On February 17, 2025, the Russian Federation (“Russia”) and the United Arab Emirates (“UAE”) signed an Agreement for the Elimination of Double Taxation on Income and Capital and the Prevention of Tax Avoidance (“Agreement”). While the signed Agreement has not yet been published, its significant terms are outlined in the Order of the Government of the Russian Federation dated February 11, 2025, No. 280-r[1].
Currently, there exists a tax agreement[2] between Russia and the UAE that is limited to government financial and investment institutions. The new Agreement aims to apply to all tax residents of both countries, including individuals and entities, as well as residents of UAE free trade zones (FTZs). It will govern property tax, profit tax, and personal income tax in Russia, along with personal and corporate income tax in the UAE.
The Agreement is expected to come into force and be applicable from January 1, 2026, pending the completion of all necessary ratification procedures in 2025.
Tax Residency Considerations
One of the primary causes of double taxation is the recognition of an individual as a tax resident in multiple jurisdictions due to differing criteria that define this status.
An individual is considered a tax resident of the Russian Federation if they spend 183 days or more in the country within a year. However, if that individual holds a Residence Permit in the UAE and has a permanent residence (such as an owned or long-term rented apartment), employment, or business in the UAE, they may also be deemed a tax resident of the UAE if they reside there for 90 days or more. As a result, both Russia and the UAE recognize the individual as their tax resident and claim the right to tax their income.
The Agreement includes provisions to resolve such situations (the so-called tie-breaker rule), which will apply the following criteria in order:
- Availability of a permanent home;
- Personal and economic ties to the respective jurisdiction;
- Place of habitual residence;
- Citizenship.
If these criteria do not establish the individual’s tax status, it will be determined by agreement between the tax authorities of Russia and the UAE.
The tax residency provisions of the Agreement will be particularly relevant for Russian citizens with residence permits, employment, or assets in the UAE. Their application will provide clarity and allow for more efficient structuring of assets and businesses in the UAE in terms of tax burden.
Key Tax Changes Under the Agreement
- A reduced withholding tax (WHT[3]) rate of 10% on passive income, such as dividends, royalties, and interest, provided the recipient has a genuine right to this income.
- No WHT on payments for services rendered by a related resident of the UAE (currently subject to a 15% WHT in Russia).
- Exemption of income for individual UAE residents from personal income tax when selling shares (stocks) of Russian companies (except for those where more than 50% of assets are represented by Russian real estate).
- Taxation of personal income tax on salaries of remote employees of Russian companies working from the UAE. Since 2024, such payments are subject to personal income tax under Russian Tax Code, but internationally, they are typically taxed only at the employee’s place of residence. This provision is included in the international tax agreement for the first time.
- The ability for Russian residents to credit taxes paid in the UAE. Without the Agreement, this was only available to companies. Since there is no personal income tax in the UAE, this provision will only be relevant when an individual’s income is subject to corporate tax in the UAE. For example, if a person conducts business in the UAE under their name and their annual revenue exceeds AED 1 million (₽24.9 million).
Information Exchange and Offshore Lists by the Ministry of Finance
The Ministry of Finance classifies the UAE as an offshore zone[4] due to favorable tax conditions and the non-disclosure of financial information to Russian tax authorities.
We anticipate that upon the Agreement’s entry into force, the Ministry of Finance will remove the UAE from its offshore lists. Russia and the UAE have committed to exchanging information necessary for tax purposes, thereby granting Russian tax authorities access to information regarding the income, assets, and accounts of Russian residents in the UAE.
Exclusion of the UAE from offshore lists will result in the following consequences:
- A 0% profit tax rate for Russian companies receiving:
- dividends from companies in the UAE, provided minimum requirements for holding duration (1 year) and ownership share (at least 50%) are met;
- income from the sale of shares of companies in the UAE, provided requirements for minimum holding duration (5 years) and the balance sheet value of real estate in the subsidiary’s assets (less than 50%) are met.
- Exemption of gratuitous financial aid received by a Russian company from its parent or subsidiary company in the UAE (with at least a 50% ownership stake) from profit tax.
- In the absence of signs of interdependence, transactions with UAE residents will not be recognized as controlled for transfer pricing purposes.
- Profits of a controlled foreign company in the UAE may be exempt from taxation in Russia under certain conditions.
Changes in Taxation Rules Upon the Entry into Force of the Agreement
| Operation (transaction) | Current taxation | Taxation under the Agreement | ||
| Russia | UAE | Russia | UAE | |
| 1. Income of UAE Tax Residents: | ||||
| a) Dividends and Similar Payments | WHT 15 % | Corporate Tax 9%[1] | WHT 10 %[2] | Corporate Tax 9% |
| b) Interest | WHT 25 % (15% on government bonds) | |||
| c) Royalties | WHT 25 % | |||
| d) Rental Income: | ||||
| – Real Estate in Russia, | WHT 25 % | Corporate Tax 9% | WHT 25 % | Corporate Tax 9% |
| – Maritime, Air, and Transport Vehicles, Containers for International Transport, | WHT 10 % | No Tax | ||
| – Real Estate in UAE | No Tax | |||
| e) Capital gains: | ||||
| – Shares, Stocks of Russian Companies, | No Tax WHT is 25% if at least 50% of the target’s assets consist of real estate in Russia (with an exception for publicly traded shares). | Corporate Tax 9%[3] | No Tax WHT is 25% if, at any time within the 365 days preceding the transaction, at least 50% of the target’s assets consisted of real estate in Russia (with an exception for publicly traded shares). | Corporate Tax 9% |
| – Real Estate in Russia, | WHT 25 % | WHT 25 % | ||
| – Shares, Stocks of UAE Companies, Real Estate in UAE | No Tax | No Tax | ||
| f) Payment for Goods, Works, Services | No Tax | Corporate Tax 9% | No Tax | Corporate Tax 9% |
| g) Payment for Services, Works to Related Parties[4] | 15 % WHT | Corporate Tax 9% | No Tax | Corporate Tax 9% |
| h) Salary and Similar Payments | Personal Income Tax (“PIT”) 30%, along with social contributions, if the employee is physically present in Russia. For non-residents with a work permit, highly qualified specialists (HQS), and remote workers, a progressive PIT scale applies: 13% to 22%, depending on income level | No Personal Income Tax Corporate Tax is not applicable | PIT 30%, along with social contributions, if the employee is physically present in Russia. For non-residents with a work permit, highly qualified specialists (HQS), and remote workers, a progressive PIT scale applies: 13% to 22%, depending on income level | No Personal Income Tax Corporate Tax not applicable Salaries of employees of Russian companies working remotely from the UAE may be subject to taxation in Russia. |
| 2. Income of Russian Tax Residents: | ||||
| a) Dividends and Similar Payments | Corporate Tax 25% PIT 13 – 22 % | WHT 0 %[5] | Corporate Tax 25% PIT 13-22% with tax credit for tax paid in the UAE | WHT up to 10 %[6] |
| b) Interest | ||||
| c) Royalties | ||||
| d) Rental Income: | ||||
| – Real Estate in UAE, | Corporate Tax 25% PIT 13 – 22 % | Corporate Tax 9% if the Russian resident has a permanent establishment in the UAE | Corporate Tax 25% PIT 13-22% with tax credit for tax paid in the UAE | Corporate Tax 9% if a Russian resident has a permanent establishment in the UAE (both individuals and companies may credit this tax in Russia). |
| – Maritime, Air, and Transport Vehicles, Containers for International Transport, | ||||
| – Real Estate in Russia | No Tax | No Tax | ||
| e) Capital Gains: | ||||
| – Shares, Stocks of UAE Companies[7], | Corporate Tax 25% PIT 15 % | WHT 0 % or Corporate Tax 9% if the Russian resident has a permanent establishment in the UAE | Corporate Tax 25% PIT 15 % | WHT if, at any time within the 365 days preceding the transaction, at least 50% of the target’s assets consisted of real estate in Russia (with an exception for publicly traded shares) or Corporate Tax 9% if the Russian resident has a permanent establishment in the UAE |
| – Real Estate in UAE, | Corporate Income Tax 25% PIT 15% if minimum holding periods are not met | WHT 0 % or Corporate Tax 9% if the Russian resident has a permanent establishment in the UAE | Corporate Income Tax 25% PIT 15% if minimum holding periods are not met | WHT or Corporate Tax 9% if the Russian resident has a permanent establishment in the UAE |
| – Shares, Stocks of Russian Companies, | No Tax if minimum holding periods are met | No Tax | No Tax if minimum holding periods are met | No Tax |
| – Real Estate in Russia | Corporate Income Tax 25% PIT 15% if minimum holding periods are not met | Corporate Income Tax 25% PIT 15% if minimum holding periods are not met | ||
| f) Payment for Goods, Works, Services | Corporate Tax 25% PIT 13 – 22 % | Corporate Tax 9% if the Russian resident has a permanent establishment in the UAE (Russian companies may credit this tax in Russia) | Corporate Tax 25% PIT 13 – 22 % | No Tax or Corporate Tax 9% if a Russian resident has a permanent establishment in the UAE (both individuals and companies may credit this tax in Russia). |
| g) Salary and Similar Payments | PIT 13 – 22 % | No Personal Income Tax Corporate Tax is not applicable | PIT 13 – 22 % | No Personal Income Tax Corporate Tax is not applicable Salaries of employees of UAE companies working remotely from Russia may be subject to taxation in UEA. |
[1] In the UAE, corporate tax applies to companies with an annual income exceeding AED 375,000 (approx. ₽9.3 million). Companies operating in Free Trade Zones (FTZ) may, under certain conditions, benefit from a 0% tax rate. Income from commercial activities conducted by individuals in the UAE is also subject to corporate tax if annual revenue exceeds AED 1 million (approx. ₽24.9 million). However, salaries, investment income for personal purposes, and real estate investments are not subject to corporate tax.
[2] A reduced WHT rate applies if the beneficial owner of the income is a UAE tax resident.
[3] Income derived by individuals from personal investments and real estate investments is not subject to Corporate Tax in UAE.
[4] In Russia, entities are considered related for tax purposes if their relationships can influence transaction terms, including through capital participation, agreements, or other means of decision-making control.
[5] Income earned by foreign tax residents from sources in the UAE is subject to WHT, which is currently set at 0%. The UAE Cabinet of Ministers has the authority to adjust this rate.
[6] A reduced WHT rate applies if the beneficial owner of the income is a Russian tax resident.
[7] If the UAE is removed from Russia’s list of low-tax jurisdictions, transactions involving shares or equity stakes in UAE companies may qualify for a 0% tax rate, provided certain conditions are met.
Prospects of the Agreement
Since 2022, the UAE has become one of the most popular “neutral” jurisdictions for Russian businesses operating in international markets. The absence of the Agreement and the offshore status of the UAE created additional tax and administrative burdens. The Agreement will reduce costs and establish more familiar rules.
We recommend analyzing how the implementation of the Agreement will impact your tax status and obligations.
The Nordic Star team possesses extensive experience in structuring personal and business assets in compliance with tax requirements. We are ready to assist you in assessing the implications of the Agreement and proposing ways to mitigate potential risks and optimize your business structure.
[1] http://publication.pravo.gov.ru/document/0001202502130040
[2] Agreement between the Government of the Russian Federation and the Government of the United Arab Emirates on the Taxation of Investment Income of the Contracting States and Their Financial and Investment Institutions (Signed in Abu Dhabi on December 7, 2011)
[3] In Russia, WHT on income earned by foreign organizations is only withheld by Russian organizations and individual entrepreneurs.
[4] Refer to the following Orders from the Ministry of Finance of Russia: Order No. 86n dated June 5, 2023, and Order No. 35n dated March 28, 2024.