• Service: Tax, Global Mobility Services, International Tax
  • Type: Regulatory update
  • Date: 8/17/2014

UAE - Tax treaty with Mexico, FATCA update 

August 17:  An income tax treaty between the UAE and Mexico has an effective date of 1 January 2015, following the treaty’s entry into force.

The tax treaty was signed on 20 November 2012.

Treaty provisions

The treaty establishes a withholding tax rate of 10% for interest and royalties, and specifies that dividends are only taxable in the state of residence.

The treaty also provides for the taxation of capital gains on share transfers in the country where the company whose shares are being transferred is located.

The treaty contains a limitation on benefits clause that could affect a person’s entitlement to treaty benefits.

FATCA update

In May 2014, the UAE reached an agreement in principle with the United States for a Model 1 intergovernmental agreement (IGA), providing for compliance of UAE-registered financial institutions with the FATCA regime.

Accordingly, foreign financial institutions located in the UAE will be treated as having an agreement to comply with the requirements of FATCA by the end of 2014. With the FATCA registration deadline for UAE-based institutions extended to the end of 2014, these institutions now have more time to comply with the FATCA requirements.

Read a 2014 report prepared by KPMG International: United Arab Emirates – New FATCA IGA with US, tax treaty with Mexico

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