Tax treaty between the Russian Federation and the United Arab Emirates: what to expect?
On 17 February 2025, the Russian Federation (RF) and the United Arab Emirates (UAE) signed a Double Tax Treaty. The agreement is expected to enter into force on 1 January 2026.
The purpose of the Double Tax Treaty is to promote economic cooperation between the RF and the UAE, reduce the tax burden and create a favourable environment for businesses and citizens.
What will the Double Tax Treaty regulate?
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taxation of income and capital
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combating tax avoidance (preferential rates do not apply if the main purpose of the transaction is tax avoidance)
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elimination of double taxation (mechanisms, exchange of tax information and mutual harmonisation procedures)
Which taxes are covered by the Double Tax Treaty?
In the UAE: personal income tax, corporate income tax.
In the RF: corporate income tax, personal income tax, wealth tax for organisations and individuals. Also applies to identical or similar taxes introduced in the future.
In the UAE, the Double Tax Treaty applies to all residents, whether they are taxable or not.
What are the favourable tax rates?
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Dividends – no more than 10% of the total amount of dividends
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Interest income – no more than 10% of the total amount of interest
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Royalties – no more than 10% of the total amount of income from copyrights and licences
Methods for avoiding double taxation
In the UAE: deduction of taxes paid in the Russian Federation from Russian income/capital tax.
In the RF: Deduction of taxes paid in the UAE from the Russian tax base.
What risks and complications are associated with the operation of a Double Tax Treaty?
The need to strictly adhere to the terms of the treaty (e.g. residency requirements or categories of companies covered by the permanent establishment concept).
Increased scrutiny by the tax authorities – the treaty provides for measures to combat tax evasion, which may lead to additional tax audits.
Changes in the drafting of contracts – contracts must take into account the provisions of the agreement, particularly with regard to the taxation of payments (dividends, interest, licence fees).
The new agreement is particularly important for private and state-owned companies that interact with the UAE in a wide range of activities: Export/Import between Russia and the UAE, including transport and logistics operations, investments, IT and software development, real estate and construction.
MAGENTA Legal recommends that you carefully study the Double Tax Treaty, in particular the residence rules, the conditions for establishing a permanent establishment and the conditions for claiming benefits.
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