KPMG in the United Arab Emirates (UAE) reports on the relaxation on foreign ownership rules of UAE companies, UAE joining the BEPS Inclusive Framework and the signing of the UAE-Saudi Arabia double tax treaty.
Relaxation on foreign ownership rules of UAE companies
The UAE Cabinet has recently announced that a new investment law, which would allow 100% foreign ownership of companies in the UAE would be ready by end of the year 2018. Currently, foreign investors intending to carry out business in the UAE should partner with a UAE shareholder unless they are based in certain free trade zones.
This new rule is expected to further boost foreign direct investments in UAE, especially into the non-oil sectors. It would be interesting to see the rules laying down sectors which would be impacted by the new law.
UAE joins the BEPS Inclusive Framework
On 5 December 2017, UAE was added to the EU Blacklist of non-cooperative tax jurisdictions. In response to being included on the EU Black List, UAE committed to undertake certain tax reforms, which led to being removed from the EU Black List and placed on the so-called “Grey List” on 23 January 2018.
On 16 May 2018, the Organization for Economic Cooperation and Development (“OECD”) announced that UAE has joined the BEPS Inclusive Framework (‘IF’). By joining the BEPS IF, the UAE has committed to implement the four BEPS minimum standards, by March 2019:
Following VAT and excise tax, the implementation of the IF may be the next game changer as UAE multinationals and businesses may need to re-visit their operating structures and could be subject to additional compliance and reporting obligations. The legislative changes for the implementation of BEPS minimum standards in UAE are expected to be announced by the end of the year 2018.
UAE-Saudi Arabia double tax treaty signed
On 23 May 2018, the UAE and the Kingdom of Saudi Arabia (KSA) signed a double tax avoidance agreement (Tax Treaty). This event marks another mutually coordinated tax initiative between the two GCC countries, pursuant to the roll out of VAT. The details of the Tax Treaty and its application are not known as yet, nonetheless this is the first Tax Treaty ever signed amongst GCC States and hence is expected to further enhance the economic partnership of the two GCC Countries.