From the overview of DTAs and TIEAs as provided by the Fiscal Authority of the Principality of Liechtenstein we understand that the Agreement between the Principality of Liechtenstein and the United Arab Emirates for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, which was signed on October 1, 2015, (Hereafter: the DTA) is to enter into force on February 24, 2017.
Based on Article 30, Paragraph 2 of the DTA (“Entry into force”) the fact that the DTA shall enter into force on February 24, 2017 means that the DTA shall have effect:
a) in respect of taxes withheld at source, to income paid or credited on or after January 1, 2018;
b) in respect of other taxes on income and taxes on capital, to taxes chargeable for any taxable year beginning on or after January 1, 2018;
c) in respect of Article 26 to requests made on or after 1 January 1, 2018 and only in respect of taxable periods beginning on or after January 1, 2018.
Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.
Taxes covered
Based on Article 2, Paragraph 3 of the DTA (“Taxes covered”), the existing taxes to which the DTA shall apply are in particular:
a) in the case of the Principality of Liechtenstein:
(i) the personal income tax (Erwerbssteuer);
(ii) the corporate income tax (Ertragssteuer);
(iii) the real estate capital gains tax (Grundstücksgewinnsteuer);
(iv) the wealth tax (Vermögenssteuer); and
(v) the coupon tax (Couponsteuer);
b) in case of the United Arab Emirates:
(i) the income tax;
(ii) the corporate tax.
Article 2, Paragraph 4 subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes that are imposed under the laws of a Contracting State after the date of signature of this Agreement in addition to, or in place of, the existing taxes.
Residency
Article 4, Paragraph 3 of the DTA (“Resident”) arranges that where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.
Permanent establishment
Article 5, Paragraph 3 of the DTA (“Permanent establishment”) arranges that A building site or construction or installation project constitutes a permanent establishment only if it lasts more than nine months.
With respect to profits to be attributed to a permanent establishment Article 7, Paragraphs 3 of the DTA (“Business profits”) contains a so-called adjustment clause that applies to permanent establishments.
Immovable property
Article 6, Paragraph 1 of the DTA (“Income from immovable property”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State shall be taxable only in that other State.
With respect to immovable property Article 13, Paragraph 1 of the DTA (“Capital gains”) arranges that Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State shall be taxable only in that other State.
Article 13, Paragraph 4 of the DTA subsequently arranges that Gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State shall be taxable only in that other State.
Article 22, Paragraph 1 of the DTA (“Capital”) arranges that capital represented by immovable property referred to in Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, shall be taxable only in that other State.
Associated enterprises
Article 9, Paragraph 2 of the DTA (“Associated enterprises”) contains a so-called appropriate adjustment clause.
With respect to this appropriate adjustment clause Article 9, Paragraph 3 determines that the provisions of paragraph 2 shall not apply where judicial, administrative or other legal proceedings have resulted in a final ruling that by actions giving rise to an adjustment of profits under paragraph 1, one of the enterprises concerned is liable to penalty with respect to fraud, gross negligence or wilful default.
Dividends
If the beneficial owner of the dividends is a resident of the other Contracting State, the Source State is not allowed to withhold taxes over such dividends (Article 10 of the DTA).
Interest
If the beneficial owner of the interest is a resident of the other Contracting State, the Source State is not allowed to withhold taxes over such interest (Article 11 of the DTA).
Royalties
If the beneficial owner of the royalties is a resident of the other Contracting State, the Source State is not allowed to withhold taxes over such royalties (Article 12 of the DTA).
Anti-abuse clause
Article 28 of the DTA (“Entitlement to benefits”) contains a.o. a so-called Principal Purpose Test.
Other
Furthermore the DTA contains a.o. provisions regarding a Mutual Agreement Procedure (Article 25) and regarding the Exchange of Information (Article 26).
Click here to be forwarded to the text of the DTA (in English) as available on the website of the Liechtenstein Government or click here to be forwarded to the German version of the DTA as available on the website of the Liechtenstein Government.
Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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