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Are the United Arab Emirates a tax haven?

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Are the United Arab Emirates a tax haven?

Short? No! The United Arab Emirates (UAE) is not considered a tax haven under German, European and international law for the following main reasons:

British Law

Under UK law, the UAE is not considered a tax haven. Although some reports and studies, such as those by the Tax Justice Network, have identified the UAE as a popular destination for corporate tax avoidance, the UK does not officially classify the UAE as a tax haven. In addition, the UAE has signed information exchange agreements with the UK and other countries to improve tax transparency.

European Legislation

The European Union (EU) maintains a list of non-cooperative tax jurisdictions, commonly known as the “blacklist” of tax havens. The UAE has been included and removed from this list at various times, but at the last review the UAE was not categorised as a tax haven. Inclusion on this list is based on the criteria of tax transparency, tax fairness and the implementation of measures proposed by the Organisation for Economic Co-operation and Development (OECD).

International Legislation

At the international level, the OECD and other bodies such as the Global Forum on Transparency and Exchange of Information for Tax Purposes assess countries based on their co-operation in the exchange of information and implementation of tax good governance standards. The UAE has taken significant steps to meet these standards, including the adoption of economic substance regulations and the signing of information exchange agreements.

Context and compliance efforts

The UAE has implemented a number of reforms to align with international standards for tax transparency and good governance. These include:

  • Introduction of corporate tax: effective June 2023, the UAE has introduced a 9% corporate tax on income above AED 375,000.
  • Economic substance regulations: To avoid being categorised as a tax haven, the UAE has introduced regulations that require companies to prove an actual economic presence in the country.
  • Information exchange agreements: The UAE has signed several information exchange agreements with other countries to improve tax transparency.

Conclusion

Although the UAE offers a favourable tax environment with low or no taxation in certain cases, it does not meet the definition of a tax haven under British, European or international law due to its efforts towards tax transparency and good governance standards.

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