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Double Tax Treaties in Dubai

Dubai is a 'no tax' emirate. Accordingly double taxation treaties are aimed at making Dubai a more attractive territory in which to operate by reducing taxation levied in the foreign jurisdiction on profits remitted abroad by foreign corporations operating in Dubai.

Dubai (the United Arab Emirates) has an extensive and growing list of double tax treaties, which by November 2008 numbered 47 countries. This network includes treaties with China, France, Germany, India, Indonesia, Italy, Luxembourg, Malta, Malaysia, the Netherlands, Singapore, South Korea.

In May 2008, negotiating teams form the Netherlands Antilles and the United Arab Emirates kicked off the first round of negotiations towards a double taxation treaty, whilst in October of that year, the UAE and Japan were said t be close to concluding a double tax treaty. A new tax treaty between the UAE and Vietnam was signed in February 2009.

Under these treaties profits derived from shares, dividends, interest, royalties and fees are taxable only in the contracting state where the income is earned.

Although corporate income tax is not levied in the UAE the provisions of the treaties do not state that such income must be taxed to qualify for benefits.

Thus dividend income paid by a UAE company to a company which has a double taxation treaty with UAE may not be taxable in the hands of the foreign parent corporation. However it is wise to study the text of the treaties themselves before assuming anything about the tax treatment of untaxed income flows originating in Dubai.

Recent additions to the UAE's list of bilateral tax agreements were Luxembourg in 2005, and the Netherlands in 2007.

The signature of the UAE-Netherlands DTAA in May 2007 coincided with an official visit by a Dutch trade delegation, led Dutch Foreign Trade Minister Frank Heemskerk, to the Dubai Chamber of Commerce and Industry where he opened the Dutch Investment Office in Dubai.

According to Obaid Humaid Al Tayer, Chairman of Dubai Chamber of Commerce, Dubai's direct non-oil trade with the Netherlands reached AED3.2 billion ($880 million) in 2006.

At the time, there were 207 Dutch companies operating in Dubai, 32 of which were fully owned by Dutch businessmen.





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