On 28 June 2016 the UK published the text of the double taxation agreement with the United Arab Emirates (UAE) that was signed on 12 April 2016. The agreement generally follows the provisions of the OECD Model Tax Convention but the following points should be noted:

Permanent establishment

A building site or construction or installation project constitutes a permanent establishment only if it lasts for more than twelve months. There is no provision for a permanent establishment to be created by the performance of services in the territory of the other contracting state.

Withholding tax

The agreement provides that there is no withholding tax on dividends paid by a company in a contracting state where the beneficial owner is resident in the other contracting State.

Where the dividends are paid out of income and gains derived directly or indirectly from immovable property by an investment vehicle that distributes most of its income annually and whose income from immovable property is exempt from tax then the tax on dividends can be withheld at source in the source State up to 15% of the gross dividend. Where the investment vehicle is a pension fund however the exemption from withholding tax applies.

Interest may be taxed in the source state but is exempt from withholding tax if paid to the State; an individual; a company whose principal class of shares are listed on recognized stock exchange; a pension scheme; or a financial institution that is unrelated to and dealing independently with the payer; or if the dividend is paid by a contracting State or one of its subdivisions or local authorities.

Royalties are taxable only in the State of residence of the recipient.

Mutual agreement procedure

The Article on the mutual agreement procedure does not include any provision for arbitration if the competent authorities cannot reach agreement on an issue.

Entry into force

The treaty will come into force when the two countries have ratified the provisions and notified each other of the completion of procedures. For withholding tax the provisions will come into effect from 1 January following entry into force: and for other taxes they will take effect for taxable years or financial years beginning on or after 1 January following entry into force.