India–UAE Tax Treaty (DTAA): A 2026 Guide for Businesses

The India UAE DTAA caps Indian tax on dividends and royalties at 10% and on interest at 12.5% (5% for bank loans). Service fees are taxable in India only through a permanent establishment (PE), and most sellers of Indian shares get no relief. A UAE group paid from India in the tax year ending 31 March 2027, the first under the Income-tax Act 2025, should confirm before the next payment that its UAE company is a treaty resident, that its Indian activity is not a PE after the Supreme Court’s Hyatt ruling, and that its paperwork and substance will survive anti-abuse rules.

India–UAE DTAA at a glance

Signed on 29 April 1992, the treaty has been in force since 22 September 1993. A 2007 Protocol (effective in India from 1 April 2008; S.O. 2001(E)) rewrote residence, dividends and capital gains and added Article 29. A 2012 Protocol (in force 12 March 2013; S.O. 951(E)) covers exchange of information only. We found no later protocol, and there is no most-favoured-nation clause.

Who qualifies as a UAE resident

A UAE company must be “incorporated in the UAE and which is managed and controlled wholly in UAE” (Art 4(1)(b)). UAE law also treats a foreign company “effectively managed and controlled” in the UAE as resident (Art 11(3)(b), UAE Federal Decree-Law No. 47 of 2022), but such a company fails the treaty’s incorporation limb.

A company is also resident in India if its place of effective management is in India, meaning where “key management and commercial decisions necessary for the conduct of business of the company as a whole are, in substance, made” (s.6(10), Income-tax Act 2025). A dual resident is resident where its place of effective management is (Art 4(4)). A Dubai company whose real decisions are taken by promoters in India risks failing the “wholly in UAE” test, becoming Indian resident, or both.

Permanent establishment after Hyatt

Article 5 creates a PE in three ways:

1. Fixed place, such as an office or branch, excluding preparatory or auxiliary activity (Art 5(1)–(3)).
2. Services through personnel “for the same project or connected project for a period or periods aggregating more than 9 months within any twelve-month period” (Art 5(2)(i)). Construction projects must last more than 9 months (Art 5(2)(h)).
3. Dependent agent who “has, and habitually exercises” authority to conclude contracts (Art 5(4)–(5)). The MLI does not modify Article 5.

In Hyatt International Southwest Asia Ltd v ADIT (2025 INSC 891, 24 July 2025), a Dubai (DIFC) company gave “strategic oversight” services to Indian hotels owned by another company. It had no exclusive or designated space in the hotels, and no single employee exceeded the 9-month stay (paras 17, 21). The Supreme Court affirmed the finding of a fixed place PE under Article 5(1) (paras 22, 24):

• The test is “a fact-specific inquiry” into the enterprise’s “right of disposal over the premises”, its control and supervision, and any “ownership, management, or operational authority” (para 15).
• The company could appoint the general manager, set HR and procurement policy, control pricing, run operating bank accounts and assign staff (para 16). Exclusive space was not required (para 17).
• An Indian company running daily operations did not “decisively support” the taxpayer’s case: “legal form does not override economic substance” (para 19).
• Under Article 5(2)(i), the Court said, what counts is “continuity of business presence in aggregate – not the length of stay of each individual employee” (para 21). But the holding was a fixed place PE under Article 5(1) (paras 22, 24); the Court made no separate finding of a service PE, and it proceeded on the basis that the company was a UAE tax resident without deciding residence (paras 3.1, 10).
• The Court also noted a Delhi High Court Larger Bench ruling that profits can be attributed to a PE even where the enterprise as a whole made a loss (para 23). That question was not on appeal (para 3.10).

A UAE headquarters that supervises Indian staff, controls pricing or bank accounts, or rotates people through Indian premises should test those facts against Hyatt. Our insight on running an India business from Dubai turns those facts into a governance checklist and covers the residence tests. For seconded staff, see our PE and employer-of-record insight.

Dividends, interest, royalties and technical services

A lower domestic rate prevails, because the Act applies where “more beneficial” (s.159(4), Income-tax Act 2025); see our withholding tax rates insight. For how the Qatar, Oman and Saudi Arabian treaties compare on the same income, see India’s Gulf tax treaties. Amounts above arm’s length lose the cap (Arts 11(7), 12(6)).

No technical-services article. Unlike India’s treaties with Singapore and Mauritius, this one has no fees-for-technical-services article. Indian law deems fees for “managerial, technical or consultancy services” to arise in India (s.9(7), Income-tax Act 2025), but the treaty prevails where more beneficial. A service fee is a royalty only if it pays for IP, equipment or “information concerning industrial, commercial or scientific experience” (Art 12(3)). Otherwise, where it is properly business profit and not another specifically covered class of income, it is taxable only through a PE (Arts 7(1), 22). Describing a contract as management or consultancy services does not by itself secure that result. In Hyatt, the royalty claim failed in the High Court and was not before the Supreme Court (paras 3.4, 3.9–3.10).

Worked example: management services to an Indian subsidiary

A Dubai company, managed wholly in the UAE, charges its Indian subsidiary INR 5 crore a year for management services and INR 1 crore for the group brand. Figures are illustrative, before surcharge and cess.

The UAE credit “cannot exceed the amount of Corporate Tax due on the relevant income” and cannot be carried forward or back (Art 47(2)–(3), Decree-Law 47 of 2022). Assuming the royalty is fully taxable in the UAE at 9%, in the same period, and the credit is otherwise available, India’s 10% on the gross royalty exceeds 9% UAE tax on the net royalty (INR 10 lakh against at most INR 9 lakh here), so part of the Indian tax is a final cost. Qualifying free zone income and exempt income differ: where no UAE tax is due on the royalty, all of the Indian tax is a final cost.

Capital gains on Indian shares

Under the 2007 Protocol, India may tax gains on shares of land-rich companies (Art 13(3)) and on any other shares “in a company which is a resident of a Contracting State” (Art 13(4)). The Protocol applies in India from 1 April 2008 with no grandfathering clause (Protocol Art 8). A UAE holding company selling Indian shares therefore pays Indian tax at domestic rates, however old the holding. The treaties that do still stop Indian tax on a share sale are listed in where India still can’t tax your exit. The only treaty exemption is for government income “including capital gains tax”, which for the UAE covers the Central Bank, ADIA, the Abu Dhabi Fund for Economic Development and other agreed bodies (Art 24). A UAE-resident wholly owned subsidiary of ADIA can also qualify, subject to conditions, for India’s domestic exemption on eligible infrastructure investment made by 31 March 2030; see sovereign and pension fund tax exemption in India. The GAAR carve-out for pre-1 April 2017 investments (r.128(1)(d), Income-tax Rules 2026, substituted by Notification 55/2026) switches off GAAR only; it creates no treaty exemption. For holding locations compared, see Singapore vs UAE for an Indian investment.

Anti-abuse: Article 29, the MLI and GAAR

Article 29, added in 2007, denies benefits to an entity where “the main purpose or one of the main purposes of the creation of such entity was to obtain the benefits of this Agreement”, and “legal entities not having bona fide business activities shall be covered”.

The MLI. Both states are parties, and the ITD synthesised text applies the MLI preamble, the principal purpose test (PPT, shown as replacing Article 29), a three-year mutual agreement window (Article 27 says two) and corresponding adjustments, for India from 1 April 2020.

Whether India can enforce it. In Sky High Appeal XLIII / TFDAC Ireland II (ITAT Mumbai, ITA 1122 and 1198/Mum/2025, 13 August 2025), the Tribunal, following Nestle SA (SC 2023), held that the synthesised text “cannot be treated as a source of enforceable law” (para 43) and that the MLI PPT “cannot be invoked” without a s.90(1) notification for the India–Ireland treaty (para 47); alternatively, the PPT would not have denied relief on the facts (paras 77–79). In Kosi Aviation Leasing (ITAT Delhi, ITA 994/Del/2025, 30 September 2025), the Tribunal agreed: “A specific notification for each country is required” (paras 22, 37).

For the UAE treaty, the position is unsettled:

• Both are tribunal decisions on the India–Ireland treaty and do not conclusively decide the UAE position; the ITD synthesised text presents the MLI as modifying the UAE treaty. We found no ruling on the UAE treaty, no reported Revenue appeal and, as of 29 October 2026, no notification giving effect to the MLI for the India–UAE treaty (it would now issue under s.159(1)). Officers may still apply the PPT.
• If the MLI is not effective here, Article 29 arguably still applies, so a UAE entity without bona fide business activity is exposed either way. Filing any mutual agreement request within two years avoids an argument over the window.

GAAR and Tiger Global. GAAR (Chapter XI) applies even where the treaty is more beneficial (s.159(6)), unless the year’s total tax benefit is INR 3 crore or less (r.128(1)(a)). In AAR v Tiger Global International II Holdings (2026 INSC 60, 15 January 2026), the Supreme Court, construing s.90(4) of the 1961 Act (now s.159(8)), called a tax residency certificate an “eligibility condition”, not “sufficient” evidence of residency (para 37). Substance matters more than the certificate. See our holding-jurisdiction substance insight.

Documentation: UAE TRC and Form 41

A non-resident claiming treaty relief needs a certificate of residence from its own government, plus the prescribed information (s.159(8), Income-tax Act 2025). That is Form 41, which replaces Form 10F from 1 April 2026; supporting documents must be kept (r.75(1)–(2), Income-tax Rules 2026). The filing mechanics are in our Form 10F and Form 41 insight.

The UAE Federal Tax Authority, which issues it, says an applicant company “must be already incorporated or established for at least 12 months”, that “Branches of foreign companies and offshore companies are not eligible”, and that applicants need “proof of effective management and control in the UAE, where applicable”. A certificate covers the current or a prior tax period, or another 12-month period the applicant selects, but “cannot be issued to cover a future period”. For a period still running, a company can apply “after (3) three months into the period or any time after expiry of the period” (FAQ 6). A new UAE company therefore cannot give an Indian payer a certificate during its first year. Domestic-rate withholding may need to be budgeted for where a valid TRC cannot be produced, subject to Indian withholding procedures, such as a certificate for lower deduction, and a later refund claim. A certificate for that year can apparently be obtained afterwards, which may support a later claim in the Indian return.

The UAE side

UAE corporate tax is 9% above a Cabinet threshold, with 0% on qualifying income of a qualifying free zone person (Art 3(1)–(2), Decree-Law 47 of 2022), and a top-up to a 15% effective rate for large multinationals (Art 3(3)). The Ministry of Finance applies this Domestic Minimum Top-up Tax, for financial years from 1 January 2025, to UAE entities of groups with global revenue of EUR 750 million or more in two of the four preceding years.

Dividends and gains on a holding of 5% or more, held or intended to be held for an uninterrupted 12 months, may be exempt under the participation exemption (Art 23); India’s tax on that income is then a final cost.

Investment protection

The India–UAE bilateral investment treaty (signed 13 February 2024, in force 31 August 2024, DEA) excludes “any measure regarding taxation” (Art 2.4(ii)), so it is no route for treaty-rate disputes. For other claims, an investor must first file in the host state’s courts or administrative bodies within one year of when it knew, or should have known, of the measure and the resulting loss. Local remedies count as pursued three years after that date without a satisfactory resolution, or earlier if exhausted; the step does not apply where no domestic remedy can reasonably provide any relief (Art 17.1). Benefits are denied to an investor owned or controlled by persons of a non-Party “or of the denying Party” (for claims against India, Indian nationals or entities), and to one established, restructured or lacking substantial business activity “with the primary purpose of gaining access to the dispute resolution mechanisms” (Art 36.1). Cover is also excluded where a person of a country sharing a land border with India holds a beneficial interest (Arts 36.2–36.3). See the investment treaty protection reset insight.

Points to review

• Residence. Board decisions, signatories and key management sit wholly in the UAE (Art 4(1)(b)), with no place of effective management in India (s.6(10)).
• PE. Staff-days on connected Indian projects are tracked over every 12-month window (Art 5(2)(i)), and control over Indian premises, staff, pricing and bank accounts is tested against Hyatt.
• Payment streams. Contracts separate royalties (Art 12) from services (Art 7), and interest and fees are at arm’s length (Arts 9, 11(7), 12(6)).
• Paperwork timing. The payer has a UAE TRC for the right period and the Form 41 before applying the treaty rate; for a UAE company under 12 months old, domestic-rate withholding is budgeted for where a valid TRC cannot be produced.
• Anti-abuse file. The UAE entity’s commercial reasons and substance are documented against Article 29, the PPT and GAAR.
• Net cost. The UAE credit cap (Art 47), the participation exemption and, for large groups, the 15% top-up tax are modelled.

Common questions

Does the India UAE DTAA have a fees for technical services clause?

No. Service fees that are properly business profits, and not royalties (Art 12(3)) or another specifically covered class of income, are taxable in India only through a PE (Art 7).

What is the dividend withholding rate under the India–UAE tax treaty?

At most 10% for a UAE beneficial owner, whatever the holding (Art 10(2)), or a lower domestic rate (s.159(4)).

Are capital gains on Indian shares exempt under the DTAA between India and UAE?

No. Since the 2007 Protocol, India may tax gains on shares of Indian companies (Art 13(4)), with no grandfathering. Only government bodies covered by Article 24, such as ADIA, are exempt.

How does a UAE company get a tax residency certificate for India?

From the Federal Tax Authority, once it has been established for 12 months. It covers a current or past period, never a future one, and is used in India with Form 41.

Does the MLI principal purpose test apply to the India UAE double tax treaty?

The ITD synthesised text says so, but the Tribunal has held (for Ireland) that a treaty-specific notification is needed; we found none for the UAE. If the PPT does not apply, Article 29 arguably does. GAAR applies either way where the year’s tax benefit exceeds INR 3 crore, except on income from transferring investments made before 1 April 2017.

Sources

1. Agreement between India and the UAE for the avoidance of double taxation (signed 29 April 1992; in force 22 September 1993), consolidated text with notifications GSR 710(E) of 18 November 1993, S.O. 2001(E) of 28 November 2007 and No. 29/2013 of 12 April 2013. Income Tax Department. incometaxindia.gov.in
2. Protocol amending the India–UAE DTAA, signed 26 March 2007, notified by S.O. 2001(E), 28 November 2007 (Arts 1–8). Ministry of Finance (Department of Revenue), Gazette of India. incometaxindia.gov.in
3. Second Protocol amending the India–UAE DTAA, signed 16 April 2012, in force 12 March 2013, S.O. 951(E), Notification No. 29/2013, 12 April 2013. Gazette of India, linked from the ITD treaty page. incometaxindia.gov.in
4. Synthesised text of the MLI and the India–UAE DTAA. Income Tax Department, viewed 29 October 2026. incometaxindia.gov.in
5. Income-tax Act 2025, s.159. Income Tax Department. incometaxindia.gov.in
6. Income-tax Act 2025, s.6(10). Income Tax Department. incometaxindia.gov.in
7. Income-tax Act 2025, s.9(7). Income Tax Department. incometaxindia.gov.in
8. Income-tax Rules 2026, G.S.R. 198(E), 20 March 2026 (rr.75, 128). CBDT. incometaxindia.gov.in
9. CBDT Notification No. 55/2026, G.S.R. 241(E), 31 March 2026 (r.128). CBDT. incometaxindia.gov.in
10. Hyatt International Southwest Asia Ltd v Additional Director of Income Tax, 2025 INSC 891, Civil Appeal No. 9766 of 2025, 24 July 2025. Supreme Court of India. sci.gov.in
11. The Authority for Advance Rulings (Income Tax) v Tiger Global International II Holdings, 2026 INSC 60, 15 January 2026. Supreme Court of India. sci.gov.in
12. Sky High Appeal XLIII Leasing Company Ltd / TFDAC Ireland II, ITA 1122/Mum/2025 and 1198/Mum/2025 and others, ITAT Mumbai ‘I’ Bench, 13 August 2025. Income Tax Appellate Tribunal. itat.gov.in
13. Kosi Aviation Leasing Ltd and others, ITA 994/Del/2025 and others, ITAT Delhi ‘D’ Bench, 30 September 2025. Income Tax Appellate Tribunal. itat.gov.in
14. Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended to Federal Decree-Law No. 28 of 2025 (Arts 3, 11, 23, 47, 50). UAE Ministry of Finance (English text marked “not an official Translation”). mof.gov.ae
15. “Issuance of a Tax Residency & Commercial Activity Certificate”. UAE Federal Tax Authority, page last updated 22 October 2026. tax.gov.ae
16. “UAE Domestic Minimum Top-up Tax”. UAE Ministry of Finance, viewed 29 October 2026. mof.gov.ae
17. Bilateral Investment Treaty between India and the UAE, signed 13 February 2024 (Arts 1.9, 2.4, 17.1, 36, 39), and the DEA BIT table (signed 13.02.2024, in force 31.08.2024). Department of Economic Affairs. dea.gov.in

Related insights

• Form 10F and Form 41: tax residency certificates in India – filing the TRC and Form 41 that a treaty claim needs.
• India withholding tax rates and repatriation – domestic rates to set against the treaty caps.
• Permanent establishment risk and employers of record – PE risk from staff working in India.
• Singapore vs UAE to hold an Indian investment – how the two treaties compare on exits and anti-abuse.
• The UAE–India corridor and GIFT City – where GIFT IFSC fits in a UAE–India structure.
• India–UAE business structuring – setting up the operating and holding layers.
• UAE tax residency and TRCs for individuals – the residence tests for people rather than companies.

Disclaimer: This article is general information, not tax or legal advice; rules change, so check the current position and take advice on your facts before acting.