Harmful Tax Practices – 2023 Peer Review Reports on the Exchange of Information on Tax Rulings

1201. The United Arab Emirates can legally issue the following five types of rulings within the scope of the transparency framework: (i) preferential regimes;1 (ii) cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) rulings providing for unilateral downward adjustments; (iv) permanent establishment rulings; and (v) related party conduit rulings.

1202. For the United Arab Emirates, past rulings are any tax rulings issued prior to 1 September 2023. However, there is no obligation for the United Arab Emirates to conduct spontaneous exchange information on past rulings.

1203. For the United Arab Emirates, future rulings are any tax rulings within scope that are issued on or after 1 September 2023.

1204. When a taxpayer applies for a ruling, it must complete a tax ruling application form. Regardless of the type of ruling, the taxpayer must provide certain details to identify the residence country of the immediate parent entity and the ultimate parent entity. If the ruling is a permanent establishment ruling, then the taxpayer must provide additional information on the jurisdiction of the head office or the country of the permanent establishment, as the case may be. Furthermore, the taxpayer must disclose all related parties (a 25% threshold test applies) that are subject to the cross-border transaction within the scope of the application.

1205. The information provided by the taxpayer in the ruling application is recorded in a specific tax rulings tracker, that includes appropriate confidentiality safeguards. The Federal Tax Authority (FTA) will verify if all information has been provided before commencing the process of evaluating the application. Once all information is received, the FTA determines if the ruling is in scope of the Action 5 transparency framework and if yes, it identifies the relevant exchange jurisdictions. This is verified by the technical committee upon assessment of the application and issuance of the ruling and once again by the Exchange of Information and Policy Unit before any exchange of information actually occurs.

1206. If the issued ruling is within the scope of the transparency framework, it is updated to the central tracker and an exchange of information outbound tracker. This is done by a member of the FTA team and must be reviewed by another FTA team member. The review process must be documented into a checklist by the FTA.

1207. To date, no rulings within the scope of the transparency framework have been issued as no applications have been submitted by taxpayers requiring the issuance of such rulings. As such, there was no need to identify potential exchange jurisdictions.

1208. The United Arab Emirates’ review and supervision mechanism is in detailed described in the previous paragraph. In addition, it is noted that the FTA team uses internally developed guidance on how to identify rulings within the scope of the transparency framework and exchange jurisdictions. Furthermore, the team received specific trainings from other tax authorities on best practices in this area.

1209. The United Arab Emirates has met all of the ToR for the information gathering process and no recommendations are made.

1210. The United Arab Emirates has the necessary domestic legal basis to exchange information spontaneously. The United Arab Emirates notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

1211. The United Arab Emirates has international agreements permitting spontaneous exchange of information, including: (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011[2]) (“the Convention”) and (ii) bilateral agreements in force with 117 jurisdictions.2

1212. As described in section A, the taxpayer requesting a ruling from the FTA must fill in the application for tax ruling request which includes the details on the applicable related parties. This information is included in the FTA’s tax ruling tracker. The FTA staff member will then populate the Exchange of Information (EoI) form which is based on the template of Annex C of the BEPS Action 5 Report (OECD, 2015[3]). This process is reviewed by another FTA member. The summary section of the EoI form has to be completed in line with the internal FHTP suggested guidance.

1213. After the review, the EoI form is transmitted to the Exchange of Information and Policy Unit. This unit will then verify the EoI form is complete and accurate and then check whether the recipient jurisdictions have appropriate legal mechanisms in place for the exchange to be conducted. The EoI member will have to complete a checklist verifying these steps have been completed and reviewed by a senior member of the EOI and Policy Unit before exchange can take place. The timelines in line with the Action 5 transparency framework for completing the exchange is also attached to the checklist to ensure timely exchange of information.

1214. During the year in review, no exchanges were required to take place and no data on the timeliness of exchanges is reported.

1215. The United Arab Emirates has the necessary legal basis for spontaneous exchange of information and has a process for completing the templates in a timely way. The United Arab Emirates has met all of the ToR for the exchange of information process and no recommendations are made.

1216. As no rulings were issued, no statistics can be reported.

1217. The United Arab Emirates does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015[3]) were imposed.

[1] OECD (2021), BEPS Action 5 on Harmful Tax Practices - Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD Publishing, Paris, http://www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparency-framework.pdf.

[3] OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://doi.org/10.1787/9789264241190-en.

[2] OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris, https://doi.org/10.1787/9789264115606-en.