UAE–USA Double Taxation Agreement | What It Means and How It Works

The Double Taxation Agreement (DTA) between the UAE and the United States of America prevents individuals and businesses from being taxed on the same income in both countries. This article explains how the UAE–US treaty works, who can benefit from it, and the key provisions that apply to income types such as dividends, interest, and royalties. You’ll learn when and how relief applies, what documentation is needed, and how residents of both countries can use the agreement.

Introduction

A Double Taxation Agreement (DTA) is a treaty between two countries to prevent the same income from being taxed twice. The UAE–US DTA ensures that individuals and businesses engaged in cross-border activities don’t pay tax on the same income in both jurisdictions. This provides certainty, reduces tax barriers, and promotes investment between the UAE and the U.S.

As of 2026, the United Arab Emirates does not have a formal double taxation agreement (DTA) with the United States. Despite strong economic ties and numerous bilateral investment treaties, the two countries have not concluded a comprehensive tax treaty that eliminates double taxation for individuals or corporations.

Dubai, in particular, does not levy taxes on income earned by foreign investors. Nevertheless, Dubai has signed various double taxation treaties to enhance its appeal to foreign entrepreneurs. These agreements aim to reduce withholding taxes in the home countries of foreign companies operating in the UAE.

Double taxation Agreement – Decrees – UAE & USA

‘Decrees’ Although there is no double tax treaty between the UAE and the USA, the UAE government has implemented several tax regulations that address the taxation of foreign nationals living, working, or owning businesses in the country. Each tax authority within the Emirates imposes an income tax of up to 50% on the taxable income of companies, regardless of their country of incorporation. However, this tax applies primarily to oil-exporting companies and foreign banks. It is important to note that the tax rate can vary, as it is determined through agreements between the company and the relevant Emirate’s tax authorities, making it personalised.

Key Provisions of the UAE–US DTA

The treaty covers several major income categories:

• Dividends: May be taxed at reduced rates or exempt under certain conditions
• Interest: Limits withholding tax on cross-border interest payments
• Royalties: Caps the tax rate on royalty payments between treaty partners
• Capital gains: Clarifies which country has taxing rights on gains
• Elimination of double taxation: Provides mechanisms for tax credits or exemptions

These provisions help prevent the same income from being taxed in both countries.

Who Benefits From the Treaty?

Residents and businesses of either the UAE or the U.S.A. that earn income in the other country benefit from the treaty. This includes expatriates, investors, multinational companies, and individuals earning cross-border income. Qualifying for treaty benefits usually requires proof of tax residency and proper documentation.

How to Claim Treaty Benefits

To claim tax relief under the UAE–USA DTA:

1. Establish tax residency in your home country (UAE or U.S.)
2. Provide a certificate of residence to the other jurisdiction’s tax authority
3. Submit requisite forms (such as IRS Form W-8BEN for U.S. withholding tax relief)
4. Follow documentation requirements for banks, employers, or clients

Correct documentation is essential to avoid unnecessary withholding tax.

FATC Over DTAs Between UAE & USA

Foreign Account Tax Compliance – FATC is an initiative by the U.S. to combat tax evasion by U.S. taxpayers holding financial assets outside the country. The UAE has agreed to comply with FATCA through an intergovernmental agreement (IGA) with the United States. Under this agreement, UAE financial institutions are required to identify and report accounts held by U.S. persons to the U.S. Internal Revenue Service (IRS). The goal is to improve transparency and ensure that U.S. taxpayers are complying with tax obligations on foreign financial assets. In exchange, the UAE benefits from the ability to receive financial information from U.S. institutions to assist in its tax enforcement.

FAQs

Q: What does the UAE–USA double taxation agreement do?
A: It prevents the same income from being taxed in both the UAE and the U.S., offering relief through exemptions and tax credits.

Q: Who qualifies for treaty benefits?
A: Residents and companies of the UAE or the U.S. earning income across the border may qualify, subject to proper documentation.

Q: Does the treaty reduce withholding tax?
A: Yes, the treaty often caps withholding tax rates on dividends, interest, and royalties.

Q: What documents are needed to claim benefits?
A: A tax residency certificate and the appropriate tax forms (e.g., IRS W-8BEN) are typically required.

Q: Does the treaty affect capital gains tax?
A: Yes, the agreement clarifies which country can tax capital gains in specific scenarios.

Key Takeaways

Unlike countries like Germany, Switzerland, India, the UK, Singapore, and more, the USA hasn’t signed any Double Taxation Agreement with the UAE. Alternatively, these two countries have a concept called ‘FATC – Foreign Account Tax Compliance’ in which the UAE officials provide the account information of US individuals working or setting up a business there. In exchange, the UAE will also get financial reports of the individuals and their past track records. To get a clearer picture of DTA and FATC, contact our experts at Arnifi.

Also Read: https://arnifi.com/blog/double-taxation-agreement-between-uae-germany/