UAE Tax Treaties only for UAE Nationals?

[erad128]

I've been reading some of the Tax Treaties signed between the UAE and other countries and I'm surprised to see that in many of them the definition of "resident individuals" only seems to include UAE nationals.

Here are example extracts from some of these treaties defining what is a "resident individual" in the UAE, usually part of article 4 in these treaties:


Treaty with Spain:

an individual who has his domicile in the United Arab Emirates and is a national of the United Arab Emirates

Treaty with Portugal:

an individual who has his domicile in the United Arab Emirates and is a national of the United Arab Emirates

Treaty with Poland:

an individual who has his domicile in the United Arab Emirates and is a national of the United Arab Emirates

Treaty with Latvia:

an individual who is a national of the United Arab Emirates, provided that the individual has a substantial presence, permanent home or habitual abode in the United Arab Emirates and that individual's personal and economic relations are closer to the United Arab Emirates than to any other State

And probably many others. These are just the first few that I found.

Does this mean that if I'm dual resident in the UAE and one of these countries, and I am not an UAE national, I'll never be able to benefit from these tax treaties as an individual residing in the UAE even if I meet other usual criteria in the UAE such as residing for more than 6 months, center of vital interest, etc? Or is this supposed to be interpreted differently?

 

[Sols]

If I'm not mistaken, this is fairly common in tax treaties with jurisdictions that have no or very low tax. It's the only way such jurisdictions would get a high tax jurisdiction to agree to a tax treaty.

Does this mean that if I'm dual resident in the UAE and one of these countries, and I am not an UAE national, I'll never be able to benefit from these tax treaties as an individual residing in the UAE even if I meet other usual criteria in the UAE such as residing for more than 6 months, center of vital interest, etc?

Correct.

 

[Fred]

You have mentioned here only EU countries with very unfavorable relations to the UAE - Spanish and Polish Citizens even doesn't get any Tax Residence Certificate from the UAE despite living full-time or at least 6 months in the UAE.

Austria had a full functional double tax treaty for both ways with UAE till 2021 - Switzerland still has it.

Just to name 2 out of the mind.

Portugal under NHR again seems to doesn't enforce anything at all - at least the clients being NHR in Portugal we served in the past with a Setup are reporting this.

Don't expect Tax Hells like France, Germany, Spain etc. to give you any advantage. Germany even terminated the already earlier existing double tax treatie which was only one way for UAE nationals.

The question is why you would want to benefit from such a tax treaty when you stay your 6 months in the UAE anyway. If you think of having real estate or such in the EU countries in almost all scenarios some specific limited tax has to be paid for rent income etc. and that's it.

 

[backpacker]

dual resident in the UAE and one of these countries,

Why dual-resident ? If you are a resident of a tax free country you should arrange your life in a way that your one & only residency in this specific tax free country!

The question is why you would want to benefit from such a tax treaty when you stay your 6 months in the UAE anyway. If you think of having real estate or such in the EU countries in almost all scenarios some specific limited tax has to be paid for rent income etc. and that's it.

Indeed, that's the question.
The same question comes up with regards to tax residence certificates: Why on Earth does somebody need a tax residence certificate when he lives permanently in the UAE (or another country of choice) ... !?
It seems there is a lot of obsession when it comes to these things.

 

[Fred]

Indeed, that's the question.
The same question comes up with regards to tax residence certificates: Why on Earth does somebody need a tax residence certificate when he lives permanently in the UAE (or another country of choice) ... !?
It seems there is a lot of obsession when it comes to these things.

Praise the lord!

At least one beside of me does mention this as well - for me it seems it became some kind of myth for people getting lost with theory in the internet - yes it has it's rationale for existence however it's required in very rare case and you can even see this in the pricing offered to get such.

 

[erad128]

Some countries, such as Portugal among the ones that I mentioned, consider you tax resident if you have a residence at your disposal in their territory. So, let's say I live in the UAE and buy or rent an apartment in Portugal so that I can spend a couple of months there whenever I want. In this situation, I would need a tax treaty to protect me in case the portuguese taxman decides to break my balls. Otherwise, what's the alternative?

 

[Marzio]

Otherwise, what's the alternative?

The alternative is DO NOT BUY an apartment in Portugal.

Just use Airbnb or booking or other sites so you dont have anything in your name.

 

[Fred]

The alternative is DO NOT BUY an apartment in Portugal.

Just use Airbnb or booking or other sites so you dont have anything in your name.

Exactly and still - look around how many people have some holiday home in Spain being still handled like a tourist.

And again when your center of life is in the UAE it's almost impossible for them to claim something - there is a reason why @Martin Everson is going crazy about Spain and having a holiday home there and still in practice look how famous it is for purchasing a holiday home there.

 

[bedouin]

Exactly and still - look around how many people have some holiday home in Spain being still handled like a tourist.

And again when your center of life is in the UAE it's almost impossible for them to claim something - there is a reason why @Martin Everson is going crazy about Spain and having a holiday home there and still in practice look how famous it is for purchasing a holiday home there.

Exactly and still - look around how many people have some holiday home in Spain being still handled like a tourist.

And again when your center of life is in the UAE it's almost impossible for them to claim something - there is a reason why @Martin Everson is going crazy about Spain and having a holiday home there and still in practice look how famous it is for purchasing a holiday home there.

I guess the reason the op is posting this is in the case/scenario where you go back. If you're eg a Spanish/German citizen, move to Dubai, spend 2-3 years in UAE (living fulltime, no family/property in Spain, all vital interest in UAE etc)... make 2-3 million € and then go back to Spain/Germany because you believe you're set for life... What happens? You will be taxed for that money while you were 100% living in UAE?

 

[Fred]

I guess the reason the op is posting this is in the case/scenario where you go back. If you're eg a Spanish/German citizen, move to Dubai, spend 2-3 years in UAE (living fulltime, no family/property in Spain, all vital interest in UAE etc)... make 2-3 million € and then go back to Spain/Germany because you believe you're set for life... What happens? You will be taxed for that money while you were 100% living in UAE?

Of course not.

No matter which tax hell - when you have 2-3 years with Rent Payments, Grocery Spending, Gym Membership, Cars, Company etc in the UAE while you have in your home country 2 times visited your Grand Mother for example - no court on this planet will make you tax liable in your home country.

You need to stick to reality - example for Germany:

You can be still registered as Resident but live the whole year in the UAE and you can be de-regsitered in Germany but keep living full-time in Germany - in the 1st case just being registered while living full time in the UAE is not enough to make you tax liable in Germany same like in the 2nd case it's not enough to be NOT tax liable in Germany while being just de-register but physical the whole year in Germany.

Most important is where you are as a physical person and of course you can have much more complex case - general speaking as more substance you have still in the home country the more a Tax Residence Certifcate can be important which is a very rare case.

 

[khinkali]

I guess the reason the op is posting this is in the case/scenario where you go back.

No matter which tax hell - when you have 2-3 years with Rent Payments, Grocery Spending, Gym Membership, Cars, Company etc in the UAE while you have in your home country 2 times visited your Grand Mother for example - no court on this planet will make you tax liable in your home country.

While income during 2-3 years fully offshore should not be taxed in many cases (USA excepted obviously), there can be an issue with assets held before moving away. This includes offshore assets.

For example a UK tax resident who owns BTC or some shares in Tesla, moves to UAE, sells the asset while offshore but moves back within five years can be liable for capital gains on that asset. This is whether the asset is sold while away or after return and it includes some odd things such as lump sum or drawdown from a pension.

It is worth taking advice in the relevant jurisdiction and in some cases to transact one's assets when leaving (crystalising capital gains to avoid tax on further gains), if there is any chance of moving back to the old country.

 

[Fred]

While income during 2-3 years fully offshore should not be taxed in many cases (USA excepted obviously), there can be an issue with assets held before moving away. This includes offshore assets.

For example a UK tax resident who owns BTC or some shares in Tesla, moves to UAE, sells the asset while offshore but moves back within five years can be liable for capital gains on that asset. This is whether the asset is sold while away or after return and it includes some odd things such as lump sum or drawdown from a pension.

It is worth taking advice in the relevant jurisdiction and in some cases to transact one's assets when leaving (crystalising capital gains to avoid tax on further gains), if there is any chance of moving back to the old country.

Exactly that's right and a Tax Residence Certificate doesn't change this facts.

 

[erad128]

I guess the reason the op is posting this is in the case/scenario where you go back.

Not at all. The reason why I posted this is because I would like to have a permanent property and legal residency in an EU country that is convenient for traveling and spending a couple of months there each year, but I would also like to avoid becoming tax resident in that EU country. Which EU country? No idea yet, that's why I am looking at some of these tax treaties with the UAE: To understand in which EU countries I can actually rely on the tax treaty if ever necessary, in case that EU country decides to claim I'm their tax resident. I'll have more substance outside this EU country than inside it, so the chances that I will ever need to make use of the tax treaty are very small. But still, I like to be prepared. If the tax treaty has a nationality clause, apparently I wouldn't be able to benefit from it even if I spend 365 days in the UAE.