The UAE included in The EU list of non-cooperative jurisdictions for tax purposes: What does it mean for businesses?

Jul 22, 2019 Resources

The UAE included in The EU list of non-cooperative jurisdictions for tax purposes: What does it mean for businesses?

On March 12, 2019 the Council of the European Union have updated the list of a non-cooperative jurisdictions for tax purposes, the “EU blacklist”. Two GCC countries have been added to the list this year: the UAE and Oman. The reason why the UAE is back in the blacklist is failure of implementing Economic substance regulations by the 31st of December 2018. Oman on the other hand has not made progress in implementing exchange of information protocols. 

DAC 6 Reporting obligations. 

DAC 6 is the EU’s Directive on Administrative Cooperation in the field of taxation. Under this Directive certain transactions between EU and blacklisted countries should be reported and automatic exchange of information will be done. 

EU countries already started to apply safeguard measures working with these countries such as: 

  • Automatic exchange of information; 
  • Additional documents requirements for transactions with countries included to the EU black list;
  • Enhanced monitoring;
  • Audit from Tax authorities and financial institutions.

Relating to the double tax treaties signed between blacklisted countries and EU member-states there will be careful review in situations when a legal entity registered in the blacklisted country would like to mitigate tax burdens.   

What did the UAE do to be removed from the EU blacklist? 

The Cabinet of Ministers of the UAE on April 20, 2019 issued Resolution No.31 of 2019 concerning Economic substance regulation. 

Under this resolution UAE mainland and Free zone companies, that carry on a Relevant Activity, excluding entities directly or indirectly owned by the UAE government are obligated to pass the Economic Substance test (read more in our article https://www.linkedin.com/pulse/what-you-need-know-uae-economic-substance-law-do-daria-sichkovska?articleId=6556395263710334976#comments-6556395263710334976&trk=public_profile_post )

We are confident that 2017 will be repeated and the UAE will be removed from the EU blacklist. However the new rules and regulations implemented by the government cannot be ignored and the economic substance requirements should be upheld (office, adequate number of qualified full-time employees etc.). This impacts private businesses with minimum physical presence in the UAE that mainly use it for tax efficiency purposes, billing and banking. Non adherence to the new rules will lead to fines and possible license suspension. 

How can we help you? 

We can support you in determining business risks and advise you on the best way to comply with the new rules and regulation. Please feel free to contact us at info@mf-sol.com and one of our advisors will get back to you within 24 hours for an initial consultation.