UAE- KSA Enter into Double Tax Treaty

Earlier this month, the Kingdom of Saudi Arabia (“KSA”) issued the country’s first double tax treaty (“DTT”) with the United Arab Emirates (“UAE”). The aim is to avoid double taxation in respect to income, capital and further, to prevent tax evasion. This is the first treaty between the two respective (2) Gulf Cooperation Council states.

KEY PROVISIONS OF THE DTT:

• Under article 1 of the DTT, KSA and UAE nationals, residents and companies can benefit from the DTT;
• Article 8 of the DTT provides that operation of ships and aircrafts in international traffic are only taxable where the effective management of the respective company is domiciled;
• DTT caps Withholding Tax (“WTH”) on royalties’ payment from 15% to 10%, this includes but is not limited to the right to use scientific, commercial and industrial equipment;
• The treaty also includes elimination of double taxation by way of a credit against tax payable in KSA and UAE;
• Further, Article 25 of the DTT enables tax payers to seek assistance from their local authorities in resolving disputes related to but not limited to interpretation of the treaty;
• Under article 27 of the treaty, KSA and UAE’s governmental bodies and Private financial institutions are exempted from taxes on their investments in the respective countries; and
• Article 29 of the treaty also includes a Principal Purpose Test (“PPT”) provision preventing DTT relief for the transactions whose main aim is to obtain the DTT relief.

HOW CAN TLG HELP?

Our Corporate and Commercial division retains due expertise in advising on taxation and regulatory aspects relating to international trade such as but not limited to import, export and local manufacturing goods and customs.

Should you have any questions and/or queries, please feel free to contact our Team via email at: corporate@tlg.ae