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Good News: UAE No Longer on European Union Blacklist

22 February 2018

 
The European Union recently removed several countries, including the UAE, from its “blacklist” of Uncooperative Tax Havens. The move is due to the country’s improved tax transparency. In addition, 113 more agreements between the UAE and EU were set down to avoid the double taxation problem, including 8 that would mean greater tax information exchange.
 
Barbados, Grenada, Macau, Mongolia, Panama, South Korea, and Tunisia were the other countries taken off the blacklist.
 
UAE Now “Largely Compliant”
 
The Ministry of Finance announced the new status for UAE relating to the Global Forum on Transparency and Exchange of Information for Tax Purposes Index. Furthermore, officials in the country also signed FATCA (Foreign Account Tax Compliance Act) for compliance with US financial regulation. Finally, UAE now complies with international Common Reporting Standards. Now that UAE is in BEPS (Base Erosion and Profit Shifting), UAE’s international business standing will improve considerably.
 
Once BEPS is fully adopted, multinational companies operating within the UAE are required to provide information on revenues and profitability, employee numbers, and tax information for each country. Now, if any international tax authority requires information for any organisation operating in the UAE, it may approach UAE’s tax authorities directly, subject to agreement and proper procedure.
 
Previously, loopholes meant operators could structure their organisation to pay minimum tax or avoid it altogether.
 
Global Trends on Tax Avoidance
 
These new regulations mean that where a business entity must submit full documentation on their financial operations, it becomes easier to see where profits go and how much tax is being paid against those profits.
 
BEPS is a framework of the OECD (Organisation for Economic Co-operation and Development) requiring minimum standards on tax and profit disclosure regarding international transactions. Globally, the world’s economic powers are tightening up laws on tax avoidance and evasion for greater fiscal transparency and information exchange.
 
UAE’s new compliance will increase investment and jobs to UAE, expecting to gain at the cost of western countries and developing Asian economies. Tax reform will certainly attract new foreign investment and provide a common national market in the UAE.
 
It’s considered a great victory on all sides, especially for UAE’s efforts over the past year to work towards greater tax transparency. Now, the country expects growth in many areas such as education, healthcare, logistics, real estate, and retail, amongst others. It’s expected to show new investment by the end of the first quarter of the year.
 

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