UAE has signed a Double Taxation Agreement with more than 137 countries around the world.

Double Taxation Avoidance Agreement – Highlights

Being part of the international tax framework and adhering to the OECD (Organisation for Economic Co-operation and Development) regulations, the DTAA treaty provides protection and benefits for companies registered in UAE.

Double Taxation Avoidance Agreement allocates taxing right and ensure individuals and businesses are only taxed once.  The agreements also provide relief from foreign taxation and certain foreign tax compliances of other countries.

The Double Taxation treaties allow for the exchange of information and cooperation between countries to address tax evasion and provide a globalized framework to resolve any tax-related issues between countries.

What impact do UAE expatriates and Company Have from DTAA?

For expatriates’ double taxation agreement come into play when they have a second residence outside of UAE. Also, the individual is living in UAE for more than 183 days (need not be a continuous stay). Companies that consist of international shareholding, it is not subjected to a tax of jurisdiction of the shareholders.

Companies with more than 1 year of establishment in UAE can avail of the benefits of Double Taxation by applying for the Tax Residence Certificate.

Things to Lookout – Tax Reforms in the UAE

UAE has a strategic partnership with the OECD and part of the inclusive framework on ‘Base Erosion and Profit Shifting (BEPS). It refers to strategies used by large global companies as part of tax avoidance strategies.

Companies shift profits from higher-tax jurisdictions to a lower-tax jurisdiction. Thereby, eroding the tax base of higher -tax jurisdiction.

UAE has created regulations and treaties based on the consensus of international tax rules to protect tax bases while offering increased benefits for residents of UAE.

Multilateral Agreements of UAE with Other Nations

UAE has signed a Multilateral Instrument that makes it easier to amend the existing treaties accordingly to comply with the international framework of double taxation avoidance and Base Profit Erosion and Profit Shifting (BEPS) regulations.

To be further transparent and compliant with international taxation standards, UAE introduced the Economic Substance regulations.

Companies in certain relevant sectors residing in UAE and exchanging business transactions with foreign connected entities are subjected to an Economic Substance Regulation Test and filing of sufficient information about the business operations in UAE to the authorities.

Double Taxation Agreement & UAE’s Commitment

Double Taxation Agreement aims to exempt or reduce tax on investment and profits from direct and indirect taxes. Also helps in profit repatriation to other currencies without any tax regulations.

UAE has signed almost 137 DTAs with its trade partners to avoid double taxation for the inevstors who conduct business in UAE legally. DTA is aims at free trade and eliminate the chances of double taxation on the tax payer having company operations in UAE.

DTA supports free flow of trade between economies and cross-borders. It helps UAE to diversify the income source and increase investment inflow. Also, exchaning tax information helps in acheiving transparency and protection of national economy.

By complying to the DTA, the stature of UAE as a global financial and trade hub is strong. Also UAE plays an active role in supporting Double Taxation. It helps in strengthening international cooperation and comply with international regulations.

UAE Ultimate Beneficial Ownership Regulations

A legislative change aimed to improve corporate transparency is issued by the UAE Cabinet. It is a framework for reporting and registering beneficial interests, ultimate beneficial owners, and shadow directors.

All UAE Companies (Onshore and Offshore – excluding those registered in the DIFC or ADGM) must comply with their reporting obligations under the UBO regulations.

Companies must prepare the following details to comply with the UBO regulations.

1. A UBO Register

UBO is a natural person who ultimately owns or controls or has the right to vote with a minimum of 25% shareholding of the company.

In the absence of a natural person satisfying the condition, any natural person who exercises control over the company can be the UBO.

2. Register of Nominee Directors/Managers

Details of directors/managers acting under the instructions of a third party.

3. Shareholder/Partner Register

Include the number of ownership interests held by each partner/shareholder and their voting rights, date of acquisition of interests.

Any change in the information provided must be notified to the relevant authority within 15 days of such change. All registers must always be completed and up to date to avoid administrative fines.

MLI Synthesized Text of the India-UAE DTAA

The Multilateral Convention to Implement Tax Treaty Related Measures to prevent Base Erosion and Profit Shifting (MLI) is an outcome of the BEPS action plan of the IECD Inclusive framework.

BEPS framework offers a solution for governments to plug loopholes in international tax treaties by introducing favorable bilateral tax treaties worldwide.

What is Synthesized Text?

“Synthesized Text” is a document consisting of the consolidated text of the provisions of a Double Taxation Avoidance Agreement (DTAA) and the Multilateral Instrument (MLI).

The Synthesised Text is not a source of law or cannot be used for legal purposes, it is a few procedural amendments to be followed to ensure double taxation is avoided for residents living outside their home country.

Amendments in the Synthesised Text for India -UAE DTAA

The Synthesised text for the application of the India – UAE DTAA is edited on a common agreement by UAE and India to protect the interests of both parties. The amendments in the synthesized text have been developed on the lines of the OECD Guidance and DTAA regulations. 

The amended text will cover the regulations of tax savings strategies and the right way of evading double taxation in the home country by a foreign investor.

To know more about Double Taxation and apply for a Tax Residence Certificate in UAE or How Tax Residency in UAE can help Investors from Europe, connect with our expert team right away!

Contact: Aurion Business Consultants

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The investors can easily coordinate the Company Liquidation Process in Dubai with the help of an expert Business Consultant. The following are the common causes of Company Liquidation in Dubai:

• Generating Low Revenues, or,
• Not-Performing to the mark to sustain the business competition, or
• Not able to scale up
• No Cash Flow to pay Suppliers and Loan Balances
• No Business Feasibility, and more.

Company Liquidation in Dubai

Company Liquidation in Dubai consists of certain steps that the investor must follow. Assessment of the company’s financial position is a pre-requisite before starting the process of company liquidation.

Also, the investor at this stage must review the company’s current liabilities and work out a disbursement plan. The company’s finance team must record all outstanding payments, claims, assets, etc.

The Business Consultants will manage the company liquidation process. They will assist in preparing financial documents, maintaining accounts, conducting financial audits, and preparing the debt recovery plan.

The investor must intimate all the creditors & debtors about outstanding bills and prepare the company liquidation plan accordingly.

As the final step, the company must terminate all employment contracts, business transactions, Bank accounts, utilities, and essentials. Also, the clearances from the Free Zone or Economic Department authorities must be ready.

At the same time, inform all the stakeholders, creditors & suppliers, customers, etc., about the closing of the company and settlement amount disbursement. After the settlement, file for the company license cancellation certificate.

Dubai Company Liquidation Steps

During the instance of incurring heavy financial losses, the investor is left with no option but to wind up the company. So, the investor will have to cancel the trade license first and then wind up the business operations.

Company Liquidation or Trade License Cancellation is an important process for any UAE-based business. Without winding up the business operations of a loss-making company, the investor will have to pay for the yearly renewals even if the company is at a loss.

Also, pay the fines for defaults, salary delays, bank charges for overdrafts, and more. Hence, it is advisable to close a loss-making company than to keep it running in most instances.

Company Liquidation in Dubai involves a set of processes. All the steps have to be executed with the utmost importance as they will hinder any future restart of the company in the UAE.

1. License Cancellation of Limited Liability Company in Dubai

Let us look at the steps involved in closing a Limited Liability Company in Dubai Mainland.

• The first step in winding up the company in the UAE is to cancel all the existing employment contracts and visas under the company.
• The termination must adhere to the labor laws. The right compensation and notice period have to be given to the employees.
• The board of directors must prepare a resolution and appoint a liquidator. The board resolution document must be attested from the Notary public.
• Assign an Authorized Company Liquidator to initiate the Company Closing process, coordinate the Liquidation Audit documentation, obtain required clearances, etc.
• Prepare all the documents along with the board resolution. (Trade License Copy, Auditor report, Authorized Signature Certificate. etc.)
• Cancel all the visas, & get the clearance letter from all the government agencies, immigration, DEWA, Etisalat, banks, customs, Ejari Cancellation, etc.
• Pay all outstanding debts and collections to and from the suppliers
• News Paper publication (English & Arabic) for obtaining No objection from Stakeholders, customers, creditors & suppliers.
• The copy of the advertisement, along with No Objection Certificate from Concerned authorities is to be submitted with all documents
• Submit all the required documents to the Department of Economic Department (DED) for assessment and review.
• The company liquidation certificate will be issued from the DED. There is a fee to be paid for the issuance of the certificate.

2. Company Liquidation in Dubai Free Zones

Across the Free zones the company liquidation process varies significantly, however here are the basic requirements of company liquidation in Dubai.

• A Board Resolution was issued to liquidate the company in the respective free zone
• Appoint a registered company liquidator to conduct the company closing procedure
• Initiate Visa cancellation of all employees before closing down
• A liquidation letter has to be submitted to the free zone approved auditor to prepare the closing financial statements
• Clearance Certificate from the free zone authority
• Other clearance certificates from telephone service providers
• All the fees have to be paid to the respective free zone authority to obtain the final cancellation certificate.

The Requirement of Liquidation Audit in Dubai

Liquidation Audit is a critical task every company has to initiate while closing down its operations. Auditors will assess all the company’s assets and create an inventory record.

The Audit will also help in arriving at the company’s outstanding obligations and preparing a report on the same. It will include the list of assets & liabilities and help in settling the creditors efficiently.

Lastly, the Company can proceed to a successful cancellation of the trade license. All the company’s assets will be converted to cash and distributed to the creditors or fulfilling any other company’s liabilities.

There are specific guidelines and business laws to distribute the assets and clear the company liability before closing down.

Who is Authorized to Perform Liquidation Audits in Dubai?

Audit and Accounting firms who are approved and registered by the UAE financial authorities in the mainland and Free zones are eligible to conduct liquidation audits.

The liquidation audit report has to be submitted for reference to the responding authorities for receiving the company cancellation certificate.

How Aurion Will Assist You?

Aurion Business Consultants are expert company liquidation agents in all major free zones as well as the mainland of UAE.

Our Business and legal experts will guide you throughout the company liquidation process. We assure you of a hassle-free company liquidation in Dubai or UAE.

To know more about Company Cancellation in UAE, connect with our expert business setup consultants right away!

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