The UAE signed a Double Tax Agreement (DTA) with Israel on 31 May, which is intended to incentivise business development between the countries following their decision to ‘normalise’ relations last year. The treaty must be ratified by both countries and is expected to enter into force on 1 January 2022.
Based on the OECD Model Tax Convention, the treaty’s primary focus is the avoidance of double taxation. The applicable withholding tax rates under the treaty will be 0% to 15% for dividends, 0% to 10% for interest and 12% for royalties. The application of reduced withholding taxes will depend on aspects such as tax residency, the identity of the income’s recipient and beneficial ownership.
UAE national or resident individuals and UAE resident companies have access to an extensive and growing network of over 100 DTAs. These DTAs may not be immediately relevant for obtaining relief from UAE taxation – because the UAE does not levy WHT or other forms of non-resident taxation – but they continue to allow for relief from taxation in DTA partner countries.