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Corporate Tax

UAE and Qatar Sign Landmark Double Taxation Avoidance Agreement to Boost Economic Cooperation

June 05, 2024

The UAE and Qatar have signed a new Double Taxation Avoidance Agreement (DTAA) to prevent fiscal evasion and alleviate the burden of double taxation. This landmark agreement was finalized during the 121st meeting of the GCC Financial and Economic Cooperation Committee in Doha. The fine print of official text is yet to be made available.

As rapidly growing economies in the Gulf region, the UAE and Qatar recognize the importance of facilitating cross-border trade and investment. The DTAA between the two nations aims to eliminate barriers to trade and investment by alleviating the burden of double taxation.

The DTAA serves as a cornerstone for promoting bilateral trade and investment while ensuring fair and equitable tax treatment for residents of both countries. By providing clarity on tax obligations and mechanisms to prevent double taxation, the agreement significantly contributes to the growth and prosperity of both economies.  

The DTAA is expected to address some of the complex tax issues such as -

  • Foreign Tax Credit: Where one country does not provide for unilateral tax relief under its domestic tax laws, this DTAA will help resolve such situation by allowing credit of foreign taxes paid by taxpayers in one country against the taxes payable in other country, thereby reducing the overall tax burden.
  • Withholding Tax: Where either country provides for withholding tax on foreign payments at certain rates under its domestic tax laws, the DTAA is likely to provide for non-withholding or reduced withholding tax rates on payouts from one country to the other, encouraging cross-border payments and investments.
  • Permanent Establishment (PE): The DTAA is expected to defines taxable business presence criteria, ensuring businesses are taxed appropriately based on their economic activities in each country.
  • Place of Effective Management (POEM): In the present day scenario, corporate tax residency is normally based on where key management decisions are made. In cases of dual residency of an entity, a tie-breaker rule determines the residency by considering factors such as the location of the head office, the place where senior management resides, and where key commercial decisions are made. This DTAA is expected to address the issues of dual tax residency.

Once the fine print of the DTAA is published, it is expected to provide certainty and clarity on various aspects of tax matters. This marks a significant step towards deeper economic integration between the UAE and Qatar.

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