Withholding tax is a tax charged in the country where income has been generated and applies primarily to interest, dividends and royalties. The tax rate depends on the tax regime in each country and, in the case of transfer of interest, dividends or royalties to another country, on availability of double taxation avoidance agreement and, if such agreement has been signed, its specific terms and conditions.
Withholding tax is charged for previous reporting period. The amount of tax is determined based on current applicable rates. In addition, withholding tax is taken into account when calculating tax in the country where payment has been accepted.
The connection of tax policy of the state with official policy shall be noted when talking about tax policy of the United Arab Emirates. Policy of the Emirates is designed to attract more foreign investors and, for this purpose, to ensure the most favorable level of taxation.
That is why tax regime of the United Arab Emirates is relatively friendly. Some taxes applicable on the territory of most of other jurisdictions are not charged here.
Where companies and individuals are charged withholding tax in other countries, this tax is not charged for most of items in the UAE.
In addition, in case of resident company in the UAE or status of an individual living in the United Arab Emirates and having the status of a tax resident, the UAE allows you to receive payments on favorable terms from other states. This is due to the fact that the UAE has signed a number of double tax voidance agreements with many countries and, consequently, when transferring money funds from such countries to the UAE the withholding tax in such countries is reduced or is not charged at all.
