India and the United Arab Emirates (UAE) have long-standing economic ties, and both countries have been working actively towards furthering their trade and investment relations. One crucial aspect of this endeavor is to eliminate the double taxation of income earned by entities operating in both countries. And the India-UAE Double Taxation Avoidance Agreement (DTAA) is precisely aimed at that.
The agreement signed in 1993
The India-UAE DTAA was signed in 1993 and was operationalized in 1994. The key objective of the agreement is to prevent double taxation of income earned by individuals and companies operating in both countries. Under the DTAA, only one country can tax the income earned by the individual or entity in question.
What type of income is covered?
The DTAA covers various types of income, including income from businesses, employment, and other sources like interest, dividends, and royalties. Both India and UAE have agreed to apply the DTAA to their respective tax laws, thus ensuring the agreement`s effective implementation.
How does it benefit businesses operating in India and the UAE?
The India-UAE DTAA provides a significant benefit to businesses operating in both countries. For instance, if an Indian company has a branch in the UAE, the income earned by that branch will be taxed in the UAE. And the same applies to a UAE company with a branch in India. Therefore, the companies operating in both countries do not have to pay tax on the same income twice.
Also, income earned by Indian individuals or companies in the UAE will have to pay tax on that income in only one country. And in case an Indian company faces a higher tax rate in the UAE, they can claim a tax credit in India for the taxes paid in the UAE, thereby avoiding double taxation.
What is the impact of the revised agreement?
The India-UAE DTAA was revised recently in 2017, which has made a significant impact on businesses operating in both countries. The revised agreement has expanded its scope to include newer areas like exchange of information and assistance in collection of taxes.
Furthermore, it has also incorporated provisions to prevent tax avoidance and evasion, which has led to the prevention of double non-taxation of income earned by entities operating in India and the UAE.
Conclusion
In conclusion, the India-UAE DTAA is a significant step towards strengthening economic and trade relations between the two countries. It has benefited businesses operating in both countries by eliminating the double taxation of income and encouraging cross-border trade and investment. The revised agreement has further improved the scope of the agreement and ensured its effective implementation.