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. EU officials said so-called non-cooperative tax jurisdictions had about a year to change tax rules, but have so far not done so, Reuters reported. Representatives of the United Arab Emirates Ministry of Finance, the Organisation for Economic Co-operation and Development and the private sector celebrated 30 years of signing such agreements – the first treaty with France in 1989 – at an event in Dubai. In recent years, the United Arab Emirates has also undertaken reforms to combat international tax evasion. 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. There are 21 outstanding double taxation agreements, 12 signed but not yet ratified and nine currently under negotiation. The VaE signed an agreement with Saudi Arabia last May, the first in the GCC.
Among the countries under negotiation are Australia, Peru and Nepal. Earlier this month, seven new countries signed the Organisation for Economic Co-operation and Development`s (OECD) Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of tax information. 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. Of the 90 tax treaties in force, 42 are in Europe, 23 in Asia, 13 in Africa, 4 in the Middle East, two in South America, two in Central America, two in Oceania and one in North America and one in North America and the Caribbean. The treaty with Russia is a state agreement on investment income tax, which means that it applies only to the profits of dividends, interest and capital gains of governments and their financial or investment institutions. Following FATCA, the Organisation for Economic Co-operation and Development (OECD) launched a Global Tax Transparency Initiative, known as the Common Reporting Standard (SIR). The IRS is a comprehensive reporting system that relies heavily on the intergovernmental approach to THE implementation of FATCA. Like FATCA, the IRS requires all financial institutions established in a participating country to identify and report all reporting accounts (usually subject to reporting in a country participating in the IRS). Since May 2018, more than 100 legal systems have signed or are committed to signing IRS; Bahrain, Kuwait, Lebanon, Qatar, Saudi Arabia and the United Arab Emirates. 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. Foreign Account Tax Compliance Act (FATCA) is a U.S. law aimed at combating tax evasion by U.S. people. The intent behind the law is for foreign financial institutions (FFIs), i.e. non-U.S. companies. Financial institutions identify U.S. individuals with assets abroad and report them to the Internal Revenue Service (IRS). To date, a large majority of FFIs in the Middle East region are complying with FATCA requirements (either by entering into a FATCA agreement directly with the IRS or by complying with the inter-go agreement