The United Arab Emirates (UAE) and Thailand have enjoyed a long-standing diplomatic relationship rooted in mutual respect and economic cooperation. As part of their commitment to facilitating cross-border trade and investment, the two nations signed a Double Taxation Avoidance Agreement (DTA) on March 1, 2000. This agreement officially entered into force on January 4, 2001, aiming to eliminate double taxation and promote smoother investment flows between the two countries.
Who Does the Treaty Apply To?
As outlined in Article 1, the treaty applies to individuals and legal entities who are residents of either the UAE or Thailand.
Article 4 further clarifies that a “resident of a Contracting State” refers to any person liable to tax in that state by reason of domicile, residence, place of incorporation, or other similar criteria.
When an individual qualifies as a resident in both countries, Article 4 provides a series of tie-breaker rules to determine single residency, applied in the following order:
✓ Country in which the individual has a permanent home;
✓ Country where the individual has a habitual abode;
✓ Country where the individual maintains the center of vital personal or economic interests;
✓ Country of nationality.
If none of the above criteria is decisive, the competent authorities of both states shall settle the matter through mutual agreement.
Corporate Residency and Permanent Establishments (PE)
For legal entities, residency is determined by the location of management or place of incorporation. Under Article 5, the concept of Permanent Establishment (PE) is key to determining tax obligations for cross-border operations.
Material PE includes:
✓ A fixed place of business such as a place of management, branch, office, factory, or workshop;
✓ Sites for extraction of natural resources, including mines, oil wells, and quarries;
✓ A farm or plantation, or a permanent warehouse used as a storage facility;
✓ Construction, assembly, or installation projects, or supervisory activities lasting more than six months;
✓ Services or consultancy projects performed by staff physically present in the other state for more than six months in connection with the same or a related project.
Agent PE arises where a person:
✓ Habitually concludes contracts on behalf of a foreign enterprise;
✓ Maintains stock and regularly delivers goods for that enterprise;
✓ Habitually secures orders almost exclusively for the enterprise or a group it controls.
Taxes Covered (Article 2)
In the UAE:
✓ Income tax
✓ Corporate tax (UAE federal tax)
In Thailand:
✓ Personal income tax
✓ Petroleum income tax
Covered Types of Income and Their Tax Treatment
Article |
Income Type |
Tax Treatment |
Notes |
|---|---|---|---|
| 6 | Income from Immovable Property | Taxed in the country where the property is located | |
| 7 | Business Profits | Taxed in the residence country unless PE exists in the other country | If PE exists, taxed in that country too |
| 8 | Shipping and Air Transport | Taxed only in the residence country of the enterprise | |
| 10 | Dividends | Taxed in both countries | Source country typically applies a capped rate, often 10% |
| 11 | Interest | Taxed in both countries | Capped withholding tax, usually 10% |
| 12 | Royalties | Taxed in both countries | Capped source tax rate, typically 5%-10% |
| 13 | Capital Gains | Generally taxed in residence country | Exceptions for real estate and PE-connected gains |
| 14 | Independent Personal Services | Taxed in residence country | Unless fixed base in the other country exists |
| 15 | Dependent Personal Services | Taxed where services are performed | Exceptions for short stays (<183 days) |
| 19 | Directors’ Fees | Taxed in the country of the paying company | |
| 20 | Pensions | Usually taxed in the recipient’s residence country | |
| 21 | Government Service Income | Taxed only in the paying country | |
| 17 | Students and Trainees | Exempt in the host country | If in country solely for education/training |
| 22 | Other Income | Taxed in the country of residence | Unless linked to a PE in the other country |
Main Provisions of the DTA
✓ Income from Immovable Property (Art. 6): Taxed in the country where the property is located.
✓ Business Profits (Art. 7): Taxed in the residence country unless a PE exists in the other state; in that case, profits may also be taxed there.
✓ Shipping and Air Transport (Art. 8): Income is typically taxed only in the country where the enterprise is resident.
✓ Dividends (Art. 10): May be taxed in both countries. Withholding tax by the source country is typically capped at 10%.
✓ Interest (Art. 11): Similar to dividends, capped withholding tax usually does not exceed 10%.
✓ Royalties (Art. 12): Taxable in both states, with source-country withholding typically limited to 5% to 10%.
✓ Capital Gains (Art. 13): Generally taxed in the residence state, unless gains involve immovable property or interests in property-rich companies.
✓ Independent Personal Services (Art. 14): Taxed in the country of residence, unless a fixed base is maintained in the other country.
✓ Dependent Personal Services (Art. 15): Usually taxed where services are performed, with exceptions (e.g., short-term assignments under 183 days).
✓ Directors’ Fees (Art. 19): Taxed in the country of the company paying the fees.
✓ Pensions (Art. 20): Usually taxed in the recipient’s country of residence.
✓ Government Service (Art. 21): Generally taxed only in the paying country.
✓ Students and Trainees (Art. 17): Tax-exempt in the host country if present solely for education or training.
✓ Other Income (Art. 22): Taxable only in the country of residence unless connected to a PE in the other country.
Detailed Commentary on Select Articles
A. Dividends (Article 10) Dividends paid from one contracting state to a resident of the other may be taxed in both jurisdictions, but the source-country withholding tax is limited—typically to 10%. The exact rate may vary depending on conditions such as shareholding thresholds, and should be confirmed by consulting the DTA protocol and relevant domestic laws.
B. Interest (Article 11) Interest income is subject to tax in both the source and residence countries, with the source-country withholding capped at 10%. Exemptions or reduced rates may apply for interest paid to government entities or financial institutions.
C. Royalties (Article 12) Royalties are taxable in both states, with the source-country withholding rate typically ranging from 5% to 10%. These include payments for intellectual property, software, technical services, and know-how.
D. Capital Gains (Article 13) Capital gains are generally taxed in the taxpayer’s country of residence. However, gains from immovable property and shares in real estate holding companies may be taxed in the country where the property is located. Gains from movable property forming part of a PE’s assets may also be taxed in the country where the PE is located.
E. Relief From Double Taxation (Article 22) Each contracting state shall offer relief from double taxation. This is usually provided via either the exemption method or the credit method, as determined by domestic law. For example, if a UAE resident pays tax in Thailand, the UAE may grant a credit for Thai taxes paid.
Illustrative Application of DTA: Thai Residents Receiving UAE Income
Income Type |
Taxable in Thailand |
Taxable in UAE |
| UAE Immovable Property Income | – | ✓ |
| Dividends from UAE (10% WHT) | ✓ | ✓ |
| Interest from UAE (10% WHT) | ✓ | ✓ |
| Royalties from UAE (10% WHT) | ✓ | ✓ |
| Capital Gains (except UAE real estate) | ✓ | – |
| Independent Personal Services in UAE | ✓ | ✓ |
| Employment in UAE < 183 days, paid by foreign employer | ✓ | – |
| Directors’ Fees from UAE Companies (10% WHT) | ✓ | ✓ |
| Employment on UAE Ships/Aircraft | ✓ | ✓ |
| Pensions from UAE (5% WHT) | ✓ | ✓ |
| UAE Government Pensions and Compensation | – | ✓ |
Concluding Remarks
The Thailand–UAE Double Taxation Avoidance Agreement is a key instrument for enhancing cross-border trade, investment, and economic cooperation. It offers legal certainty and ensures equitable tax treatment through clear allocation of taxing rights. With alignment to international best practices and the OECD’s Multilateral Instrument, the DTA supports transparency and reduces risks of tax disputes. As global tax dynamics evolve, the treaty remains a foundational framework for businesses and individuals engaged in cross-border activities between Thailand and the UAE.