KSA - UAE / Double Tax Treaty signed
Few months ago, on January 23, 2018, the Saudi Arabian cabinet authorized the Minister of Finance (MoF) to sign an Income and Capital Double Taxation Convention with the UAE (hereinafter, the DTC).
The 24th of May 2018 will be long reminded as a landmark date for the GCC market.
Yesterday – May 24, 2018 – HE Obaid Humaid Al Tayer (UAE Minister of State for Financial Affairs) and HE Mohammed Bin Abdullah Al-Jadaan (KSA Minister of Finance) signed the DTC at the Headquarters of the KSA Ministry of Finance in Jeddah.
Although the official text of the DTC is not available yet there are few remarkable aspects deserving due attention and dealt with below.
DTC and GCC Market
Despite being a DTC between two sovereign States, worth to underline that such DTC ties two countries forming a Regional organisation, the GCC.
Like the other (landmark) EU Regional experience, also in the GCC context, one has to consider the relationship between the DTC and the GCC market founding principles, such as non-discrimination, ‘national treatment’ and ‘most favoured nation’ clause and fundamental freedoms (to move, reside, etc).
Despite the EU and GCC are not exactly overlapping in terms of objectives and structures the EU experience shows that such relationship between these International sources (and their hierarchy) will be unavoidably an issue to be considered.
When the official text of the DTC will be available it will be interesting checking whether the DTC (itself, or any Protocol thereof) will be dealing with this issue.
On the concept above, see:
• Roberto Scalia, A Tax Law Perspective of the Cooperation Council for the Arab States of the Gulf’ (GCC), Intertax 1(2017), Wolter Kluwer Journal).
DTC and Exchange of Information
The signature of the DTC took place in the context of a meeting in which the Ministers discussed also about the cooperation between the two States in the application of the two GCC Unified Agreements (on VAT and Excise tax).
Although the DTC scope is limited to taxes on income and capital (subject to closer analysis of the DTC official text), worth to underline the close nexus existing with the signature of the DTC and the recent introduction of VAT in both States.
Both Agreements are based upon an Exchange of Information mechanism that has not been put in place yet. Its enforcement affects also the (complete and effective) implementation of the VAT Intra-GCC rules that, until now, are not applicable.
Noteworthy, the effective implementation of all such self-commitments will be monitored by the two States’ Tax Authorities and established a team for this purposes that will be headed by HE Khalid Ali Al Bustani (Director General of the UAE Federal Tax Authority FTA) and Suhail Bin Mohammed Abanmi (Governor of the KSA General Authority of Zakat and Tax GAZT).
For learning more about cross-border aspects of VAT in the two States, see:
• Howard R. Hull, Roberto Scalia, GCC VAT – International Goods, in Bulletin for International Taxation 2(2018), IBFD Journals;
• Howard R. Hull, Roberto Scalia, GCC VAT – International Goods, in Bulletin for International Taxation 3(2018), IBFD Journals;
• Roberto Scalia, GCC VAT – An Introduction – part 1, JIACC Tax Insight n° 1 (available at: www.jiac.it)
Author: Roberto Scalia, Chairman JIACC Tax Commission
