Russia, UAE sign agreement to avoid double taxation
MOSCOW. Feb 17 (Interfax) - Russia and the United Arab Emirates have signed an agreement to avoid double taxation of income and capital and prevent tax evasion, the Russian Finance Ministry said.
The agreement was signed in Abu Dhabi during the first Russian-Emirati financial dialogue meeting attended by Russian Finance Minister Anton Siluanov and Mohamed bin Hadi Al Hussaini, the UAE Minister of State for Financial Affairs.
"The finance ministries' teams did extensive work to cater for the interests of both parties and put the conditions in place for mutual investment and elimination of the double taxation of legal entities and individuals. This will stimulate trade, increase mutual investment and create a favorable environment for businesses and citizens," Siluanov was quoted as saying.
It is anticipated the agreement will go into effect on January 1, 2026 following ratification by both countries.
The agreement applies to income and corporate taxes in the UAE, as well as profit tax, personal income tax and corporate and individual property tax in Russia and follows standard approaches to international tax treaties that Russia adheres to at present.
The profit of a company from one country is taxed only in that country, unless it conducts business in the other country through a permanent establishment. If a company operates in the other country, then only that portion of profit related to that establishment can be taxed. When determining the profit of a permanent establishment, a deduction is permitted for expenses incurred during business activity, including management and general administrative expenses.
Dividends paid by a company from one country to a resident of the other country can be taxed in the beneficiary's own country. However, these dividends can also be taxed in the country where the issuer is located. If the beneficiary of dividends is a resident of the other country, then the tax must not exceed 10% of the dividends. These rules do not concern taxes on the profit of the company from which the dividends are paid.
Dividends arising in one of the countries participating in the agreement are exempt from tax in the other country if they are paid to the state or its financial and investment institutions. For Russia's part this applies, in particular, to the Russian government, regional authorities, the Bank of Russia, the Pension and Social Insurance Fund, the Russian Direct Investment Fund, VEB.RF, Rostec, Rusnano, Rosatom, Roscosmos and any organization that is wholly or indirectly owned by the government or a constituent member of the Russian Federation.
If a company receives profit or income from the other country of which it is not a resident, then this country cannot withhold any taxes on dividends paid by this company, except in cases when they are paid to a resident of this country.
Interest and royalties will also be taxed at 10% and will be exempt from tax if paid to the other country or its financial and investment institutions.
Salaries, wages and similar remuneration will be taxable only in the country of which the recipient is a resident, unless the work is carried out in the other country party to the agreement, in which case it can be taxed in the second country. However, this does not apply to cases where the recipient is present in the other country for not more than 183 days in any 12-month period commencing or ending in the relevant tax year, where remuneration is paid by or on behalf of an employer who is not a resident of that country and where remuneration is not borne by a permanent establishment.
If a UAE resident receives income or owns capital from Russia, they can deduct Russian tax from their own tax. However, the deduction should not exceed the portion of tax payable on income or capital in the UAE.
Similarly, a Russian resident who receives income or capital taxable in the UAE can deduct this tax from their Russian tax. However, this deduction cannot exceed the amount of tax payable in Russia.
Russia and the UAE have an agreement on taxation of income from investment that was signed in 2011. The need for such an agreement was attributed to the fact that state-owned investment funds and banks in the UAE were interested in investing in the Russian economy, but the essential absence of taxation of corporate profit and personal income in the UAE made it impossible to sign a standard double taxation agreement. The UAE introduced a corporate profit tax in June 2023.
The 2011 agreement will cease to apply once the new double taxation agreement goes into effect.