UTC:
Capital City:
Language:
Population:
Currency:
Country Code:
Domain:
+4
Abu Dhabi
Arabic
10,180,000
UAE Dirham
+971
.ae
United Arab Emirates-Israel relations
In 2020, an agreement was signed between Israel and the United Arab Emirates in preparation for regulating their relations. This agreement was officially formalized in 2022 under the Abraham Accords, which represent a series of agreements aimed at normalizing relations between Israel and several Arab countries, mediated by the United States.
Relations between the countries have begun before the agreements, including visits by Israeli delegations and Knesset members to Abu Dhabi and Dubai at international conferences. Israel has also established an official diplomatic agency in Abu Dhabi in 2015 for the International Renewable Energy Agency.
The United Arab Emirates embassy is located in the Tel Aviv Stock Exchange building. The location is a highly central one, and is considered one of the main economic centers in Israel. The United Arab Emirates embassy is the first embassy to be located there.
Details about Israel’s embassy in the United Arab Emirates
Address: Etihad Towers 3, Abu Dhabi, UAE
Phone: +971-224558807
Website: Click Here
Email: info@abudhabi.mfa.gov.il
Details about the United Arab Emirates embassy in Israel
Address: Ahuzat Bayit 2, corner of Montefiore Ave, Tel Aviv
Phone: +97180044444
Website: https://www.mofaic.gov.ae/en/missions/tel-aviv
E-mail: telavivemb@mofaic.gov.ae
Letter of appreciation for the captivating lecture delivered at the Accountants Association Conference in Dubai by CPA Nimrod Yaron – 22.01.2023. Click here to read the full letter!
Business activity in the United Arab Emirates
The United Arab Emirates benefits from its strategic and important location along shipping routes, which facilitates the carriage of goods with its trade partners. Additionally, the UAE offers various Free Trade Zones, opportunities for businesses and legal entities to establish themselves, and significant tax benefits, as outlined below. In 2020, the Israel-UAE Business Forum was established with the goal of promoting and developing trade and service cooperation between the two countries. Currently, the forum has approximately 3,000 entrepreneurs and businessmen as members. In April 2022, Israel and the UAE signed a bilateral free trade agreement that provides tax benefits for 95% of the products traded between the two countries, including food, agricultural and cosmetic products, medicines, and medical equipment.
Economic agreements between Israel and the UAE:
- Free Trade Agreement
- Promotion and Protection of Investments
- Convention for the Prevention of Double Taxation
Promotion and Protection of Investments
This agreement aims to promote and defend investors’ activity from uncommercial threats and encourage mutual investments. The agreement was signed on October 2020.
To read the agreement in English click here.
Treaty for the Prevention of Double Taxation between Israel and the United Arab Emirates:
Also known as the Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income.
The taxation that is imposed on a specific economic activity is influenced by the domestic tax laws of each country. The Tax Treaty is a bilateral agreement in which both countries establish the rules of taxation regarding income and property that has connection to both countries. The Tax Treaty between Israel and the United Arab Emirates was signed in 2021 and came into force in January 2022. The agreement includes principles of information exchanging about tax matters between the two countries.
The entire agreement between Israel and the United Arab Emirates is available in English here.
Applicability of the MLI
The United Arab Emirates and Israel have both signed the MLI, indicating that there is an automatic information exchange between the two countries. Tax authorities in the UAE continuously report about the bank accounts and assets held by Israelis in the UAE, and the Israeli tax authority reports about the bank accounts that held by the UAE residents in Israeli banks.
The UAE signed the agreement in 2018 and ratified it in 2019, while Israel signed the agreement in 2017 and ratified it in 2018. The MLI does not affect The Tax Treaty between Israel and the UAE, because it was signed and came into force after the two countries signed the MLI.
Residency for tax purposes in The United Arab Emirates:
Individual Residency:
According to The Tax Treaty, an Israeli will be considered an Emirate resident for tax purposes if he meets the following conditions:
- If an individual has been physically present in the UAE, a total of 183 days or more within a 12-month period; and
- If their personal and economic connections are stronger to the UAE than to any other country.
If the individual is defined as a resident in both countries, his status will be determined according to the following conditions:
- He will be defined as a resident of the country in which his personal and economic ties are tighter (the center of interests test). If it is impossible to determine a center of vital interests, an individual will be considered a resident of the country where he has a permanent home.
If he has a permanent home in both countries or in none of them, his residency will be determined by the country in which he lives.
- If he lives in both countries or in none of them, he will be considered a resident of the country in which he holds citizenship.
- If he holds citizenship in both countries or is not a citizen of neither of them, the authorities of the involved countries, will resolve the issue by a mutual agreement.
In 2022 the UAE government passed decision 85 which expands the tax residency criteria for individuals (who are not Israeli residents or citizens), which was previously limited to the requirement of physical presence for 183 days in a calendar year. The law expansion reflects the UAE’s will to adapt itself to the expanding global economy. The agreement came in to force on March 1st 2023.
It should be noted that an individual who was an Israeli resident in one or more of the last five years, and also considered a resident of the UAE, will not be entitled to Tax Treaty benefits. This means that in order to benefit from the Tax treaty conditions, the individual must disconnect their residency from Israel for a period of five years.
An individual who is neither a citizen nor a resident of Israel will be considered a resident of the United Arab Emirates if:
- Their main or regular place of residency is in the UAE and their financial and personal interests center is in the UAE; or
- The individual stayed in the United Arab Emirates for over 183 days in a 12 month period; or
- The individual stayed in the UAE for over 90 days in a 12 month period and he is an Emirate citizen, Emirate resident, or a GCC (Gulf Cooperation Council) citizen who has a permanent home in the UAE, or performs a job/business in the UAE.
Residency of a company:
According to The Tax Treaty, an Israeli company will be considered a resident for tax purposes of the UAE if it meets the following conditions:
- The company is incorporated in the UAE;
- The actual managerial place of the company is located in the UAE;
- The company’s capital is held, with integrity, by the UAE, a federal government, local governments, or individuals who are residents of the UAE, and the company is controlled by these residents.
A legal entity that is not considered an Israeli resident will be considered a resident of the UAE for tax purposes if it was established, formed, or registered according to the UAE laws, except for branches of foreign legal entities.
Information about residency in Israel can be found in this link here.
United Arab Emirates Tax Regime:
The UAE tax authority is called “Federal Tax Authority”, it’s located at the Central Park Business Towers – DIFC, Dubai, UAE.
Income Tax for individuals: There is no income tax for individuals in the UAE.
Corporate and Branch Tax: Until recently there was no corporate tax at all, but starting in June 2023 the UAE government introduced a 9% corporate tax law for companies with a profit more than AED 375,000 (about $102,000) per year.
VAT: standard rate of 5%.
0% VAT cases: applies to goods and services that have been exported outside the VAT-implementing Gulf Cooperation Council (GCC) member states.
Capital Gains Tax: 0%.
Withholding tax:
|
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United Arab Emirates Internal tax rate |
Israel’s Internal tax rate |
Treaty Withholding Tax |
|
Personal Income tax (Tax brackets) |
– |
0%-50% |
– |
|
Corporate income tax |
– |
23% |
– |
|
Individual capital gains tax rate |
– |
25%-30% (plus exceptional income tax for high earners at 3%) |
– |
|
Branch tax |
– |
23% |
– |
|
Withholding tax (Non-Resident) Dividends |
– |
25% or 30% |
0%, 5%, 15% |
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Interest
|
4.4% |
15%,25%,23% |
0%,5%,10% |
|
Tax on renting real estate abroad |
– |
Marginal or 15% |
– |
|
Royalties |
– |
23%-40% |
12% |
|
VAT |
– |
17% |
– |
|
Inheritance tax |
– |
– |
– |
Inheritance / Estate Tax in the United Arab Emirates:
There is no inheritance nor estate tax in both the United Arab Emirates and Israel.
Transfer Pricing in the United Arab Emirates:
In 2018, the United Arab Emirates joined the OECD and committed to the organization’s goals. Subsequently, the UAE Treasury Department has presented regulations (ESR) aimed at ensuring that the profits reported match the economic activity taking place in the Emirates.
On June 1, 2023, a federal corporate tax on business profits, which includes transfer pricing, will become valid in the UAE. The UAE declared that transfer pricing rules will be consistent with the OECD transfer pricing guidelines, including related people and parties, the arm’s length principle, and transfer pricing documentation requirements.
For information on Israel transfer pricing click here.
Relocation:
Many Israelis relocate to the United Arab Emirates due to the many advantages it offers.
The tax regime in the UAE is very friendly to individuals and businesses because it has no income tax, company tax, tax on dividends, etc. The advantage is particularly significant and can be realized by an Israeli citizen in the process of severing residency from Israel.
Our office provides consulting services to businesses and individuals operating in the United Arab Emirates due to the significant tax benefit associated with severing residency from Israel. We have extensive experience dealing with cases related to residency severance.
The standard of living in the UAE is very high and there is a wide variety of private schools. Furthermore, since the “Abraham Accords,” there is a wide range of business opportunities and many Free Trade Zones in the UAE.
Real Estate Taxation in the United Arab Emirates:
When purchasing real estate in the United Arab Emirates, it is important to note the different Taxes between one emirate to another. For example, the transfer fee in Dubai is 4% compared to the 2% tax in Abu Dhabi.
The tax usually divides between the seller and the buyer.
In addition, the buyer is required to pay a registration fee which changes according to the value of the property:
- For a property under 500,000 AED (137,000$) the tax is 2000 AED (545$)
- For a property over 500,000 AED (137,000$) the tax is 4000 AED (1,090$)
To learn about real estate taxation in Israel click here.
Business Activities between the United Arab Emirates and Israel:
The trade volume between Israel and the UAE was valued at 3.7 billion shekels in 2021, representing a substantial rise from the 367 million shekels recorded in 2020. The increase was mainly driven by diamond exports and the “Abraham Accords”, which led to a 483% surge in trade between the two countries.
Our connections with accountants and lawyers in the UAE assist our clients in establishing businesses, opening bank accounts, and connecting with companies.
Transfer funds from Israel to the United Arab Emirates
According to section 170(a) of the Israeli Income Tax ordinances, most transfers of funds from Israel to the United Arab Emirates will require a prior approval of the Tax Authority. Our office helps our clients in obtaining tax exemptions from withholding tax upon the transfer of funds to the United Arab Emirates.
The Tax Authority makes it difficult to transfer funds from the UAE to Israel, as they are concerned about money laundering. Our firm also helps with money transferring between the two countries in easiest and cheapest way, Contact us.
Types of business entities in the United Arab Emirates
The most common companies in the UAE are:
- Sole Proprietorship – a company of this type is owned by an individual who controls all its activities and holds all of its stocks. This is the simplest form of business entity in the UAE. A foreigner can establish this entity if he holds a residency permit, but only citizens of the UAE can establish this entity in its commercial or industrial form. If a non-citizen wants to establish this entity, he can appoint a local service agent who will open the company on his behalf. There is no minimum capital requirement for this type of entity, and the company name must be related to its business activities.
- Limited Liability Company (LLC) – The most common business structure in the United Arab Emirates is a limited liability company because it offers a degree of protection to the partners by limiting their liability to the extent of their investment in the company. This means that the creditors of the company cannot go after the personal assets of the partners to recover any outstanding debts. A non-citizen of the UAE can establish such a company and hold only up to 49% of the share capital, the remaining 51% are required to be held by a citizen of the UAE. The minimum number of investors in this type of company is 2, and the maximum is 50. LLC can engage in various industrial or commercial activities, but are generally restricted from providing consulting services, except for those related to banking, insurance or investment.
- Private Stock Holding Company – also known as a Private Joint Stock holding Company. The minimum capital required to establish such a company is 5 million AED with a minimum of 3 investors. At least 51% of the stocks must be owned by a UAE citizen. It should be noted that approval from the Ministry of Economy is required in order to establish this type of business entity.
- Public Stock Holding Company – also known as a Public Joint Stock holding Company. The minimum capital required to establish the company is 30 million AED with tradable shares, and each shareholder is only responsible for their share of the capital. The company can have a maximum of 5 directors, and at least 5 founding members who are UAE citizens which will hold a minimum of 30% and a maximum of 70% of the company’s stocks.
Investment Incentives in the United Arab Emirates
- Free Trade Zones – in the UAE there are over 40 Free Trade Zones, for investors in a variety of fields, each one has different These areas are known for their efficient infrastructures and services that allow smooth management of business transactions, which saves a lot of time and effort.
Some of the Free Zone advantages:
- A company can have 100% foreign ownership.
- 100% exemption from corporate tax and income tax.
- Establish businesses easily
- 100% exemption from customs and more.
To read more about the UAE Free Trade Zones click here.
- Exemption from income tax and full profit transfer – In the United Arab Emirates, individuals, investors, or corporations are not subject to income tax, except for oil companies and branches of foreign banks. This allows investors in the UAE to return all their investments and make profits.
- Golden visa for investors – The United Arab Emirates provides long-term residency visas, which can range from 5 to 10 years, as an incentive for investors and entrepreneurs to invest and establish businesses in the country.
- Different legal ownership types – The UAE offers foreign investors a variety of legal ownership arrangements, such as public and private stock companies, LTD companies, and more.
To read more about investment incentives on the UAE website, click here.
The countries with which The United Arab Emirates has Double Tax Treaties:
Albania | Algeria | Andorra | Angola | Argentina | Armenia | Austria | Azerbaijan | Bangladesh |
Barbados | Belarus | Belgium | Belize | Bermuda | Bosnia and Herzegovina | Botswana | Brazil | Brunei |
Bulgaria | Burundi | Germany | Kosovo | China | Comoro Islands | Croatia | Czech Republic | Egypt |
Estonia | Ethiopia | Fiji | Finland | France | Georgia | Greece | Guinea | Hong Kong |
Hungary | India | Indonesia | Ireland | Israel | Italy | Japan | Jersey | Jorden |
Kazakhstan | Kenya | Korea | Kyrgyzstan | Latvia | Lebanon | Liechtenstein | Lithuania | Luxembourg |
Malaysia | Malta | Mauritania | Mauritius | Mexico | Moldova | Montenegro | Morocco | Mozambique |
New Zealand | Niger | North Macedonia | Pakistan | Panama | Paraguay | Poland | Portugal | Romania |
Russia | Saint Vincent and the Grenadines | Saudi Arabia | Senegal | Serbia | Seychelles | Singapore | Slovakia | Slovenia |
South Africa | Spain | Sri Lanka | Sudan | Switzerland | Syria | Tajikistan | Thailand | The Maldives |
The Netherlands | The Philippines | The United Kingdom | Tunisia | Turkey | Turkmenistan | Ukraine | Uruguay | Uzbekistan |
Venezuela | Vietnam | Yemen | Zimbabwe |
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