The United Arab Emirates have signed a double taxation agreement with Indonesia in the summer of 1996. The agreement only covers the avoidance of double taxation of income earned by Indonesian and UAE residents. The treaty also covers the profits of political parties and local authorities. The UAE-Indonesia double taxation treaty covers the taxes imposed on the worldwide income or on elements of the income, including the sale or rental of immovable property earned by taxpayers. The following elements of the income fall under the provisions of the UAE-Indonesia double tax agreement:
- the income tax imposed in Indonesia,
- the income and the corporate taxes in the UAE.
Our specialists in Dubai can provide you with more information about taxation in the United Arab Emirates.
Tax residency under the UAE-Indonesia double tax treaty
Under the Indonesian and UAE legislation, tax residency is established based on domicile and residence in the case of natural persons, and place of management or another similar criterion in the case of companies. The UAE-Indonesia double tax treaty respects these regulations and tax residency will be established for each taxpayer based on these criteria. However, the agreement defines the term “permanent establishment” in the case of companies in order to assess how branch offices or subsidiaries of UAE and Indonesian companies will be taxed or relieved from taxation. Permanent establishments are regarded as fixed places where foreign companies carry out their activities under the UAE-Indonesia double taxation treaty.
Avoidance of double taxation in the UAE and Indonesia
The terms of the UAE-Indonesia double taxation agreement establish that each country’s tax laws will override the agreement. However, the taxpayer will be credited against any tax levied on the income covered by the agreement in the first contracting state applying such tax. The UAE-Indonesia double tax treaty also establishes the following rates for the following taxes:
- 0% tax rate in the case of dividends,
- 0% tax rate in the case of interests,
- 0% tax rate in the case of royalties.
The disposal of shares in a UAE or Indonesian company by a non-resident is exempt from taxation under the treaty. For detailed information about the UAE-Indonesia double tax treaty, you can also contact our company registration agents in Dubai.