A taxation treaty that would boost investment ties between Israel and the United Arab Emirates is in the works and could be finalized within the coming weeks.
The treaty is expected to help facilitate more than $2 billion in annual bilateral trade in the coming years and could grow to as much as $6.5b. a year within the coming decade. That would make the UAE one of Israel’s most significant trading partners.
Taxation treaties help ensure that individuals and corporations don’t pay the same taxes twice to different countries, and they help encourage bilateral trade. The basic terms of the Israel-UAE treaty have been agreed upon by both sides, and only a few questions of the scope of the agreement remain to be finalized.
However, regardless of when the treaty is actually signed and ratified by both countries, it would only come into effect next January 1.
Since the two countries agreed to normalize relations in mid-August, the business and economic communities of Israel and the UAE have forged a number of collaborative efforts and partnerships to ease trade. While informal trade between the two nations existed before the Abraham Accords came into effect, even insiders have been surprised at how warmly economic ties have developed since the accords were formally signed last September.
Israel signed normalization agreements with several Arab countries last year, including Bahrain, Sudan and Morocco. The UAE is the only nation with which a tax treaty is currently being drafted.
Both countries have much to gain from increased commercial relations. Israel sees the UAE as a global trading hub that would give it greater access to Asian markets. The UAE sees Israel as a nexus with the West, and Emirati investors are hungry for lucrative investments in Israeli companies, particularly in the tech sector.
Existing flights between the two countries resumed this month after Israel ended its pandemic airport closures. Business travelers and tourists want to explore markets that have until recently been forbidden.
Israeli airlines El Al, Israir and Arkia, as well as Emirati-owned flydubai, have all launched regular flights between Tel Aviv and Dubai. Etihad launched the first-ever regular commercial flight to Israel from Abu Dhabi last week.