Germany and the United Arab Emirates have signed their first double taxation agreement in 1996. As the treaty was renewable, it was renegotiated in 2010 when new provisions were added. According to the new Germany-UAE double tax treaty German citizens working in the UAE will be required to fulfill several conditions in order to be exempt from the taxation of the earnings they make in the Emirates. Also, the new taxation agreement provides for new credit methods in order to avoid double taxation. The agreement also contains new regulations with respect to the taxation of foreign branch offices of UAE and German companies operating in the two signatory states.
Under the new double taxation agreement between Germany and the UAE, the new credit method requires that the state of residency will take the taxes paid in the source-state, assess the taxpayers’ liability against the taxes in the resident country and credit them against the amount paid in the source-state. The amount credited, however, will not exceed the tax paid in the source-country. Considering the UAE tax laws provide tax exemptions for individuals and companies, the amount will only be taxed in Germany.
Our law firm in Germany can explain the new credit method under the double taxation agreement with the UAE.
When it comes to the taxation of companies, the new Germany-UAE double taxation agreement, companies registered or managed in Germany will be subject to the taxation on their worldwide income in Germany. With respect to the taxation of dividends, a German parent company will be required to pay a 5% dividend tax, as dividends are not subject to taxation in the UAE. An UAE subsidiary of a German company will be subject to taxation in the UAE, but considering the UAE does not levy a corporate tax, the subsidiary will be exempt from taxation.
With respect to the taxation of individuals, German workers with earnings in the UAE will be subject to the German taxation system.
For complete information about the new provisions of the double tax treaty with the UAE you can contact our German lawyers.
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