Some pension funds may find it difficult or impossible to pay what they want to pay in the future, and they may simply not be able to find the money and will have no choice but to offer a lower pension. On 12 April 2016, the United Kingdom and the United Arab Emirates signed a double taxation convention. It entered into force on 25 December 2016 and will enter into force on 1 January 2017. As far as the personal tax is concerned, it will enter into force in the United Kingdom from 6 April 2017. This agreement will have a significant impact on the taxation of workers who change jobs between the UK and the UAE, and employers and their workers should take active steps to prepare for the entry into force of this measure from 6 April 2017. The main areas of action are as follows: for the United Arab Emirates, a person is considered to be resident in the United Arab Emirates if he resides in the United Arab Emirates, has his habitual residence there or if he has his vital center of interests. Compared to other contracts signed by the UAE, this definition is quite broad. In the case of UK ERTs, distributions of profits and capital gains are treated as UK property income in the hands of shareholders and are subject to withholding tax at the basic rate of income tax (currently 20%). The UAE-UK Tax Convention regulates the prevention of double taxation with respect to the income of UAE individuals and businesses doing business in the UK and vice versa. The double taxation treaty between the UAE and the UK will ensure that individuals will not be taxed for the same income in both countries and on investments they make by both governments. The right to tax a pension is the responsibility of the country of residence. The capital amounts of pension funds are not mentioned. As a general rule, the UK-UAE DTC provides that dividends in the country of origin are not subject to withholding taxes.
However, according to the UK-UAE DTC, the UK can only withhold 15% of taxes. To the extent that it is available, DTC UK-UAE therefore strives to significantly reduce the tax leakage that UAE investors produce during distributions resulting from their investments in UK REITS. This reduction, which represents an immediate 5% increase in the return on an investment, will, for example, make UK reits more attractive to sovereign wealth funds. This means that, in most cases, interest or equivalent financial income paid by the UK to the UAE should be exempt from withholding tax. If, according to the DTC UK-VAE, a person resides in both the United Arab Emirates and the United Kingdom, the country that is eligible for exclusive residence is determined in accordance with a Tiebreaker. The key factors are (in order of priority), where the person: subject to the imposition of targeted anti-abuse provisions that restrict legal protection in circumstances where the main objective is to preserve the usefulness of the DTC, cross-border investments by UAE agencies in the UK should be significantly facilitated and improved by combining Article 10. 11 and 12 deal with withholding taxes on the payment of dividends, interest and royalties. . . .