Tax treaty between Switzerland and the United Arab Emirates: what real estate investors need to know
For Swiss residents investing in real estate in the United Arab Emirates, understanding the tax rules is crucial to avoiding double taxation and optimizing returns. The tax treaty between Switzerland and the United Arab Emirates aims to regulate precisely these aspects. Here are the key points to be aware of. Find the official treaty below, followed by an analysis of the document.
Avoiding double taxation
The Swiss-Emirates tax treaty ensures that investors are not taxed twice on their income in both countries. This applies to several types of tax, including income tax and capital gains tax.
Taxes concerned
The agreement covers the following taxes:
- In Switzerland: federal, cantonal and municipal taxes on income (including industrial and commercial profits, capital gains).
- In the United Arab Emirates: income tax and corporate income tax.
Tax residence: determination criteria
Determining your tax residence is essential. The treaty specifies that if you are a tax resident of both countries, specific criteria are used to determine your principal residence:
- The state where you have a permanent home.
- The country where your vital interests are centered.
- Nationality, if the above criteria are not conclusive.
Real estate income and capital gains
For Swiss investors, income from real estate located in the United Arab Emirates is taxable in the Emirates. This includes rental income and capital gains from the sale of real estate.
Capital gains
Gains from the disposal of real estate located in the United Arab Emirates are also taxable locally. However, under the terms of the treaty, these gains will not be taxed again in Switzerland, ensuring protection against double taxation.
Dividends, interest and royalties
Dividends, interest and royalties paid by an Emirates company to a Swiss resident are subject to reduced tax rates in the Emirates. Switzerland may offer tax credits to avoid double taxation on such income.
Elimination of double taxation
To avoid double taxation, the agreement provides for :
- Exemption: Switzerland exempts income taxed in the Emirates, but can use this income to determine the rate applicable to other income in Switzerland.
- Tax credit: for certain types of income (dividends, interest, royalties), Switzerland can grant a tax credit equivalent to the taxes paid in the Emirates.
Tax non-discrimination
Swiss residents must not be subject to more burdensome taxes or tax obligations than those imposed on residents of the Emirates in similar circumstances. This guarantees fair tax treatment.
Conclusion
The tax treaty between Switzerland and the United Arab Emirates offers Swiss real estate investors protection against double taxation and a clear tax framework. Thanks to this agreement, it is possible to maximize returns on investments while complying with the tax legislation of both countries.
