The provisions of the new treaty will apply from 1 January 2025 to income arising in periods beginning after that date and, in the case of income subject to withholding tax at source, to income paid or credited on or after 1 January 2025.

Given the very favourable taxation system in the United Arab Emirates, the change in the definition of residence in Article 4 of the Treaty is undoubtedly the main innovation. In the case of the United Arab Emirates, residence will now be assessed in relation to local legislation and not in relation to the taxation of a person on the basis of residence, domicile, place of management or any other similar criterion, as has been the case until now. The new definition of the conditions of residency thus abandons the condition of de facto taxation of income in the UAE, which in practice has led to interpretive uncertainty as to how to view residency and the application of the treaty in general.

Another interesting feature of the treaty is the addition of an article confirming the right to own rules for the taxation of income and gains from natural resource activities.

Key points of the treaty:

• A permanent establishment includes the concept of a so-called service permanent establishment (where the relevant activities exceed six months in aggregate in any twelve-month period).
• The treaty also allows dividends to be taxed in the source country –  the tax so imposed shall not exceed 5% of the gross amount of the dividends (except for an exemption for situations where the profits are received by a contracting country or its government or any subdivision thereof, or by a local authority of that country, a central bank or an entity owned directly or indirectly by such entities).
• Interest is taxable only in the country of residence.
• The treaty allows royalties to be taxed in the source country as well –  the tax so imposed shall not exceed 10% of the gross amount of royalties.
• Gains on the disposal of property in the case of the sale of shares in a company resident in the other country may be taxed in the country of source (except where the gain is received by a contracting country or its government or any subdivision thereof, or by a local authority of that country, a central bank or an entity owned directly or indirectly by such entities).