Page 13 - Focus Group

 Activities of Preparatory or Auxiliary conditions:
character (Subject to Force of Attraction
Rule)  Beneficial owner of Income is resident of
another country;
 Agent of Independent Status
 Such Income is not effectively connected to
 Mere existence of Subsidiary in another fixed base of PE of Payee, if any, in the
country country of Payer.

• Taxability • Elimination of Double Taxation – The DTT has
prescribed that resident country shall provide the
 Business Profits – Profits from business Credit of taxes paid in the other country. However,
profit shall be taxable only in the country such credit shall not exceed the tax payable in
of residence unless business is carried on
through Permanent Establishment (PE) in resident country on such Income (i.e. Ordinary
the other country Credit method). Further, in case of KSA, credit is not
admissible against Zakat liability.
 Capital Gains – Gains from transfer of any
immovable property and shares in unlisted This DTT also includes specific guidance on Exchange
company shall be taxable only in the country of Information (EoI) and Mutual Agreement Procedure
where property is situated, and company (MAP), in line with the requirement as per BEPS
is registered. Any other Capital gain shall be Action Plan 6 and Action Plan 14 respectively.
taxable in the resident country of transferor. Additionally, it includes Principal Purpose Test
(PPT) to prevent treaty abuse as required by BEPS
 Independent Personal Services– Action Plan 6.
Income derived by individual from
professional services or any similar Overall, this DTT is aligned to international
activities shall be taxable in the country of standards and is in compliance with emerging OECD
residence; however, such income may also principles. It provides clarity on tax applicability to
be taxed in the other country if:
a greater extent and expected to reduce burden of
 Services are provided through a fixed tax cost and compliance obligation, especially for
place in other country; or UAE residents who are otherwise not subject to tax
in UAE.
 Individual’s stay in other country
exceeds 183 days in any 12 months,

 Dependent Personal Services –
Remuneration derived by any individual
in respect of employment exercised in
other country shall be taxable in such
other country; however, such remuneration
shall be taxable only in country of the
residence if:

 Individual is present in other country for
less than 183 days in any 12 months; and

 The employer, who is paying remuneration
is not resident in other country; and

 The remuneration is not borne by the PE
which employer has in other country, if any

• Withholding Tax Provisions (WHT):
 The DTT has prescribed WHT rates for any
Dividend (5%), Interest (0%) and Royalties
(10%). DTT doesn’t contain specific article Disclaimer:
for any service income This article and/or write ups and/or any of its content shall not be treated as opinion and/
or advice in any circumstances of the author(s) and/ or the Chapter. Reader’s to apply their
 Above rates are subject to the following best judgement in the best interest of their requirement and should seek a formal opinion
on any issue.

The Institute of Chartered Accountants of India (Dubai) Chapter NPIO TAX JOURNAL 2020 13