Dubai Taxation: France-United Arab Emirates Tax Treaty

The question of taxation for French expatriates in the United Arab Emirates is a central concern for them. It is a topic that can be somewhat complex and often misunderstood, depending on individual situations.

French individuals residing and working abroad are subject to different tax regulations than those of their home country.

Each country has its own rules, and the tax regulations of the United Arab Emirates can be particularly challenging for expatriates who do not have the necessary information to understand local taxation. However, by being well-informed and understanding the tax requirements, you can fully benefit from the advantages associated with the French expatriate status in the United Arab Emirates, thanks to the double taxation avoidance treaties between France and the United Arab Emirates signed on July 19, 1989.

What is a tax treaty?

Tax treaties are bilateral agreements concluded between two countries to regulate tax aspects between specific pairs of nations. These agreements define the tax rules applicable to residents of both countries, with the main objective of avoiding double taxation and, consequently, the payment of taxes in both countries.

Double taxation occurs when the same income is taxed in both countries involved, creating an excessive tax burden for the taxpayer. Tax treaties aim to solve this problem by establishing clear criteria for determining tax residence, the types of taxable income, and mechanisms for tax credit or exemption to avoid double taxation.

These agreements have several objectives, including promoting economic and commercial exchanges between the two nations, protecting taxpayers against double taxation, and preventing tax fraud. By eliminating tax barriers, tax treaties create a more favorable environment for cross-border investments and promote financial stability between the signing countries. In summary, tax treaties are essential instruments for establishing a clear legal and tax framework, thus fostering economic cooperation and the free flow of capital between nations.

Taxes covered by the France-UAE tax treaty

According to the double taxation avoidance agreement between the United Arab Emirates and France, various taxes are taken into consideration, including the following:

On the French side: income tax, corporate tax, solidarity tax on wealth applicable to individuals, and inheritance tax in France. As well as any withholding tax, prepayments, and advances deducted on these taxes;
On the UAE side: corporate income tax and income tax in the United Arab Emirates.

The treaty also encompasses other similar taxes, whether established before or after the signing of the agreement. Any new levy authorized by either of the two signatory states will be integrated into or replaced in the current double taxation avoidance agreement between the United Arab Emirates and France.

Benefits for Individuals

The France-United Arab Emirates tax treaty offers several advantages for individuals residing in either of these two countries. Here are some of the key benefits:

Avoiding Double Taxation: The treaty aims to prevent double taxation on income. Individuals will not be taxed on the same income in both countries, reducing the overall tax burden.
Tax Optimization: The provisions of the treaty allow taxpayers to benefit from certain tax optimizations by strategically planning their income and investments.
Reduction of Tax Rates: Certain types of income, such as dividends, interest, and royalties, may be subject to reduced rates or tax exemptions under the treaty, providing financial benefits to taxpayers.
Treatment of Capital Gains: The treaty establishes clear rules regarding the taxation of capital gains, offering predictability to individuals engaged in asset transfer transactions.
Protection against Tax Fraud: By clarifying tax rules and promoting transparency, the treaty helps prevent tax fraud and ensures better tax compliance.
Deduction of Expenses: The treaty’s rules allow taxpayers to deduct certain expenses in the calculation of their taxable income, offering additional benefits.
Facilitation of Administrative Formalities: By eliminating uncertainties related to international taxation, the treaty simplifies administrative formalities for individuals residing or investing between France and the United Arab Emirates.

It is important, however, to consult tax experts to fully understand the specific benefits that may arise from the tax treaty, depending on your financial situation and activities.

Reminder: Fiscal residence in the French sense

Fiscal residence in France is defined by Article 4B of the General Tax Code (CGI). According to this article, a person is considered fiscally resident in France if they meet one of the following criteria:

They have their home in France,
They carry out a professional activity in France,
They have the center of their economic interests in France,
Or they stay in France regularly.

The concept of fiscal residence is of paramount importance in determining the tax obligations of an individual in France. It guides the calculation of income tax by taking into account the worldwide income of the resident. Thus, Article 4B of the CGI plays a key role in the application of French tax rules by defining the criteria that determine the fiscal residence of a taxpayer in the country.

Our support

In conclusion, the France-United Arab Emirates tax treaty represents a significant step in simplifying cross-border tax obligations. To maximize the benefits it offers, it is crucial for taxpayers and businesses to fully understand its ins and outs. For personalized advice and efficient optimization of international taxation, our team of legal experts within the firm is at your disposal to provide clarification on this treaty and discuss any potential implications it may have on you and your activities in Dubai.

If you have further questions, feel free to contact us via support@merritt.group or visit us at our offices in JLT, Dubai – United Arab Emirates.