ADGM Tax Environment
Executive Summary
This report was commissioned by Abu Dhabi Global Market (“ADGM”) and prepared by PwC to analyse the tax environment of ADGM, with a particular focus on the UAE’s extensive double tax treaty network. The report compares the UAE to leading business jurisdictions such as Cyprus, Hong Kong, Ireland, Luxembourg, Mauritius, the Netherlands, Singapore, Switzerland and the United Kingdom (“comparison jurisdictions”).
ADGM companies benefit from a full English common law environment, a 0% corporate income tax rate, no foreign ownership restrictions, no limits on repatriation of profits and no withholding taxes, as well as independent courts and a financial services regulator.
We believe there is a strong case for the incorporation of a regional presence in ADGM, whether banks, advisory firms or other businesses across the financial sector, to be closer to regional clients and business. With a highly competitive SPV regime, benchmarked against the world’s leading jurisdictions, ADGM also serves as an attractive domicile for SPVs used in the structuring of transactions.
We hope you find this report useful, and it enables you to identify clear opportunities to enhance operational and tax efficiency for your business. We welcome all discussions about ADGM’s offerings and how the ADGM platform can serve your business needs. Please do not hesitate to contact us.
Tax Analysis
PwC’s analysis has identified some clear strengths and opportunities from a tax perspective over the comparison jurisdictions. The UAE has an extensive network of double tax treaties, with 90 in-force double tax treaties and a further 39 in various stages of negotiation, signature or ratification (as at 15 November 2018).
In addition to a wide and favourable double tax treaty network, ADGM currently offers a 0% corporate income tax rate to ADGM companies and the UAE does not levy withholding taxes on outbound dividend, interest and other payments.
The UAE joined the Organisation for Economic Cooperation and Development (“OECD”) Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) on 16 May 2018, which was one of the requirements to be considered a cooperative jurisdiction for tax purposes by the European Union.
As part of its commitment to combat ‘treaty shopping’, the UAE also signed the multilateral convention to incorporate the treaty related BEPS measures into its existing double tax treaties. If double tax treaty benefits are commercially important, it is important that the ADGM company has appropriate operational substance in the UAE and that it supports a principal commercial purpose. This is in addition to meeting the minimum substance and procedural requirements set by the UAE Ministry of Finance and any source country requirements.
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