On 25 June 2026, the Qatar-UAE tax treaty was ratified and published in the official Gazette in Qatar.
This step follows the signing of the treaty by both States in Doha on 30 May 2024, and the subsequent approval of the income tax treaty with Qatar by the Emirati Cabinet on 3 February 2025. Below is a summary of the treaty’s legal status:
- Status: Not In Force
- Conclusion Date: 30 May 2024
- Entry into Force*: Not yet in force
- Effective Date**: Not yet effective
Note: the exchange of ratification instruments between the two States should then trigger the treaty to enter into force on the date of the later of these notifications.
If these are finalized by, for example, 31 December 2026, the treaty should then be effective on or after the first day of January of the calendar year immediately following FY 2026 (i.e., on or after 1 January 2027).
(*) This is when the treaty legally comes into existence between the two States.
(**) This is when taxpayers and tax authorities shall start applying the treaty’s provisions.
Key Takeaways
UAE perspective as “Source State” (SS), i.e., the state where the income arises (the “Resident State” (RS) is Qatar in this case)
Dividends: the UAE already provides, unilaterally, a 0% WHT ‘on exit’ from the country [no need to claim the treaty]
Interest: is already subject to 0% WHT in the UAE [again, no need to claim the treaty]
Royalties: the 3% WHT limit present in the treaty does not affect the general 0% WHT available in the UAE. *** (“Tax treaties merely allocate taxing rights”)
Capital Gains: the UAE already provides for a 0% Capital Gains’ Taxation (CGT), if certain conditions are duly satisfied. Thus, there is no need for a Qatari shareholder to claim any treaty benefit also in the field of Capital Gains.
(***) Note: Tax treaties simply allocate taxing rights. Consequently, in this case, even if the treaty allocates taxing rights to the UAE (up to 3%), since the UAE has no provision to tax this income upon exiting the country, no taxation should occur. The 3% cannot be imposed in violation of the UAE's sovereignty. Treaties do not create a new tax or a new domestic taxing power.
Qatari perspective as “Source State” (SS), i.e., the state where the income arises (the “Resident State” (RS) is the UAE in this case)
- Dividends: like the UAE, Qatar already provides, unilaterally, a 0% WHT ‘on exit’ from the country [no need to claim the treaty]
- Interest: is subject to 5% WHT. Here, the treaty indeed helps to bring this burden down to 0% WHT.
- Royalties: are also subject to 5% WHT, as with interest. In this case, claiming the treaty is beneficial for UAE resident beneficiaries of these payments, but they will only be able to reduce taxation to 3% as per the treaty.
- Capital Gains: a 10% CGT should apply on the sale of Qatari shares by UAE shareholders. The Qatar-UAE treaty presents some restrictions (see below) that could bring taxation back to the SS (i.e., Qatar in this case) in situations where 50% or more of the value of the shares of the Qatari entity is represented by Real Estates (the so-called “Real Estate-Rich” clause).
The Analysis
Art. 10 “Dividends”
In the case of dividend distributions, Qatar and the UAE have agreed to allocate the exclusive right to tax solely to the Resident State (RS) of the beneficiary. This approach deviates from the OECD Model, which instead allocates a certain percentage (%) to the Source State (SS) as well.
Domestic Tax considerations
Qatar
Domestic tax law in Qatar already grants a 0% withholding tax on exit from the country on dividend payments. Thus, currently, this treaty does not provide any additional benefit for dividends arising in Qatar and paid to UAE residents. However, if Qatar decides in the future to introduce a certain level of exit WHT on these payments, then the full exemption specified in the relevant sections of this treaty would become significant, though not at the present time.
UAE
Currently, the UAE provides a general exemption from any withholding tax (WHT) on exit from the country regarding income paid to non-residents, unless said income is attributable to a Permanent Establishment (PE) of the foreign entity in the UAE. As a result, in principle, the treaty does not offer any advantage when a “dividend” arises in the UAE and is paid to a ‘person’ who is a tax resident in Qatar (with no PE in the UAE), since the domestic tax law already offers a 0% WHT. If, in the future, the UAE implements an exit WHT on dividend payments abroad, the new treaty could be beneficial. However, at present, the UAE tax law, with its 0% WHT, is already advantageous for any Qatari beneficiary of the dividend. This means that, in principle, there is no need, from a Qatari point of view, to claim any treaty protection under the new Qatar-UAE treaty now, but rather to simply rely on the UAE exemption.
Art. 11 “Interest”
Interest follows the same exclusive-right-to-tax approach described above for dividends (i.e., the exclusive right to tax is allocated to the RS). This also deviates from the OECD Model, which for interest likewise allocates a certain percentage (%) of taxation to the SS.
Qatar
Domestic tax law in Qatar provides for a 5% WHT on exit from the country on interest payments. Thus, currently, this treaty grants UAE residents who are beneficiaries of interest paid by UAE residents the possibility to bring the 5% WHT, which, in the absence of the Qatar-UAE tax treaty, would have applied, down to 0%. Thus, this treaty grants a 5% WHT saving, provided that all the relevant conditions to claim the treaty’s protection are duly satisfied.
UAE
Under the new Qatar-UAE tax treaty, interest payments are not, currently, granted de facto any advantage vis-à-vis domestic law in the case of outbound payments of interest arising in the UAE and paid to Qatari residents.
Art. 11 “Royalties”
A shared taxing right between the RS and the SS is present in this treaty for Royalties. This deviates from the OECD Model, which instead allocates the exclusive right to tax to the RS only. The “shared taxing right” approach is clearly inspired by the UN Model Tax Convention, as a reaction to the structure of the Royalties’ article in the OECD Model, aiming to allocate at least some taxing rights to the SS. Note: normally, developing countries are in the SS position and are thus massive importers of “know-how” (and other IP rights). The allocation of taxing rights to the SS is limited, in the Qatari-UAE tax treaty, to an ancillary 3% WHT.
Regarding the definition of what should represent a Royalty, Qatar and the UAE have retained the “leasing of equipment” within the definition of Royalties. This is quite out of date, since the inclusion of the leasing of equipment in the definition of Royalties was something of an ‘imprecision’ by the OECD in the Model until 1992, when it was removed in order to correctly classify these payments as “Business Profits” and thus taxable only in the country of residence of the beneficiary.
Conversely, a positive aspect is that “services” (including technical services and any other type) are not part of the definition of Royalties, and thus payments relating to these should be qualified as “Business Profits” and, in principle, exempted in the SS.
Qatar
Likewise for Interest, domestic tax law in Qatar provides for a 5% WHT on exit from the country. Thus, also in this case, this treaty grants UAE residents who are beneficiaries of Royalties paid by Qatari residents the possibility to restrict domestic taxation from 5% down to 3% only, as this is the ‘cap’ agreed by the two Contracting States. Therefore, a 2% WHT saving could be achieved through such treaty by UAE lenders as beneficiaries of the interest.
UAE
Similarly for Royalties, the new Qatar-UAE tax treaty does not grant de facto any advantage, now, in the case of outbound payments of Royalties arising in the UAE and paid to Qatari residents, due to the domestic general exemption in the UAE.
Art. 13 “Capital Gains”
In alignment with the MLI and with the OECD Model 2017, ‘Capital Gains’ include a so-called “Real Estate-Rich” clause (as anticipated at the beginning of this ‘alert’), so that the sale of shares deriving more than 50% of their value from Real Estates brings taxation back to the SS, where the entity that owns the Real Estate is located. This anti-avoidance principle aims to tax the indirect sale of Real Estates, through the sale of the shares of the company owning them, as a deemed direct sale of Real Estate, whenever the value of the latter is material (i.e., more than 50% of the value of the shares sold). The article also includes a so-called “Catch all clause”, again mirroring the OECD Model 2017, based on which, if the Real Estate-Rich clause is not triggered, the relevant gain can be taxed only in the RS (i.e., the State of the seller), with full exemption in the SS (i.e., the state where the company sold is based). In this case, the SS is ‘restricted’ and shall allocate full taxing rights to the RS.
Qatar
A 10% Capital Gain Tax (CGT) should apply on the sale of shares in Qatari entities by foreign shareholders. Thus, if UAE shareholders sell shares in a Qatari entity, this event should trigger taxation at 10% in Qatar, unless the exemption (“Catch all” clause) available under the UAE-Qatar tax treaty can be claimed by the UAE shareholder. The presence of the “Real Estate-Rich” clause should, however, restrict this exemption whenever more than 50% of the value of the shares of the Qatari entity is represented by Real Estates. (See the scheme below)
UAE
Normally, foreign shareholders disposing of shares in UAE entities are not subject to any Capital Gains’ Tax (CGT), unless they are subject to UAE Corporate Tax because of a sufficient UAE nexus (e.g., a UAE PE to which the shares disposed of are effectively connected). Thus, in normal situations, the new Qatar-UAE tax treaty does not add any particular benefit, since Qatari sellers of shares in UAE entities can already enjoy a full exemption as per UAE tax law (unless the limitations above are triggered, of course).
How Deloitte can assist
Our International Tax practice across the Middle East, and in both Qatar and the UAE, has extensive experience advising multinational enterprises and Gulf conglomerates on treaty-related matters. We are positioned to assist you with:
- Assessing the future tax impact of this treaty on your business activities in the Middle East
- Navigating the actual application of any of the benefits provided vis-à-vis the domestic tax law of the SS (either the UAE or Qatar, depending on the situation)
