UAE signs tax treaties with Bahrain and Kuwait

It has recently been announced by the Ministry of Finance that the United Arab Emirates (UAE) has signed double taxation avoidance agreements (DTAAs) with Kingdom of Bahrain and with the state of Kuwait. The UAE has signed a second agreement with Bahrain on boosting and protecting investments.

Andersen Takeaway

•  With the introduction of UAE CT Law in the UAE, there could be possibilities of double taxation for businesses operating in the UAE and Bahrain and / or Kuwait (corporate tax is expected to be implemented in Bahrain soon). This is a welcome step in assisting in elimination of such double taxation and will give clarity on jurisdictional rights to tax certain receipts.
•  Furthermore, it will need to be seen from the final text of the respective DTAAs the methodology for providing bilateral foreign tax credit relief and very critically, the tie-breaker rule for residency of companies, which is usually place of effective management. Thus, if a company is resident of two countries as a result of place of effective management, the relevant jurisdictions may have to mutually agree on the residency as per the prescribed process in the DTAA.