On February 17, 2025, the governments of Russia and the UAE signed a new Double Taxation Agreement (DTA) in Abu Dhabi. This agreement, set to replace the current treaty signed in 2011, is scheduled to come into effect on January 1, 2026, provided it is ratified by both countries in 2025. The new DTA aims to reduce the tax burden on individuals and businesses operating across both countries and streamline taxation policies in line with international standards.
This article provides an overview of the key provisions of the new agreement and explores how it will impact businesses, employees, and investors in both Russia and the UAE.
The new Double Taxation Agreement (DTA) introduces several important changes, which are expected to have significant implications for companies and individuals operating in both Russia and the UAE. Here are the main provisions of the agreement:
The DTA introduces a 10% withholding tax rate on dividends, interest, and royalties. This tax rate applies regardless of the ownership percentage. Previously, withholding taxes on such payments may have been higher, but under the new agreement, the tax burden will be lower, making cross-border transactions between the two countries more efficient.
Dividends, interest, and royalties paid by entities in one country to residents of the other country will now be subject to a flat 10% withholding tax, which is more favorable compared to the previous rate.
Mutual investment fund payments, including those from closed-end investment funds, will be classified as dividends and taxed at a 10% rate. However, there is an exception for real estate funds, which will be taxed at a higher rate of 25%. This provision aims to harmonize the taxation of investment returns between the two countries.
One of the standout provisions of this agreement is how remote work income will be taxed. Under the new DTA, income from remote work will be taxed in the employer’s jurisdiction, not where the employee is physically located. This is a departure from the traditional approach in many tax treaties, where tax obligations are based on the location of the employee.
For example, if a Russian company employs an individual in the UAE and the employee works remotely from the UAE, the employee’s income will be taxed under Russian tax law, not UAE law.
This provision is particularly relevant in today’s global economy, where remote work is increasingly common.
Income derived from international transportation, whether by aviation or maritime transport, will be taxed in the home jurisdiction of the carrier. This provision ensures that businesses engaged in international transport activities, such as airlines and shipping companies, will be taxed in their home countries rather than in every country they operate in.
Business profits earned by companies in one country will not be subject to withholding tax in the other country. This provision will simplify tax reporting for companies engaged in cross-border operations between Russia and the UAE, as business profits will only be taxed in the jurisdiction where the business is located.
The most unique and standout provision in this agreement is the taxation of remote work. This provision has not been common in traditional tax treaties, and its inclusion signals a forward-thinking approach by both Russia and the UAE in adapting to the realities of the modern workplace.
With the growing trend of remote working, many tax treaties have struggled to keep up with this evolving aspect of the global workforce. Under this agreement, Russian companies employing individuals working remotely from the UAE will not need to withhold tax in the UAE. Instead, the employee’s income will be taxed under Russian tax law.
This can significantly simplify the tax compliance process for both employers and employees, as it avoids double taxation or complex tax filings in both jurisdictions.
The new DTA introduces several benefits and changes for businesses operating across Russia and the UAE. Companies in both countries should be aware of how these provisions will affect their tax liabilities and reporting requirements.
Under the new DTA, Russian companies will no longer be required to withhold a 15% tax when making payments for services provided by UAE residents. This is a significant relief for Russian businesses, as they will no longer face the burden of withholding tax on payments made to UAE service providers, reducing administrative overhead.
This also makes cross-border transactions between the two countries simpler and more efficient for companies operating in industries such as consulting, tech, and finance.
Previously, UAE banks were required to provide a tax residency certificate to Russian tax authorities when businesses or individuals in the UAE received payments. Under the new DTA, this requirement is lifted. UAE banks will no longer need to supply such certificates, streamlining the process for businesses making payments to UAE residents.
This change is particularly beneficial for businesses involved in international banking and cross-border investments, as it reduces the documentation requirements and speeds up the process.
Under the new DTA, Russian companies will be able to credit UAE taxes against their Russian tax liabilities on dividends, provided they do not qualify for the participation exemption. This means that if a Russian business receives dividends from a UAE-based company and taxes are paid in the UAE, these taxes can be credited against the business’s Russian tax obligations.
This provision is beneficial for companies with substantial investments in the UAE, as it helps avoid double taxation on income received from their investments.
The agreement between Russia and the UAE is a significant step forward in strengthening the economic ties between the two countries. The negotiations on this new DTA have been ongoing since 2022, and the signing of the agreement in February 2025 marks the culmination of these discussions. However, before it can come into effect on January 1, 2026, the agreement must be ratified by the parliaments of Russia and the UAE.
Ratification is a standard procedure for international agreements, but it is essential to monitor the process closely to ensure that the DTA is implemented on schedule.
Businesses operating between Russia and the UAE should take the following steps to prepare for the new DTA:
Review existing contracts with clients, suppliers, and employees to understand how the new withholding tax provisions and remote work tax rules will impact them.
Consult tax advisors to ensure compliance with the new agreement, especially regarding dividend payments, service fees, and remote work taxation.
Prepare for potential changes in reporting and tax filing requirements, including adjustments to how dividends, royalties, and interest payments are processed and taxed.
The new Double Taxation Agreement (DTA) between Russia and the UAE marks a pivotal moment in the economic relationship between the two nations. The provisions within the agreement are designed to simplify tax procedures, reduce the tax burden on businesses, and promote cross-border investments. With changes such as the remote work tax provisions and the removal of certain documentation requirements, businesses will have a clearer, more straightforward path for conducting operations across these two important economic hubs.
As the agreement progresses toward ratification, businesses should stay informed of any updates and ensure that they are fully prepared for the changes that will take effect in 2026. This new DTA is a positive step forward for strengthening the Russia-UAE economic partnership, and it offers significant opportunities for businesses in both countries to thrive in an evolving global tax landscape.
