November Special Edition 2021

23 As the world tilts, the legal world adjusts What are the withholding tax rates under the Treaty? The Treaty also aims to stimulate economic growth and foreign investment between the two countries and to provide greater certainty and stability across the two states in terms of investments and business opportunities. The Treaty will have positive implications for both Israeli and UAE residents and will help to strengthen financial ties, improve diplomatic relations and facilitate trade between the two states. The Treaty is based on the Organisation for Economic Cooperation and Development’s (OECD) Model Tax Convention (MTC) and, as stipulated by the Finance Ministry, the bilateral agreement primarily focuses on avoiding double taxation of income and assets connected to the UAE and Israel. The Treaty deals with both Israeli and UAE income tax and corporate tax, as well as Israeli tax that is imposed on the profits made from the sale of property. The Treaty also includes provisions regarding residency tie-breaker rules, rules for the prevention of double-taxation, anti-avoidance and non-discrimination provisions, exchange of information and more. Dividends 0% if the beneficial owner of the dividends distributed from a company in one contracting state is a pension plan of the other contracting state or the government of that state and holds less than 5% of the capital of the company distributing the dividends. 5% if the beneficial owner is the government of the other contracting state, provided it holds at least 5% of the capital of the company distributing the dividends. 5% if the beneficial owner of the dividends is a company, provided it holds at least 10%of the capital of the distributing company for a period of 365 days prior to the distribution date. 15% in all other cases. After establishing formal diplomatic ties by signing the Abraham Accords on the 15 September 2020, the United Arab Emirates and Israel have now further strengthened their relationship by signing a double tax treaty (the Treaty) to eliminate certain fiscal restrictions and situations where double taxation arises between the states.