The new document will be effective from 2026 and provides for a single withholding tax rate of 10% on payments of dividends, interest and royalties. Fyodor Petrik, Senior Tax Consultant at Tax Compliance, commented on the long-awaited event on the air of «Kommersant FM» and in the material of the business publication. The treaty replaces the 2011 agreement, which provided benefits only for government agencies, organizations with state participation and sovereign wealth funds.

Our expert notes that the Russian business community has been expecting a full-fledged tax treaty with the UAE since 2022. Most important in the context of the increase in Russia's withholding tax rate to 25% are the reduced tax rates for payments of interest, royalties, dividends and payments for intra-group services. The current agreement contains a number of preferences for businesses and will reduce the tax burden on cash flows between the UAE and Russia, including the offset of taxes paid in the other jurisdiction.

In our practice we have seen cases of Cypriot companies «moving» to the UAE, but now this practice may become more widespread, given the vague prospects of the Cyprus tax treaty and less favorable withholding tax rates.

It is most likely that after the signing of SIDN, the UAE will be removed from the RF Ministry of Finance's «black» list of offshore companies, since being on this list is directly related to the absence of a full-fledged SIDN. In this case, Russian organizations will be entitled to apply a whole set of tax benefits on transactions with companies resident in the UAE. The most expected ones are a preferential 0% rate on dividends received in Russia from the UAE, as well as the non-application of TCO rules to transactions with independent counterparties from the UAE.

The TC team provides services in the field of business registration and support in the UAE, as well as tax and legal advice. Read more on the TC UAE website.