other country to the extent attributable to that PE.
2. Deduction of Expenses including executive and general administrative expenses are allowed while determining the profits of the PE.
3. No profits shall be attributed to a PE by reason of mere purchase of goods or merchandise for the enterprise.
4. The profits to be attributed to a PE shall be determined by the same method every year unless there is sufficient reason to change.

Where an enterprise of a contracting state participates directly or indirectly in the management, control or capital of an enterprise of other contracting state

The same persons participate directly or indirectly in the management, control or capital of an enterprise of a contracting state and an enterprise of other contracting state

then any profits which would have accrued to one of the enterprises, but for those conditions imposed between two enterprises, have not so accrued may be included in the profits of that enterprise and taxed accordingly.

1. Where a resident of India derives income or owns capital which, in accordance with the provisions of the agreement, may be taxed in UAE,