Your UK Client Just Told You They Need to Withhold 20%
You have won a retainer contract with a London-based marketing agency. You operate your agency from Dubai. You send your first invoice for £8,400. Your client emails back saying their finance team needs to withhold 20% for UK tax before paying you. You would receive £6,720 instead of £8,400.
This is standard practice under UK tax law. When a UK company pays a non-resident for services performed wholly or partly in the UK, they are required to deduct 20% income tax and pay it to HMRC. But for Dubai-based agencies, there is a straightforward way to avoid this deduction.
The UK and UAE have a double tax treaty. Under that treaty, business profits earned by a UAE resident company are only taxable in the UAE, provided the company does not have a permanent establishment in the UK. To claim this exemption, you need to give your UK client the right paperwork before they process your invoice.
This article explains exactly what you need to do to invoice your UK client from Dubai without withholding tax.
Why UK Clients Withhold 20% from Non-Residents
Section 874 of the Income Tax Act 2007 places an obligation on UK companies to withhold 20% tax from payments made to non-residents for services performed in the UK. The rule applies whether the services are performed by a person, a partnership, or a company.
Your UK client's finance team is not being difficult. They are complying with HMRC rules. If they pay you without withholding and HMRC later finds the payment should have been taxed, HMRC can pursue your client for the unpaid tax plus interest and penalties. No finance director wants that risk.
The key phrase is "services performed in the UK." If your Dubai team works entirely from Dubai, there is a strong argument that the services are performed outside the UK. But HMRC's default position is that the client must withhold unless they hold a valid declaration from you confirming treaty exemption.
This is where the UK-UAE double tax treaty comes in.
The UK-UAE Double Tax Treaty: Your Exemption Route
Article 7 of the UK-UAE double tax treaty states that business profits of a UAE resident company are only taxable in the UAE, unless the company has a permanent establishment in the UK. A permanent establishment typically means a fixed place of business in the UK, such as an office, a branch, or a dependent agent operating on your behalf.
If your Dubai agency has no UK office, no UK employees, no UK bank account, and no UK-based director who makes decisions, you almost certainly do not have a permanent establishment. Your business profits are taxable only in the UAE.
But your UK client cannot simply take your word for it. They need a formal declaration to put on file. That declaration is called a "DT Individual" form, or more commonly, a declaration of treaty residence.
What Is a DT Individual Form?
HMRC's DT Individual form is the standard document used by non-UK residents to claim relief under a double tax treaty. The form confirms your tax residence in the UAE and declares that you are entitled to treaty benefits.
The form asks for your name, address, tax residence country, and the specific treaty article you are relying on. For agency services, you would reference Article 7 of the UK-UAE treaty.
You do not need to submit this form to HMRC yourself. You give it to your UK client, who keeps it on file as evidence that they were entitled to pay you without withholding. If HMRC ever questions the payment, your client produces the form.
Do You Need a Certificate of Residence?
Strictly speaking, the DT Individual form is sufficient for most UK clients. But some larger companies or more cautious finance teams will also ask for a Certificate of Residence from the UAE Federal Tax Authority.
A Certificate of Residence is an official document issued by the UAE FTA confirming that your company is tax resident in the UAE. You can apply for one through the EmaraTax portal. The certificate typically covers a specific tax year and costs nothing to obtain.
If your UK client asks for one, provide it. It strengthens your claim and removes any doubt. If they do not ask, the DT Individual form is usually enough.
Step-by-Step: How to Invoice Your UK Client Without Withholding
Here is the practical process to follow so you invoice your UK client from Dubai without withholding tax.
Step 1: Confirm Your UK Client's Understanding
Before you send your first invoice, email your client's finance team. Explain that you are a UAE resident company with no permanent establishment in the UK, and that you are entitled to exemption under the UK-UAE double tax treaty. Ask if they need a DT Individual form or a Certificate of Residence before processing your invoice.
Most finance teams will say yes. Some will send you their own version of a treaty declaration form. That is fine. Fill it out.
Step 2: Complete the DT Individual Form
Download the DT Individual form from the HMRC website. Fill in your company details, your UAE tax residence, and the treaty article you are claiming (Article 7). Sign and date it.
If you are a sole trader, use your personal details. If you are a limited company, use the company name and registered address in Dubai.
Step 3: Obtain a Certificate of Residence (If Needed)
Log into the EmaraTax portal. Request a Certificate of Residence for your company for the current tax year. Download the PDF once issued. Keep it on file alongside the DT Individual form.