UAE (United Arab Emirates) along with Switzerland has been removed from the European Union‘s Blacklist -this list consists of countries known to be acting as tax havens for the rich and influential.
The decision of UAE’s removal was done by the Code of Conduct Group on Business Taxation on October 10, 2019 after carefully reviewing UAE’s Economic Substance Regulations (Ministerial Decision No. 2015 of 2019) and finding these regulations to be on the right path of creating a country that is more cooperative with EU on tax matters.
The removal of UAE from the dreaded EU Blacklist filled the international business community with relief as UAE is the hub of all things business.
UAE’S blacklisting by the EU
UAE was blacklisted when EU first established its blacklist. EU’s tax haven lists were first setup in 2017 when the infamous Panama Papers shocked the world with their revelations regarding the tax evasion scheme encompassing the globe.
In December of 2017, UAE was added to the list after EU named UAE as a non-cooperative tax jurisdiction – allowing the wealthy individuals and corporations to evade tax by various schemes. Namely offshore companies that showed profit but did not reflect real economic activity in said jurisdiction.
The 28 nation European Union does not add a country to the blacklist just because it is not charging a tax – a sure shot sign of being a tax haven- but in UAE’s case they made an exception and requested the UAE’S Ministry of Finance to make appropriate regulations regarding their lax tax laws.
UAE committed to display transparency and cooperation worthy of EU standards:
UAE is whole- heartedly committed to transforming their tax laws so that they can be completely up to EU’s standard. The implementation of the Economic Substance Regulations in April of this year is a great leap forward in achieving transparency while conducting business in UAE.
The Economic Substance Regulations entail:
- The companies operating in the UAE must show economic activity relative to the profit earned.
- All entities registered in UAE i.e. carrying a license must notify the regulatory authority
Whenever they perform any of the following activities:
- Fund transfer or administration
- Leasing and financing
- All entities will notify the relevant regulatory authority if their income is taxable or not.
- Failure to comply will result in severe monetary penalties i.e.AED10,000 and AED50,000 persistent failure will result in suspension of the business license plus a fine of AED300,000
After its successful departure from EU’s blacklist UAE vows to adhere to the strict regulations and laws that made it possible for it break free from the list. On a more positive note, UAE will see more business from European nations as it now has gained their trust as being a safe, fair and secure country to invest in.
The news of removal from the blacklist also marks UAE as the premier financial center having international taxation laws of the highest standards that has been vetted by the great EU.
In light of recent events it is clear that UAE has cemented its place as the prime location for business setup in Dubai and right now is the best time to invest in Dubai to reap the bounties.
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