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UNITED ARAB EMIRATES: UAE removed from EU tax havens list.


Added on 07/03/2019

Extracted from ‘United Arab Emirates removed from tax havens list’, published on natlawreview.com, Wednesday 6th March, 2019.

 

The European Union recently removed the United Arab Emirates from the list of Uncooperative Tax Havens. The UAE achieved this goal after enhancing the substance and transparency of its taxation procedures. Tax analysts believe this action will make the UAE an even more attractive destination for foreign investment in future.

On May 16, 2018, the UAE signed up to the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS). This evidenced the UAE commitment to implementing four minimum standards designed to counter harmful tax practices, counter tax treaty abuse, mandate country-to-country disclosures, and improve the resolution of tax disputes.

The anti-BEPS multilateral instrument (MLI) Inclusive Framework puts into place minimum standards, including the “Principal Purpose Test” and the “Mutual Agreement Procedure,” which require competent tax authorities and taxpayers to look at the underlying commercial realities of transactions and, even more significantly, to cooperate with contracting states to resolve international tax disputes.

With the UAE viewed historically as a “low tax” or “tax beneficial” jurisdiction, its action in signing up to the MLI, particularly when coupled with the 83 existing treaties between the UAE and other jurisdictions around the world for the avoidance of double taxation and the prevention of fiscal evasion, constitutes a concerted push towards a global standard of governance in frustration of treaty shopping.

As well as signing up to the MLI, the UAE has also signed up to the Foreign Account Tax Compliance Act (FATCA), in order to be compliant with U.S. laws, taken measures to comply with the Common Reporting Standard (CRS), and executed a further 113 agreements for the purposes of avoiding double taxation and eight agreements to facilitate the exchange of information for tax purposes.

As a result of these actions, the UAE secured a “largely compliant” grade in the Global Forum on Transparency and Exchange of Information for Tax Purposes and was removed from the EU’s list of Uncooperative Tax Havens.

His Excellency Younis Haji Al Khoori, Undersecretary of the UAE Ministry of Finance applauded the decision by EU officials, saying: “The European Union’s decision reaffirms the UAE’s full and solid commitment to transparency in tax procedures, and reflects the meticulous local and international efforts made by all stakeholders in the emirates since the beginning of 2017 to cooperate with our European counterparts and adhere to the EU’s standards and requirements regarding the exchange of tax information.”