The tax convention between Canada and the United Arab Emirates that was signed on June 9, 2002 went into effect on May 25, 2004. The Convention applies retroactively, in respect of withholding taxes, to amounts paid or credited to non-residents on or after January 1, 2004.
Withholding tax rates for residents of the United Arab Emirates investing in Canada will be reduced from the general withholding rate of 25% as follows:
The new withholding tax on dividends will be 15% unless one of the following situations applies:
- A reduced withholding tax of 10% will apply to dividends paid by a non-resident owned investment corporation that is a resident of Canada to a company that is a resident of the United Arab Emirates and that holds directly or indirectly at least 10% of the voting power of the company paying the dividends.
- A reduced withholding tax of 5% will apply in any other case where the beneficial owner is a company that controls directly or indirectly at least 10% of the voting power in the company paying the dividends.