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.

 

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

  Scope

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

  Taxes Covered This agreement applies on the following existing taxes:

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 pensions in respect of Government service others:

Area of Income	Income earned in	Income taxed in	Remarks
Remuneration and Pension in respect of Govt Service	In the state where the services are rendered	-In the same state where the services are rendered	Exception: Taxable in the other state if the services are rendered there and is a resident of that state who -is a national of that state -did not become a resident solely for the purpose of rendering the services
Non-Govt pension and Annuities- Any pension other than above	In the state by a resident from sources with in other state	In the same state where he is resident

  Article 18 – Remuneration and pensions in respect of Government service

1. Remuneration paid, or any pension paid or out of funds created, by a contracting state or a political sub division or a local authority to an individual in respect of services rendered to them shall be taxable only in that state.
2. However such remuneration and pension shall be taxable only in other state if the individual is a resident of that state who is a national of that state or in the case of remuneration if the individual is a resident who did not become a resident of that state solely for the purpose of rendering the services.

  Article 19 – Non – Government pension and Annuities

Any pension other than that referred to in Article 18 or an annuity derived by a resident of a contracting state from the sources in other state may be taxed only in the first mentioned contracting state.

  Elimination of Double Taxation

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, India shall allow as a deduction from the tax on the income/capital of that resident an amount equal to Income tax or capital tax paid in UAE whether directly or by deduction.
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