How can businesses in the UAE benefit from the KSA-UAE Double Tax Treaty?
Many businesses in the UAE provide services to offshore clients across different countries. Companies operating internationally may benefit from double tax relief when dealing with clients in countries that have a Double Tax Treaty (DTT) with the UAE. Saudi Arabia (KSA) is one such country with which the UAE has an active DTT.
As a result, UAE businesses that provide services or conduct transactions with clients or customers in KSA may be eligible to claim tax benefits, provided they meet the required conditions and comply with the applicable regulations. These benefits help businesses avoid being taxed twice on the same income.
This blog explains the eligibility requirements, along with detailed information about Form Q7B, including its purpose and the submission process. By applying through this form, UAE businesses can avail themselves of the benefits offered under the UAE–KSA Double Tax Treaty and obtain relief from double taxation.
What is the Form Q7B?
Form Q7B must be filed by the Saudi entity seeking to claim benefits under the UAE–KSA Double Tax Treaty (DTT). This form is submitted by the entity located in the Kingdom of Saudi Arabia (KSA) that makes payments to a non-resident entity—typically a UAE-based company in this scenario.
Submitting Form Q7B is mandatory for Saudi entities to apply the applicable treaty benefits, such as reduced or exempt withholding tax, under the UAE–KSA DTT.
Procedure to be Followed For Q7B Submission
The following steps must be completed to submit Form Q7B and avail benefits under the UAE–KSA Double Tax Treaty:
The form must be completed in accordance with the guidance provided by the Saudi resident taxpayer.
The UAE entity must apply for a Tax Residency Certificate (TRC).
At the same time, the entity must obtain stamping from the UAE Federal Tax Authority (FTA) on the completed form.
The form must then be stamped and attested by the Ministry of Foreign Affairs (MOFA).
Once attested, the form must be submitted to the Saudi Embassy in the UAE for certification.
Finally, the certified Form Q7B must be submitted to the Zakat, Tax and Customs Authority (ZATCA) in Saudi Arabia.
What are the benefits of the UAE-KSA DTT?
There are multiple benefits of the UAE-KSA DTT. The businesses operating in both locations can get the tax benefits out of the agreement. Some of the major benefits include the following:
- Protection against double taxation
The agreement would protect the business entities from getting taxed on the same income in both countries. Hence, the tax would be payable in only one country, thereby ensuring proper cash-flow management of the companies.
- Avoiding tax evasion by the entities
The tax authorities of the respective locations can ensure that there is no tax evasion and a proper tax framework is followed, thereby ensuring transparency.
- Transparency between 2 countries
Both the countries can have the insights about the tax policies of each other’s country and can maintain the transparency, thereby reducing any risks of misunderstanding and incomplete information.
How to Overcome the Complexities of Double Tax Treaties?
In order to avail themselves of the benefit of the UAE-KSA DTT, the taxable entities must be aware of the following points:
- The form Q7B must be accurately and properly filled and submitted within the stipulated timeline.
- All necessary documents must be prepared and kept while availing the benefits. These documents must be as per the instructions of the authorities.
- The entities can avail the guidance of professional tax consultants like CDA in order to ensure effective and efficient business operations between the UAE and KSA.
- The business entities must ensure compliance with all the tax rules and regulations and must also stay updated with the new amendments.
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