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Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.

PROTOCOL

At the signing of the Convention between the Government of the State of Israel and the Government of the United Arab Emirates for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the Government of the State of Israel and the Government of the United Arab Emirates have agreed that the following provisions shall form an integral part of the Convention.

(1) In general:

It is understood that the Convention shall not prevent a Contracting State from applying provisions in its domestic law on the prevention of tax evasion or tax avoidance where those provisions are used to challenge arrangements which constitute an abuse of the Convention.

It is understood that nothing in this convention shall be construed as preventing Israel from imposing a tax on amounts included in the income of a resident of Israel with respect to a partnership, trust, or controlled foreign affiliate, in which that resident has an interest.

Nothing in this Convention shall affect the right of either Contracting State, any political subdivision, local government or local authority thereof, to apply its own laws and regulations related to the taxation of income and profits derived from exploration, extraction or exploitation of hydrocarbons situated in that State.

(2) With reference to Article 2 (Taxes Covered) of the Convention:

It is understood that the taxes described in clause 3(a)(i) include taxes imposed under the Petroleum Profits Taxation Law 5771-2011.

(3) With reference to Article 6 (income from immovable property) of the Convention:

It is understood that distributions by a real estate investment fund, according to Article 64A4 of the Israeli Income Tax Ordinance, are income from immovable property under the provisions of Article 6 (income from immovable property).

A "Real Estate Investment Fund" means a real estate investment fund according to Article 64A2 of the Israeli Income Tax Ordinance.

(4) With reference to Articles 10 (Dividends) and 11 (Interest) of the Convention:

With respect to sub-paragraphs (a) and (b) of paragraph (2) of Article 10 and of paragraph (3) of Article 11 of this Convention, it is understood that the government of a Contracting State shall include:

  • (a) In the case of Israel, the Bank of Israel and any other entity the capital of which is wholly directly owned by the Government of the State of Israel, including a political subdivision and local authority thereof, as may be agreed upon from time to time between the Governments of the Contracting States through notifications by the competent authorities, and
  • (b) In case of the United Arab Emirates, a qualified government entity.

(5) With reference to Article 10 (Dividends) of the Convention:

It is understood that the term "dividends" does not include distributions by a real estate investment fund according to Article 64A4 of the Israeli Income Tax Ordinance.

(6) With reference to Article 13 (Capital Gains):

  • (a) It is understood that Article 13 does not prevent a Contracting State from taxing a person who was its resident and has become a resident of the other Contracting State in respect of capital gains of property of that person at the day before the change of residency, according to the domestic law of the first mentioned State.
  • (b) It is understood that shares, other rights and comparable interests in a company, partnership or trust, which were owned by the alienator before they were traded in a recognised stock exchange will not be deemed as shares, other rights and comparable interests in a company, partnership or trust, which are traded in a recognised stock exchange under the provisions of paragraph (3) of Article 13.
  • (c) The provisions of paragraph (3) of Article 13 will not apply to shares, other rights and comparable interests which were alienated by a resident of a Contracting State, in a company, partnership or trust, that is a resident of the other Contracting State, that are forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State. In that case, the provisions of paragraph (4) of Article 13 will apply.

DONE in Jerusalem and Abu Dhabi, this …….. day …….. 5781, …….., 1442, which corresponds to May 31, 2021, in the Hebrew, Arabic and English languages, all texts being equally authentic. In case of any divergence of the provisions of this Convention the English text shall prevail.

FOR THE GOVERNMENT OF THE STATE OF ISRAEL:

FOR THE GOVERNMENT OF THE UNITED ARAB EMIRATES: