7 fév 2017 · The new UK-UAE double tax treaty contains a standard employment income Article 14, which allows UAE resident STBVs to claim exemption
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7 fév 2017 · The new UK-UAE double tax treaty contains a standard employment income Article 14, which allows UAE resident STBVs to claim exemption
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Insights
from Global Mobility www.pwc.comUnited Kingdom: New double tax
treaty with United Arab EmiratesFebruary 7, 2017
In brief
The new double tax agreement between the United Kingdom (UK) and the United Arab Emirates (UAE),signed on April 12, 2016, entered into force on December 25, 2016. For UK personal tax purposes, the
treaty will be in place from April 6, 2017. With increasing mobility and collaboration between the UK and UAE (and in particular between the UK, Dubai, and Abu Dhabi), employers and employees will welcome the introduction of a comprehensive double taxation agreement, which covers key areas such as residence and employment income for thefirst time. In particular, this double tax treaty will allow many UK employers to include UAE short term
business visitors (STBVs) on their EP Appendix 4 STBV agreements, providing the relevant conditions are met.In detail
STBVs to the UK from the
UAECurrent position/treatment
Current HMRC rules allow for a
relaxation of PAYE requirements for STBVs from countries with which the UK has a double tax treaty, provided the employer has an EP Appendix 4STBV agreement and the
relevant conditions are met.Until now, the UK did not have
an agreement with the UAE and therefore employers had to carefully assess the PAYE requirements for each day of UK work performed by a UAE resident STBV to ensure PAYE was withheld when due.What will change as of April 6,
2017?The new UK-UAE double tax
treaty contains a standard employment income Article 14, which allows UAE residentSTBVs to claim exemption from
UK income tax, provided the
following familiar conditions are met: the employee is present in the UK for no more than183 days in any twelve
month period beginning or ending within the UK tax year in question; the employee is paid by, or on behalf of, a non-UK resident employer, and; remuneration is not borne by a UK permanent establishment of the employer.For many employers, this will
allow them to relax the strictPAYE requirements for UAE
resident STBVs and give greater scope for business travellers to be exempt from UK tax on theirUK workdays, providing the
usual conditions are met. This includes considerations regarding cost recharges, residence, the economic employer principle, and whether or not the employer is a branch of the UK company.Insights
2 pwcEmployers should carefully review
their existing processes for UK-UAESTBVs in light of the new UK-UAE
double taxation agreement and seek professional advice when unclear.UK residence position for
individuals to/from UAECurrent position/treatment
The UK tax treatment of individuals
leaving the UK to move to the UAE or individuals from the UAE spending time in the UK, currently depends upon their residence position underWithout the protection of a double
circumstances means they trigger or fail to break UK residency, it is possible for their employment earnings for the full UK tax year (even if earned in UAE) to be considered UK taxable.What will change as of April 6, 2017?
Under the new UK-UAE tax treaty,
Article 4 allows for the determination
of residency under treaty rather than relying solely on UK domestic rules.Notably, an individual is considered
resident of the UAE if they are domiciled in the UAE, have habitual abode in the UAE or if their centre of vital interests is in the UAE.When an individual is both resident in
the UK and UAE, treaty residence is determined by looking at the normal treaty tie breaker ties (permanent home, centre of vital interests, habitual abode and nationality) and if all inconclusive by seeking mutual agreement between the tax authorities of the UK and the UAE.Individuals resident in the UAE now
have the opportunity to claim treaty non-residence in the UK (providing they meet the conditions) and exemptUAE source earnings from UK tax
even if they remain UK tax resident test.Other articles of note
Directors fees - Directors fees paid to
a resident of UAE, but in relation toUK workdays may be taxed in the UK
(Article 15), as per the current position.Pensions - Notably pensions are only
residence (Article 17). Therefore, UK expatriates in UAE may claim exemption from UK tax on pension income.Non discrimination - The new treaty
does not grant a UK personal allowance to non-UK nationals who are treaty resident in UAE (Article22), which is in line with the current
position.The takeaway
The new double tax agreement is a
significant change affecting employees moving between the UK and the UAE and for their employers. Employers will need to consider a number of implications:Impact on any current/planned
assignee movements to/from the UAE.Communication to current
assignees to/from the UAE so they are aware of the impact of the new double taxation agreement. Some individuals may currently be carefully monitoring their workdays back in the UK to ensure they remain non-UK tax resident. The new double taxation agreement may offer some flexibility to spend additional time in the UK if they are UAE treaty resident.Review existing STBV processes
and tracking for UK-UAE movements and consider whetherUAE STBVs may now be included
on an EP Appendix 4 agreement.Highlight the new double taxation
agreement to business stakeholders, to discuss whether the new double taxation agreement will affect current business travel arrangements.Insights
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For a deeper discussion of how these issues might affect your business, please contact professionals from PwC UK and PwC
UAE, including the following:
Global Mobility²United Kingdom
Ben Wilkins
+44 (0) 207 212 4096ben.wilkins@pwc.com
Jenny Adams
+44 (0) 118 938 3595jenny.adams@pwc.com