Other BriefingsUAE and Qatar Sign Double Taxation Avoidance Agreement, Boost Economic Cooperation
The UAE and Qatar are set to fully restore diplomatic ties and have signed a landmark double taxation avoidance agreement, significantly boosting bilateral trade and investment, reflecting broader regional reconciliation efforts within the GCC.
By Giulia Interesse
Amidst the backdrop of evolving economic landscapes and shifting geopolitical dynamics in the Gulf region, the United Arab Emirates (UAE) and Qatar took a pivotal step towards strengthening their economic ties. On May 30, 2024, Mohamed Al Hussaini, the UAE’s Minister of State for Financial Affairs, and Qatari Finance Minister Ahmed Al Kuwari inked a landmark agreement aimed at preventing double taxation and combating fiscal evasion of income taxes. This significant development reflects not only the growing maturity of bilateral relations between the two nations but also their shared commitment to fostering financial stability, enhancing economic cooperation, and promoting investment opportunities.
Economic and trade implications of the double tax agreement (DTA)
The agreement between the UAE and Qatar to prevent double taxation and curb fiscal evasion is poised to have significant economic and trade implications for both nations. By eliminating the risk of double taxation, the agreement reduces the financial burden on businesses and individuals engaged in cross-border activities, making it more attractive for companies to invest and operate in both countries. This is expected to foster a more favorable business environment, encourage foreign direct investment, and stimulate economic growth.
For the UAE, which has positioned itself as a regional hub for trade and investment, the agreement reinforces its attractiveness as a destination for multinational corporations and investors. It aligns with the UAE’s broader economic strategy of diversification and innovation, providing a more predictable and transparent tax regime that can boost investor confidence.
Qatar, on the other hand, is actively diversifying its economy away from a reliance on oil and gas revenues. The agreement supports this diversification by creating a more stable and appealing investment climate. It opens up opportunities for Qatari businesses to expand their operations into the UAE, taking advantage of the larger market and advanced infrastructure.
Moreover, the agreement is expected to enhance bilateral trade between the two nations. With reduced tax barriers, goods and services can flow more freely, boosting trade volumes and creating new economic linkages. This increased trade can lead to greater economic integration and collaboration in various sectors, such as finance, technology, and infrastructure.
Regionally, the agreement sets a positive example for other Gulf Cooperation Council (GCC) countries. By harmonizing tax policies and reducing barriers to trade and investment, GCC nations can work towards greater economic integration, which is crucial for the region’s long-term economic stability and growth.
Bilateral trade and investment relations between Qatar and the UAE
The economic and trade relations between Qatar and the UAE have seen remarkable growth, reflecting the strong ties between the two nations. The volume of non-oil trade between the two countries reached a record high in recent years, with total trade exchange climbing from AED 14 billion (US$3.81 billion) in 2021 to AED 31 billion (US$8.43) in 2022, a significant growth of 121.4 percent. This sharp increase underscores the deepening economic integration and cooperation between the two nations.
Investment flows between Qatar and the UAE are also substantial. According to the UAE Ministry of Economy, Qatari investments in the UAE have reached AED 4.3 billion (US$1.17 billion). There are 1,475 registered Qatari trademarks, 8 Qatari commercial agencies, and 14 Qatari companies operating in the UAE.
Key sectors for Qatari investments include:
- Financial services;
- Insurance;
- Manufacturing;
- Real estate; and
- Various professional, scientific, and technical fields.
Conversely, UAE investments in Qatar total AED 29 billion (US$7.89), spanning multiple sectors such as:
- Construction;
- Aluminum production;
- Pharmaceuticals;
- Cosmetics;
- Energy; and
- Retail.
Moreover, the UAE has established numerous shopping and entertainment centers, as well as real estate, travel and tourism, cooling, oil, and natural gas projects in Qatar.
Recent developments in Qatar-UAE relations
Qatar and the UAE are set to fully restore diplomatic ties and reopen their embassies, more than two years after the lifting of a blockade that began in 2017. Efforts to normalize relations have progressed positively, with both nations working closely to finalize the reopening process.
This diplomatic renewal follows a key meeting between Qatar’s Emir Sheikh Tamim bin Hamad Al Thani and UAE President Sheikh Mohamed bin Zayed Al Nahyan in Beijing in 2023, underscoring the commitment to strengthening bilateral ties.
In tandem with this diplomatic progress, the recent signing of the DTA will solidify the growing cooperation between Qatar and the UAE. By eliminating financial barriers, this agreement enhances economic integration and opens new avenues for investment and trade, reflecting the broader trend of reconciliation and cooperation in the Gulf region.
