The Income Tax Treaty (ITT) between the United Arab Emirates and Mexico has been ratified and entered into force in July 2014 and it will be effective from January 1, 2015. Article 4, article 10, article 11, article 12, article 13 of this treaty describe about residency, dividend, interest, royalties, capital gains respectively.
The treaty specifies that dividends are only taxable for residence and a 4.9% withholding tax (WHT) on Mexican source interest paid to UAE banks and 10% to other UAE resident persons and a 10% WHT on royalties. Again, it incorporates a drawback on Benefits Test for UAE resident persons deriving income from Mexico. According to this test, the profit of articles 8 (Shipping and Air Transport), 10 (Dividends), 11 (Interest), 12 (Royalties) and 13 (Capital Gains) are accepted only if an ownership, a purpose and a gross income test are satisfied. Foreign financial institutions situated in the UAE will be treated as having an agreement to abide by the requirements of FATCA by the end of 2014. For UAE-based institutions, the FATCA registration deadline extended to the end of 2014.
