United Arab Emirates removed from Dutch Tax Blacklist

United Arab Emirates removed from Dutch Tax Blacklist

In its updated list of low-taxed and non-cooperative jurisdictions for the year 2024, the Netherlands has removed the United Arab Emirates (UAE) therefrom. This comes after the UAE introduced a federal Corporate Income Tax (CIT) regime with a standard tax rate of 9%, with effect for financial years commencing on or after 1 June 2023.

Dutch Tax Blacklist

The Dutch list of low-taxed and non-cooperative jurisdictions (Regeling laagbelastende staten en niet-coöperatieve rechtsgebieden voor eblastingdoeleinden) is updated every year and includes jurisdictions that may be involved in abusive tax structures, as they levy no, or a low rate of taxation of less than 9%.

The Netherlands have introduced various domestic anti-tax abusive measures countering cross border structures or transactions involving blacklisted jurisdictions. Firstly, cross border payments of dividends, interest and royalties by Dutch payers to recipients in blacklisted jurisdictions will incur a conditional withholding tax equal to the Dutch CIT rate (25,8% for 2024). Secondly, no certainty in advance (in the form of a tax ruling) can be obtained for dealings with group companies established in blacklisted jurisdictions. Finally, the Dutch Controlled Foreign Corporation (CFC) rules entail that undistributed (tainted) passive income (such as dividends, interest and royalties) derived from subsidiaries that are established in blacklisted jurisdictions, will be included annually in the taxable basis of the Dutch taxpayer. Whilst the Dutch regulations include the possibility of rebutting the anti-tax abusive measures’ application, such as demonstrating adequate economic substance at the recipient entity’s level, the measures created uncertainty and practical issues for some UAE businesses with interests in the Netherlands.

On 29 December 2023, the Dutch government published the updated list of low-taxed and non-cooperative jurisdictions for the year 2024, which now no longer includes the UAE. The reason for the UAE’s removal from the list is the recent introduction of its CIT regime with a standard tax rate of 9%.

Benefit for UAE businesses

In recent years, the Netherlands has introduced various measures to counter tax abusive structures and transactions, whether as part of wider EU initiatives, or as purely domestic actions. The anti-tax abusive measures targeting group companies established in blacklisted jurisdictions, can have far-reaching implications for multinational businesses with a presence in the Netherlands. The fact the UAE is no longer considered a blacklisted jurisdiction is a welcome relaxation for corporate groups with interests in both the UAE and the Netherlands.

Conclusion

The UAE’s removal from the Dutch Tax Blacklist means that the Netherlands’ domestic anti-tax abusive measures no longer apply to UAE group counterparties. This is a welcome relaxation for UAE businesses with business interests in the Netherlands and will further stimulate economic ties between the two countries.