International Tax Planning using UAE Companies & Tax Treaties Investing from Europe to Africa and Asia Academy & Finance, Dubai 10 May 2016 – Jan Bart Schober, Tax Partner, Loyens & Loeff

Content Using the UAE for investments in Africa and India from Europe Introduction Some examples International tax developments BEPS / EU Action 6 jan.bart.schober@loyensloeff.com

Which European Investors European companies that already have a presence in the UAE Should expansion to Africa / Asia be done by the European parent company directly or through its presence in the UAE? European companies without presence in the UAE Should expansion to Africa / Asia be done by the European parent company directly or should a UAE presence be established? Not addressed: European individuals jan.bart.schober@loyensloeff.com

How to determine the legal structure Tax is just one of many considerations Tax Legal Cost Compliance Recruitment Stability Export controls Judicial system Business is alwaysleading in advance on a case-by-case basis but as consistent as possible Tax aspectsshouldbeconsidered: jan.bart.schober@loyensloeff.com

Key tax aspects to consider Common aspects in tax treaties Persons covered Taxes covered General definitions Tax residency Permanent establishment Real estate Shipping / air transport Dividends / interest / royalties Capital gains Independent / dependent income Directors fees Entertainers / sportspersons Pensions Government service Students Other income Associated enterprises Avoidance of double taxation Non-discrimination Mutual agreement procedure Exchange of information Assistance jan.bart.schober@loyensloeff.com

Morocco – Investment in Operating Company EU = NL UAE Dividends Capital gains Residency EU 10% 5% UAE Resident state Resident state Liable to tax Liable to tax jan.bart.schober@loyensloeff.com

Egypt – Investment in Operating Company EU = NL UAE Dividends Capital gains Residency EU 0% 0% UAE Resident state Resident state Liable to tax Liable to tax jan.bart.schober@loyensloeff.com

Egypt – Investment in Operating Company EU = GER UAE Dividends Capital gains Residency EU 15% 0% UAE Resident state Resident state Liable to tax Liable to tax jan.bart.schober@loyensloeff.com

Egypt – Investment in Operating Company EU = GER NL UAE Dividends Capital gains. Residency PPT EU 15% 0% 0% Resident state Resident state Resident state NL UAE Liable to tax Liable to tax Liable to tax No Yes No jan.bart.schober@loyensloeff.com

Egypt – Investment in Real Estate Company EU = NL UAE Dividends Capital gains Residency PPT EU 0% 0% UAE Resident state Source state Liable to tax Liable to tax Only for dividends No jan.bart.schober@loyensloeff.com

South Africa – Loan to SA Company EU = FR UAE Interest Capital gains Residency EU 0% N/A UAE Resident state N/A Liable to tax N/A Other considerations Effective tax rate French CIT (33%) on net income from loan South African WHT (15%) on gross interest paid Note: French participation relief available? jan.bart.schober@loyensloeff.com

Djibouti – Investment in Mining Licence EU = UK UAE Tax treaty EU N/A N/A UAE Other considerations Effective tax rate For sake of discussion, assume there’s no difference in effective tax rate Protection No international legal protection Arab Investment Treaties jan.bart.schober@loyensloeff.com

India – Rendering Oil Field Services EU = IT UAE Residency PE definition EU Incorporated and managed Liable to tax UAE All services to oil fields constitute PE, irrespective of the duration Services constitute PE if they exceed 9 months in a 12 months period jan.bart.schober@loyensloeff.com

jan.bart.schober@loyensloeff.com

International Tax Developments – What’s Going On … ?! Globally OECD / G20 BEPS Project Final reports published in September 2015 4 themes: Transparency, Mismatches, Anti-abuse and Transfer pricing 15 Action Points European Union EU Anti Tax Avoidance Package Proposal of 28 January 2016 EU Anti Tax Avoidance Directive EU council vote on 25 May 2016 Recommendation Treaty issues, CbCR Directive, Communiation on EU External Strategy CCCTB Re-launch June 2015 Public consultation ended 8 January 2016 New proposal expected in the course of 2016 jan.bart.schober@loyensloeff.com

OECD BEPS Action Points International coherence of tax systems Hybrids Base erosion / interest deductibility CFC Economic substance Avoidance of double taxation through tax treaties and transfer pricing guidelines Anti-treaty shopping Preventing artificial avoidance of p.e. Transfer pricing (intangibles, value creation) Transparency Disclosing aggressive tax planning Re-examining TP documentation via CbC reporting / Master file Hard law: multilateral agreement jan.bart.schober@loyensloeff.com

Balancing Impact on Abuse and Burden for Businesses 1. Leading role, take initiatives Transfer pricing Exchange of information / CbC Developing countries; Amend tax treaties Increase capacity Exchange of rulings 2. Prevent abuse, multilaterally, via hard law Hybrids / Interest deduction Treaty abuse CFC rules Preferential regimes (e.g.,R&D) 3. Domestic policy Participation exemption / WHT Advance tax rulings Mutual agreement / arbitration Risk of unnecessary burden for real businesses jan.bart.schober@loyensloeff.com

OECD BEPS Action 6 – Goal a common minimum standard of provisions to raise the bar for tax treaty application to tackle abuse To include in tax treaties jan.bart.schober@loyensloeff.com

OECD BEPS Action 6 – Common Minimum Standard Simplified Limitation on Benefits (LOB) + Pricipal Purpose Test (PPT) No entitlement to treaty benefits, unless Qualified persons Active business test Derivative benefits test Discretionary relief via competent authority Principal purpose test Principal Purpose Test “(…) a benefit under this Convention shall not be granted (…) if it is reasonable to conclude (…) that obtaining that benefit was one of the principal purposes of any arrangement or transaction (…), unless (…) [this is] in accordance with the object and purpose (…) of this Convention.” LOB + Anti-Conduit Rules Extensive LOB test Stricter rules regarding intermediate owners, base erosion, substantial presence or disproportionate share More elaborate on qualified persons (eg. pension funds) No entitlement to treaty benefits if the recipient is a mere conduit. jan.bart.schober@loyensloeff.com

Impact on tax planning Companies will continue toconsidertaxaspects of cross-border activities However, therules of the game have changed and will change further Focus willbe on ‘business rational’, i.e. real presence and people’sfunctions, in a transparentworld The UAE is well positionedforthat, as: It is centrallylocated Human resources and facilities are available jan.bart.schober@loyensloeff.com

Jan Bart Schober International tax partner Head of Dubai office Jan Bart Schober (1975) is a member of the International Tax practice group and heads the Dubai office. He advises multinational companies, financial institutions and funds on cross-border transactions. Jan Bart has extensive experience in structuring investments in E&P assets by oil and gas companies, as well as on acquisitions, joint ventures and corporate restructurings in the energy industry. Furthermore, he has a strong focus on financing transactions, such as securitisations and repackagings. Previously, he has worked in the Amsterdam and London offices of Loyens & Loeff. Jan Bart frequently lectures on tax law on various occasions. He is a board member of the IFA GCC branch and a member of the Dutch Association of Tax advisers (NOB) and the Dutch Association for Tax Research. +971 4 437 27 00 +971 56 179 6776 Jan.bart.schober@loyensloeff.com