Experts back tribunal ruling against taxing NRIs in UAE
June, 30th 2006
The Income Tax Appellate Tribunals (ITAT) recent decision against taxing non-resident Indians (NRIs) working in United Arab Emirates (UAE), in the Green Emirates Shipping and Travels case, has found support among the tax experts and courts abroad.
Netherlands-based professor Klaus Vogel, an international taxation Guru, in his column Tax Monitor, published in the Bulletin for International Taxation, said the Mumbai tribunals decision in the case had a parallel in a Dutch Courts ruling on similar lines.
In the Emirates case, the assessing officer had contended that since UAE does not have a tax regime, the shipping company is liable to pay tax in India. The provisions of the Double Taxation Avoidance Agreement between both the countries, do not apply here, he had said.
However, the ITAT took the stand that a tax treaty takes into account not only the current taxation but potential double taxation.
It overruled the earlier decision saying the right to tax vests with the member states of the UAE and that right, whether exercised or not, remains the exclusive right of the UAE government and hence the taxpayer is entitled to the provisions of the treaty.
The decision provides relief to the NRIs in UAE who remit about Rs 4,000 crore annually in India. The ITATs decision ended the confusion created by an earlier Authority for Advanced Rulings (AAR) decision, which decided in favour of the revenue department.
The AAR had held that since the UAE does not have an individual income tax regime in place, the taxpayer is not entitled to the provisions of the Double Taxation Avoidance Agreement.