Prior to 2020 relations between the two countries were strained, but effort has been made on both sides to stabilise this. On the 31 May 2021 the status between the two countries was further improved as they entered into their first Double Taxation Treaty (DTT) due to be ratified later in the year and come into force on the 1 January 2022.
The United Arab Emirates now have over one hundred and thirty DTT’s in addition to a number of bilateral treaties, whilst Israel now has fifty nine. The purpose of this treaty is to prevent situations of double taxation. Whilst the UAE does not generally have corporation or withholding tax except in specific circumstances, the agreement will most certainly benefit Israeli inbound investments.
Dividends will be taxed at between 0% and 15%, compared to the Israeli national standard rate of 25%.
Interest will be taxed at between 0% and 10%, compared to the Israeli national rate of 23%.
And Royalties will be taxed at 12%, compared to the Israeli national rate of 23%.
It is hoped that the advantageous tax treatment will promote investment and trade to boost both countries’ relations and economies.