The United Arab Emirates (UAE) and Tanzania signed an agreement today on double taxation.
The deal relates to preventing double taxation as well as tax evasion. It seeks to strengthen tax cooperation between the UAE and the southern African country and “avoid impeding the flow of trade and investment,” the Emirati Ministry of Finance said in a statement.
What it means: Double taxation occurs when the same income is taxed by different entities. It can occur in international trade and investment, e.g., if an Emirati citizen earns a profit from a business in Tanzania. Some countries, such as the United States, allow deductions for foreign taxes paid.
Why it matters: The agreement further indicates the UAE’s desire to remove barriers to bilateral investment and trade with Tanzania. The UAE’s ties to the country are growing. In August, the Emirati renewable energy firm Masdar agreed to develop solar and wind power projects in Tanzania.
The Emirates is seeking greater economic ties with other African states as well. In June, Abu Dhabi signed a trade financing agreement with several countries in West Africa. The UAE is also considering Kenya for its next free trade agreement.
Know more: The UAE is undergoing some significant changes with regard to taxation and financial regulation. The Gulf state has unveiled several initiatives this year in an effort to crack down on money laundering. Most recently, the central bank announced new guidelines on identifying individuals who partake in money laundering and terrorism financing. This followed several money laundering and sanctions busting controversies implicating the UAE recently.
The UAE also announced early this year that it will collect a first-ever tax on business profits starting in 2023. This is part of a larger overhaul made to attract more entrepreneurs, but also represents an effort by the state to rely less on oil and gas revenue.