“The agreements can also allow for an exemption from foreign taxation and certain obligations to comply with foreign taxes in other countries,” says Jochem Rossel, partner and international tax services provider at PwC Middle East. At the end of the day, it is a political process. Both countries have a double taxation convention, but sometimes it is not easy to share the cake. “For example, between Austria and the United Arab Emirates, there is a provision that your VaE income is exempt from Austrian income tax,” says Azhari, an expert in international tax law. “The German Double Taxation Convention stipulates that any income tax you pay in the United Arab Emirates is deducted from German income tax, so you pay the full income tax in Germany.” For companies, agreements can result in waivers and reduced withholding rates on dividends, interest and royalties. If a company in the United Arab Emirates has international shareholders, “it is not subject to the tax of the shareholders` jurisdiction,” Azhari said. To implement the BEPS measures, the United Arab Emirates has signed a multilateral instrument that facilitates the modification of its existing treaties. “It allows the UAE to change all tax treaties through an agreement,” says Khan of the law firm Al Tamimi. For a country with very low taxes, the United Arab Emirates has a vast network of double taxation conventions.
With agreements in 90 countries – and 33 in progress – the UAE has more double taxation conventions than countries such as Ireland, Luxembourg and Singapore. “The United States, in particular, receives special treatment for the UAE government and double taxation,” Said Al Khoori. “We didn`t negotiate anything, but we worked closely with the U.S. Treasury on the possibility of engaging in negotiations.” “Because the UAE doesn`t have a lot of taxes, companies in the United Arab Emirates have more advantages [of double taxation agreements],” says Shiraz Khan, who heads tax practices at the law firm Al Tamimi in the region. “This may mean that they are subject to a lower withholding rate, and that is only because of the terms of the contract.” Although tax treaties directly affect individuals and businesses, they are subject to a broader political environment. “The high level of fiscal sovereignty is, to some extent, concerned that too many companies are opening a branch or business in the United Arab Emirates. You can have a business in Europe and sometimes pay up to 50 percent in taxes, and here in the United Arab Emirates you pay zero percent tax,” says Azhari. Participation in an international tax framework offers significant guarantees and benefits for businesses and expatriates in the United Arab Emirates. Double taxation agreements assign tax duties and ensure that individuals and businesses are taxed only once.
They clarify how certain types of income, such as dividends, property income and pensions, should be taxed and establish non-discrimination rules to avoid differences in treatment based on factors such as nationality or residence. South Africans in the United Arab Emirates, who reside in South Africa, may soon have to pay foreign income tax. As part of a double taxation agreement with the United Arab Emirates, a provision of South African tax law provides for an exemption from the tax on income from working abroad, also known as the “Expat Tax”. This means that South African residents who work more than 183 days outside the country and who work for a continuous period of more than 60 days for a period of 12 months are not subject to South African tax.