Page 12 - ICAI UAE TAX UPDATE_JULY 2024

Kuwait

Kuwait has officially ratified its tax treaty with the
United Arab Emirates. Under this agreement, the state
of residence will have exclusive taxation rights on
passive income, including dividends and interest. The
treaty limits the source state’s taxation of royalties and
technical service fees to 10%.

Historically, tax treaties concluded by Kuwait did not
specifically contain a separate article dealing with
taxation of fees for technical services.

It also incorporates provisions for preventing abuse and
resolving disputes. The treaty is set to come into effect Bahrain
on January 1 of the year following its ratification, which
will be 2025. The Bahrain Parliament has introduced a new legislative
bill to implement corporate income tax (CIT), marking a
significant change in the country’s fiscal approach.

By aligning with the Organisation for Economic Co-
operation and Development (OECD)’s base erosion and
profit shifting (BEPS) guidelines, Bahrain is adopting
international standards to establish a global minimum
tax.

The proposed bill includes several key provisions aimed
at ensuring fairness and efficiency in the tax system.

Tax Rates: The CIT Law imposes a tax on the taxable
income of legal entities as follows:
Oman
• Banks and financial institutions, including exchange
The Majlis al-Shura, the lower house of the Omani companies and entities engaged in leasing activities, are
parliament, has approved a draft law and forwarded it subject to a starting tax rate of 5%, which will increase
to the State Council, the upper house, for final approval. annually by 1% until it reaches 7% of net taxable
profits (unless specified exemptions apply). Basic
Oman is now poised to become the first Gulf nation to telecommunications companies, insurance companies,
implement a personal income tax, aiming to diversify reinsurance companies, and financial brokerage
revenue sources beyond oil in alignment with its Vision partners will follow the same rate structure.
2040 plan. This decision, announced during the Shura’s • For all other legal entities, the tax starts at 3% with an
12th regular session, marks a significant shift in a region annual increase of 1% until it reaches 5% of net taxable
that has long relied on a no-income-tax policy to attract profits unless specified exemptions apply.
expatriates and drive economic development. • Foreign branches of Bahraini companies operating
outside the Kingdom will be subject to 6% tax on net
If enacted, the personal income tax will be the first of income, as declared in their final audited accounts.
its kind in the GCC region, potentially impacting high-
earning foreign workers and wealthy Omani citizens. Exemptions: Exemptions are granted to specific entities
The proposed tax targets high-income earners, with to support non-profit and public welfare activities. These
Omani citizens taxed on net global income exceeding $1 include public institutions and municipalities, income
million and foreign nationals on Oman-sourced income of trade unions, social entities, cooperative societies,
above $100,000. and other legally registered and licensed associations
that do not aim for profit. Additionally, income of non-
Further, Oman has also signed a Double Taxation profit religious, charitable, educational, sports, or
Avoidance Agreement (DTAA) with Egypt on May 22, health institutions, and the income of endowments, are
2023, to eliminate international double taxation and exempt. Companies achieving 100% Bahrainization are
enhance economic activities between the two countries. also granted tax exemptions. Commercial institutions

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UA E TAX UPD ATE NEWSLET TER ISSUE 04 - July 2024