🇮🇳 India — 🇦🇪 United Arab Emirates

Tax Treaty / Double Tax Avoidance Agreement detail

The India–UAE Double Taxation Avoidance Agreement was signed on 29 April 1992 in New Delhi and entered into force on 22 September 1993. The treaty has been updated by protocols in 2007, 2012, and 2019, progressively aligning it with OECD standards and addressing emerging avoidance structures. It is one of India's most economically significant bilateral tax treaties, given that the UAE hosts approximately 3.5 million Indian expatriates — the single largest national diaspora group in the country — and serves as a major corridor for investment, remittances, and cross-border services. Historically, a key attraction of the treaty was the treatment of capital gains: gains on Indian shares held through UAE-resident entities were not taxable in India under the original text, making UAE a popular structuring jurisdiction. This benefit was progressively curtailed: India's General Anti-Avoidance Rule (GAAR), effective from April 2017, empowered authorities to look through arrangements lacking commercial substance, and the 2019 protocol introduced a Limitation on Benefits (LOB) clause aligned with BEPS Action 6, targeting entities that do not satisfy activity or ownership tests. India's Place of Effective Management (POEM) rules further reduced the ability to claim UAE residency for entities managed from India. The UAE introduced a 9% federal corporate income tax in June 2023, reducing — though not eliminating — the tax-differential incentive. The treaty's relevance has therefore shifted toward genuine commercial structures, holding companies with substantive operations, and the large employed expatriate population. The 2019 protocol also added Article 27A on assistance in the collection of taxes and modernised the exchange of information provisions to meet current OECD transparency standards. Both India and the UAE have signed the OECD Multilateral Instrument (MLI); India has ratified, and the MLI modifies the treaty's dispute resolution and anti-abuse provisions accordingly. Competent authority mutual agreement procedure (MAP) provides the primary arbitration mechanism for residency and allocation disputes. For individuals, tax residency certificates (TRC) are a prerequisite for claiming treaty benefits on the Indian side, and coordination between PAN (India) and Emirates ID documentation is standard practice for expatriate compliance. The permanent establishment threshold is particularly relevant for technology and professional-services exports from India into UAE-based clients, determining whether income is taxable at source. There is no totalization agreement between the two countries; UAE labour protections operate separately through the Wage Protection System and the UAE labour court regime.