An agreement on the abolition of double taxation between the UAE and Russia has been signed

Russia and the United Arab Emirates have signed an intergovernmental agreement aimed at eliminating double taxation on income and capital, as well as preventing tax evasion.

After ratification, the agreement will enter into force on 01.01.2026.

The agreement will create favorable conditions for mutual investment, trade development, and improved business environments for companies and citizens of both countries. It also provides significant benefits to both individuals and legal entities that are residents of the two countries. The provisions of the agreement apply not only to income taxes but also to property taxes, opening new opportunities for companies and individuals operating in both countries.

1. Tax benefits for private companies

One of the most significant aspects of the new agreement is that it also applies to companies paying a 0% corporate tax rate in the UAE. The previous agreement only applied to state-owned companies and institutions. Now, private companies also have access to the benefits, making the agreement universal and attractive to any business.

However, the benefits under the agreement will not be available if obtaining them is the primary or one of the main purposes of a transaction or operation. The agreement primarily aims to prevent abuse and the use of the agreement solely for tax minimization purposes.

Special attention is given to tax-transparent structures. Individuals receiving income through such structures will also be able to take advantage of tax benefits. This is particularly relevant for UAE companies established as partnerships and family foundations.

2. Limitation of tax on income from dividends

As previously announced, the maximum withholding tax rate on income from dividends, interest, and royalties is set at 10%. Unlike some other agreements with Middle Eastern countries, the dividend tax rate does not depend on the ownership stake in the company paying the dividends.

The new tax agreement represents an important step in the development of economic relations between the two countries. It not only expands the range of entities eligible for benefits but also creates more transparent and predictable conditions for doing business. However, as with any tax agreement, it is crucial to carefully analyze the terms.

This was a compromise between the parties, as Russia initially proposed higher rates, while the UAE insisted on zero taxation. Previously, in December 2023, a similar agreement came into force with Oman, where the dividend tax rate is set at 15% but decreases to 10% if at least 20% of the company’s capital is owned. In 2023, Russia also signed double taxation avoidance agreements with Abkhazia and Malaysia.

The UAE currently does not have a withholding tax, but the Russian Ministry of Finance does not rule out that rates may be revised in the future. For Russian residents, the agreement with the UAE is particularly relevant in cases where the UAE is the place where key management decisions are made or where income is related to real estate in the Emirates. Once the agreement comes into force, Russian companies will be able to deduct taxes paid in the UAE when calculating corporate income tax in Russia.

3. Cancellation of tax deduction when paying for services

Starting in 2024, the requirement to withhold 15% tax when paying for services to UAE residents will also be abolished. This will significantly simplify business operations between the two countries by eliminating bureaucratic barriers. Additionally, the agreement may influence the removal of the UAE from the Russian Ministry of Finance’s “offshore list.” If this happens, an additional tax benefit will become available.

However, the specific terms of the agreement and its consequences require detailed analysis in each individual case. For example, for individuals, the deduction of taxes paid in the UAE will only be possible if an agreement is in place. It is also important to note that some benefits depend not only on the existence of the agreement but also on the exclusion of the UAE from the offshore list.

Businesses should be aware that the two countries will begin exchanging financial and tax information, ensuring transparency of income and assets. Individuals will benefit the most from the agreement, as they will be able to offset taxes paid. For legal entities, this possibility already existed. The agreement also provides for tax exemption for remote employees in the UAE receiving income from Russian employers.

The signing of the agreement may contribute to the removal of the UAE from Russia’s blacklist of offshore jurisdictions, allowing for additional benefits.