1. International Tax Planning using UAE Companies & Tax Treaties
Investing from Europe to Africa and Asia
Academy & Finance, Dubai
10 May 2016 – Jan Bart Schober, Tax Partner, Loyens & Loeff

2. Content Using the UAE for investments in Africa and India from Europe
Introduction
Some examples
International tax developments
BEPS / EU
Action 6

3. Which European Investors
European companies that already have a presence in the UAE
Should expansion to Africa / Asia be done by the European parent company directly or through its presence in the UAE?
European companies without presence in the UAE
Should expansion to Africa / Asia be done by the European parent company directly or should a UAE presence be established?
Not addressed: European individuals

4. How to determine the legal structure
Tax is just one of many considerations
Tax
Legal
Cost
Compliance
Recruitment
Stability
Export controls
Judicial system
Business is alwaysleading
in advance
on a case-by-case basis
but as consistent as possible
Tax aspectsshouldbeconsidered:

5. Key tax aspects to consider
Common aspects in tax treaties
Persons covered
Taxes covered
General definitions
Tax residency
Permanent establishment
Real estate
Shipping / air transport
Dividends / interest / royalties
Capital gains
Independent / dependent income
Directors fees
Entertainers / sportspersons
Pensions
Government service
Students
Other income
Associated enterprises
Avoidance of double taxation
Non-discrimination
Mutual agreement procedure
Exchange of information
Assistance

6. Morocco – Investment in Operating Company
EU = NL
UAE
Dividends
Capital gains
Residency EU
10% 5%
UAE
Resident state
Resident state
Liable to tax
Liable to tax

7. Egypt – Investment in Operating Company
EU = NL
UAE
Dividends
Capital gains
Residency EU 0% 0%
UAE
Resident state
Resident state
Liable to tax
Liable to tax

8. Egypt – Investment in Operating Company
EU = GER
UAE
Dividends
Capital gains
Residency EU
15% 0%
UAE
Resident state
Resident state
Liable to tax
Liable to tax

9. Egypt – Investment in Operating Company
EU = GER NL
UAE
Dividends
Capital gains.
Residency
PPT EU
15% 0% 0%
Resident state
Resident state
Resident state NL
UAE
Liable to tax
Liable to tax
Liable to tax No
Yes No

10. Egypt – Investment in Real Estate Company
EU = NL
UAE
Dividends
Capital gains
Residency
PPT EU 0% 0%
UAE
Resident state
Source state
Liable to tax
Liable to tax
Only for dividends No

11. South Africa – Loan to SA Company
EU = FR
UAE
Interest
Capital gains
Residency EU 0%
N/A
UAE
Resident state
N/A
Liable to tax
N/A
Other considerations
Effective tax rate
French CIT (33%) on net income from loan
South African WHT (15%) on gross interest paid
Note: French participation relief available?

12. Djibouti – Investment in Mining Licence
EU = UK
UAE
Tax treaty EU
N/A
N/A
UAE
Other considerations
Effective tax rate
For sake of discussion, assume there’s no difference in effective tax rate
Protection
No international legal protection
Arab Investment Treaties

13. India – Rendering Oil Field Services
EU = IT
UAE
Residency
PE definition EU
Incorporated and managed
Liable to tax
UAE
All services to oil fields constitute PE, irrespective of the duration
Services constitute PE if they exceed 9 months in a 12 months period

15. International Tax Developments – What’s Going On … ?!
Globally
OECD / G20 BEPS Project
Final reports published in September 2015
4 themes: Transparency, Mismatches, Anti-abuse and Transfer pricing
15 Action Points
European Union
EU Anti Tax Avoidance Package
Proposal of 28 January 2016
EU Anti Tax Avoidance Directive
EU council vote on 25 May 2016
Recommendation Treaty issues, CbCR Directive, Communiation on EU External Strategy
CCCTB
Re-launch June 2015
Public consultation ended 8 January 2016 New proposal expected in the course of 2016

16. OECD BEPS Action Points
International coherence of tax systems
Hybrids
Base erosion / interest deductibility
CFC
Economic substance
Avoidance of double taxation through tax treaties and transfer pricing guidelines
Anti-treaty shopping
Preventing artificial avoidance of p.e.
Transfer pricing (intangibles, value creation)
Transparency
Disclosing aggressive tax planning
Re-examining TP documentation via CbC reporting / Master file
Hard law: multilateral agreement

17. Balancing Impact on Abuse and Burden for Businesses
1. Leading role, take initiatives
Transfer pricing
Exchange of information / CbC
Developing countries;
Amend tax treaties
Increase capacity
Exchange of rulings
2. Prevent abuse, multilaterally, via hard law
Hybrids / Interest deduction
Treaty abuse
CFC rules
Preferential regimes (e.g.,R&D)
3. Domestic policy
Participation exemption / WHT
Advance tax rulings
Mutual agreement / arbitration
Risk of unnecessary burden for real businesses

18. OECD BEPS Action 6 – Goal a common minimum standard of provisions
to raise the bar for tax treaty application
to tackle abuse
To include in tax treaties

19. OECD BEPS Action 6 – Common Minimum Standard
Simplified Limitation on Benefits (LOB) + Pricipal Purpose Test (PPT)
No entitlement to treaty benefits, unless
Qualified persons
Active business test
Derivative benefits test
Discretionary relief via competent authority
Principal purpose test
Principal Purpose Test
“(…) a benefit under this Convention shall not be granted (…) if it is reasonable to conclude (…) that obtaining that benefit was one of the principal purposes of any arrangement or transaction (…), unless (…) [this is] in accordance with the object and purpose (…) of this Convention.”
LOB +
Anti-Conduit Rules
Extensive LOB test
Stricter rules regarding intermediate owners, base erosion, substantial presence or disproportionate share
More elaborate on qualified persons (eg. pension funds)
No entitlement to treaty benefits if the recipient is a mere conduit.

20. Impact on tax planning
Companies will continue toconsidertaxaspects of cross-border activities
However, therules of the game have changed and will change further
Focus willbe on ‘business rational’, i.e. real presence and people’sfunctions, in a transparentworld
The UAE is well positionedforthat, as:
It is centrallylocated
Human resources and facilities are available

21. Jan Bart Schober International tax partner Head of Dubai office
Jan Bart Schober (1975) is a member of the International Tax practice group and heads the Dubai office. He advises multinational companies, financial institutions and funds on cross-border transactions. Jan Bart has extensive experience in structuring investments in E&P assets by oil and gas companies, as well as on acquisitions, joint ventures and corporate restructurings in the energy industry. Furthermore, he has a strong focus on financing transactions, such as securitisations and repackagings. Previously, he has worked in the Amsterdam and London offices of Loyens & Loeff.
Jan Bart frequently lectures on tax law on various occasions. He is a board member of the IFA GCC branch and a member of the Dutch Association of Tax advisers (NOB) and the Dutch Association for Tax Research.