The signing in April 2016 of a double taxation agreement between the United Kingdom and the United Arab Emirates was undoubtedly eagerly awaited and marks another step in the successful expansion of the UAE`s international tax network. When a company is considered to be established in the two contracting states, the competent authorities determine the place of residence of the company within the meaning of the treaty by mutual agreement. In the absence of an agreement, the company is not entitled to the benefits of the contract, with the exception of the treaty benefits covered by Article 21 (Elimination of Double Taxation), 22 (non-discrimination) and 23 (mutual agreement procedures). After the ratification of the agreement by the two countries that reacted, it came into force on 25 December 2016 and we are discussing here the main points and main provisions of the treaty. The latest publications on this subject were published on 18 January 2017 on the British government website. | Relevant provisions Comments Definition of „residents of a contracting state“ (Article 4) For uae residents, the text of the „personal scope“ of the agreement has been adapted from the OECD standard model and does not refer to the concept of „tax obligation“. The provisions largely reflect the standard terms of the current OECD model and individuals and businesses in the United Arab Emirates do not appear to be at a disadvantage because of their de facto tax-exempt status in the United Arab Emirates. The fact that, in practice, the Uae does not impose direct taxation on individuals and most businesses is not an objective obstacle to the use of the benefits of the agreement. The following persons are considered residents of the United Arab Emirates for the purposes of the agreement, i.e.
eligible for contractual benefits: – persons who reside, reside or be of vital interest in the United Arab Emirates (in accordance with UAE law); Legal entities incorporated or „recognized differently“ under UAE laws, including local and local governments; Government and political subdivisions; Pension plans established in the United Arab Emirates; Some recognized non-profit organizations. Both countries generally use the credit method to eliminate double taxation. However, the United Kingdom will exempt dividends paid by a British company to a company established in the United Kingdom if the exemption conditions under UK law are met. The exemption may also apply to the profits of a British company establishment in the United Kingdom if the exemption conditions under UK law are met. The Double Taxation Agreement between the United Arab Emirates and the United Kingdom aims to avoid double taxation of companies or individuals operating in the United Kingdom or vice versa. So simple, it ensures that individuals are not tax numbers in the United Arab Emirates and the UNITED Kingdom for the same income or on the investments they make. The agreement appears to effectively support cross-border investment by the United Arab Emirates – UAE – and, in general, contribute to the creation of a stronger framework for the development of trade relations between the United Kingdom and the United Arab Emirates. It should be noted that, as with most double taxation agreements, the double taxation agreement between the United Arab Emirates and the United Kingdom also contains provisions that prevent tax evasion. As of January 1, 2017, the provisions for tax withheld at source will apply for amounts paid or credited as of that date, while other taxes for taxable periods (for individuals) and exercises (for businesses) will take effect from January 1, 2017.