Preamble:
Dubai’s trade relationship with India has been witnessing a considerable growth. This has been due mainly to the distinctive ties between the Governments and people of the two countries and the joint economic agreements.
Trade between India and Dubai has reached over $20.5 billion (77 billion dirham) in the first six months of 2012, accounting for 13 per cent of Dubai’s total foreign trade. The total value of Dubai’s imports from India reached $9.5 billion (35 billion dirham) during the first six months of 2012. The imports primarily include diamonds, jewellery, electronic devices and mineral oil. The value of exports to India, comprising mainly gold, diamonds, jewellery and copper wires, stood at $5.17 billion (19 billion dirham) during the same period.
To promote further inter country trade and commerce India has entered into Double Taxation Avoidance Agreement with Dubai. The treaty arrangements are as follows.
(a) The Govt. of India and the Dubai desiring to promote mutual economic relations by concluding an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital and have agreed as follows.
(b) There is no income tax or wealth tax on individuals in DUBAI. There was a limited treaty in 1969 and there was no such tax even earlier. The limited treaty paved the way for full fledged treaty on comprehensive basis coming into effect from 1-4-1994. Only foreign oil exploration companies, foreign banks and certain other kinds of corporate bodies are liable to tax in the Dubai.
Dubai Taxation Structure
Direct Taxes
Dubai Personal Income Tax- Individuals are not taxed in the Dubai. Inheritance / Estate Tax: Inheritance, in the absence of a will, is dealt with in accordance with Islamic Sheria principles. Real Property Tax: A transfer charge of 2% is levied on the transfer of the real property, with the seller paying 0.5% and the buyer paying 1.5% on the sale value of the property. Net Wealth / Net Worth Tax: There is no Net Wealth / Net Worth Tax in Dubai. Capital Acquisitions Tax: There is no Capital Acquisitions Tax in Dubai.
Dubai Corporate Taxation– There are no taxes levied by the Federal Government on income or wealth of companies and individuals in Dubai. However, most emirates have issued tax decrees of general application. These impose income tax of up to 50% on taxable income of ‘bodies corporate, wheresoever incorporated’. In practice, however, the enforcement of the decrees is limited to oil exporting companies and foreign banks. Corporate income tax is imposed on foreign oil companies, i.e. companies dealing in oil or oil exploration rights. Although the tax rate applicable to oil companies is generally 55% of operating profits, the amount of tax actually paid by the oil companies is calculated on the basis of a rate agreed mutually on the basis of specific individual concessions between the company and the respective Emirate. The tax rate may range between 55% and 85%.
The tax of Foreign Banks is not enforced in all the emirates. Branches of foreign banks are taxed at 20% of their taxable income in the Emirates of Abu Dhabi, Dubai, Sharjah and Fujairah. The basis of taxation does not differ significantly between the various Emirates. Dubai, Sharjah and Fujairah have issued specific tax legislation for branches of foreign banks, while Abu Dhabi does not have a specific decree.
Special arrangements also exist for major government controlled joint venture companies and some foreign banks. No tax returns are requested or required of other businesses operating in the Dubai. Further, there are no with holding taxes on outward remittance, whether of dividends, interest, royalties or fees for technical services, etc from the other businesses operating in the Dubai. Dubai free zones, which permit 100% foreign ownership, grant specific tax exemptions ranging from 15 to 50 years to companies operating in the free zones. Chiba Capital Financial Group
