FRANCE and UAE Double Tax Treaty - All You Need to Know
When I first sat with a UAE-based client who wanted to sign a contract with a Paris-based firm, I expected the usual questions: invoices, payment terms, and timelines. But the real anxiety showed up when they asked -
“If I do business with the UAE and France, will I have to face double taxation?"
I’ve been on the receiving end of this question many times, and the good news is - there’s already a system in place to prevent double taxation. It’s called the France-UAE Double Tax Treaty.
What You Need to Understand
The France-UAE Double Tax Treaty is not a complicated maze. Think of it as a set of rules written by two governments who sat down and said, "We will not let you pay tax twice on the same income."
The treaty has been in force since 1990, and its aim is simple - you should pay tax where the economic activity actually happens.
Let’s say you provide consulting services to a French client from your office in Dubai. You invoice them, and your work is done. Under the treaty, that income is not taxable in France, only in the UAE.
But what you need to keep in mind is - the moment you set foot in France to deliver that service, the equation shifts. If you are present in France for more than 183 days in any twelve months, France gets the right to tax that income.
How the Avoidance of Double-Taxation Actually Works
It's simple - if you are earning income connected to France, France may tax it. And if your income is connected to the UAE, the UAE may tax it. But the key part is - You won’t be taxed twice on the same income.
There are two main ways this relief is given -
- Tax Credit Method: You pay tax in one country and get a credit in the other. This means that if you reside in the UAE, are a citizen of France, and pay UAE taxes on the income earned in the UAE, then you would be taxed in France also on the income but only for the balance tax amount, which is remaining after the deduction of UAE taxes, which are already paid.
- Tax Exemption Method: One country allows you to skip tax because it’s already taxed elsewhere. As per this method, if a UAE resident is earning some income in France, which is as per the double taxation treaty agreement, then Tax authorities of France may charge the tax but on the same hand UAE wont. As per this method there would be no risk of double taxation on the same income.
Now, Let’s Break Down the applicability of the treaty on Different Types of income.
Dividends, Interest and Royalties
The treaty stipulates a 0% withholding tax rate on interest, dividend, and royalty payments between France and UAE. The individuals can get the royalty payments and benefit from reduced or 0% withholding tax compared to the default tax rate under French domestic law.
Business Profits
A company would have the obligation to pay the taxes on its profits to the country in which it has the permanent establishment. Hence, as per the treaty, if the company has any permanent establishment in either of the countries then it would have the tax obligation to that country. The permanent establishment can include the company branch, office, factory, workshops, etc.
A permanent establishment is a fancy term for a fixed place of business. An office. A warehouse. A construction site that runs for more than 12 months - France will treat these as permanent establishments. Because the treaty looks at the continuous presence. One project, one timeline.
But here’s something you need to remember - these reduced rates are not automatic. You have to claim them. You need to file the right forms with the French tax authorities and prove you are a resident of the UAE for tax purposes. The Tax Residency Certificate from the UAE is your key. Without it, the treaty might as well not exist.
Employment income
Salary earned by an individual would usually be taxed in the country where the work is carried out physically. Income earned in the UAE would be exempt from the French tax. If the physical work is done for more than 183 days in France, then that would be subjected to the tax based on certain conditions for the individuals working in the UAE.
Capital gains
For the individual who receives capital gains from shares in real estate, the tax would be charged in the country where the asset is situated; on the other hand, if the capital gains arise from normal equity shares, then the tax would be charged based on the country of residence of the seller.
Who All Can Benefit From the Treaty?
The main objective of the France-UAE Double Taxation Treaty is to provide benefits for the entities carrying out businesses and work across both countries. The individual employees and expatriates can gain benefits through this treaty by paying minimum taxes. The businesses and companies, along with the investors having investments in either of the countries, can benefit from this treaty.
Here’s My Checklist for You
- Get your Tax Residency Certificate - from the FTA before you sign any contract with a French party.
- Structure your contracts clearly - Specify where the work is performed - For instance, if you are a consultant, state in the agreement that services are delivered from the UAE.
- Track your Days - Remember the 183-day rule, because courts do not care if you were two days over in France due to a delayed flight.
- Get local Advice - If you are setting up a French subsidiary or acquiring a French company, get professional advice from a French tax expert too.
- Maintain all the required documents- Accurate documents are one of the main compliance requirements in order to be eligible for the benefits under the treaty.
Let’s Circle Back
The France-UAE Double Tax Treaty is a tool that can help you protect your income. If you are already operating between these two countries or even planning to, this is something you do not want to ignore. So, map it out - understand where your people are, where your value is created, and how the treaty applies to your situation.
How Can CDA help?
CDA’s tax team has been providing tax assistance related to all the prevailing tax regimes in the UAE for more than a decade. The entities and individuals having financial ties across both countries can approach the experts of the CDA, whereby the benefits of the treaty can be availed by them and reduce the risk of double taxation on the income earned. The team of CDA is always ready to provide assistance regarding any tax relief or provisions whereby the clients can reduce the risk of non-compliance and also reduce the tax burden.
To know more about the tax assistance provided by our team, connect with us today!
Mitesh Maithia
Tax Manager
Mitesh is a Tax Professional with expertise in direct, indirect, and international taxation, including transfer pricing, since 2018. Passionate about making complex tax matters simple, he shares insights to help businesses stay compliant and forward-looking.
