UAE inks tax treaty with Israel to improve economic relations

By Shilpa Annie Joseph, Official Reporter
  • Follow author on
UAE Israel Flags
Representational Image

Israel’s Finance Ministry has stated that the country and UAE have signed a tax treaty in order to boost the commercial development, after the two countries normalized relations last year.

The UAE finance ministry has informed that it has secured an agreement with Israel to avoid double taxes. The tax convention, once ratified by ministers and parliament this year, will be Israel’s 59th and it will take effect on January 1, 2022.

According to the statement, “It is the first tax treaty reached in the wake of Israel’s normalizing relations with the UAE and Bahrain last year. In parallel, Israel has moved to improve ties with Morocco and Sudan.”

Israeli Finance Minister Mr. Israel Katz has noted that the pact is based primarily on the OECD model, and it “provides certainty and favorable circumstances for corporate activity, as well as strengthening economic ties” with the UAE. Under the deal, tax deductions, dividends, and royalties are capped.

According to Israeli Foreign Minister Mr. Gabi Ashkenazi, the deal will allow for major investment and trade promotion, which will benefit both countries’ economies.

Since a normalization agreement was struck in September, Israeli and Emirati banks and other businesses have inked cooperation agreements, as well as direct flights. The Bank of Israel is anticipated to keep short-term interest rates steady this week for the ninth time in a row, citing increased inflation and the belief that a speedy COVID-19 vaccination roll-out will help the country’s economic growth.

The next policy move is widely expected to be a rate increase but not until at least 2022, with some projecting 2023. “No change in monetary policy is expected, but a very optimistic tone is certainly expected by the Bank of Israel, given the sharp decline in morbidity and the full opening of the economy,” said Leader Capital Markets chief economist Mr. Jonathan Katz.

Related: UAE’s Ministry of Economy enforces companies to reveal beneficiary info