San Marino has published Council Decree No. 165 in the Official Gazette, which provides for the ratification of the pending income tax treaty with the United Arab Emirates. The treaty, signed 11 July 2018, is the first of its kind between the two countries.
The treaty covers San Marino taxes imposed under the general income tax on individuals and persons other than individuals and covers UAE income tax and corporate tax.
Article 3 (Income from Hydrocarbons) provides that the treaty will not affect the right of either one of the Contracting States to apply their domestic laws and regulations related to the taxation of income and profits derived from hydrocarbons situated in the territory of the respective Contracting State.
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services through employees or other engaged personnel in a Contracting State and the activities continue for a period or periods aggregating more than 12 months.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation.
Article 24 (Mutual Agreement Procedure) includes the provision that any unresolved issues within a period of three years from the presentation of a case may be submitted to arbitration at the request of the person that presented the case. Unresolved issues may not, however, be submitted to arbitration if a decision on the issues has already been rendered by a court or administrative tribunal of either Contracting State.
Articles 26 (Limitation of Benefits) includes the provision that the benefits of the treaty will not be available to an investor who establishes a legal entity in either Contracting State for the sole purpose of getting the benefits of the treaty without having a bona fide business activity or to such companies that are directly or indirectly controlled by a third person who is not a resident of either Contracting State, if such benefits would not otherwise be available to that person.
The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.
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