The United Arab Emirates and Israel inked a tax pact on Monday, as per Israel's Finance Ministry, hailing the action as a boost to commercial development between the nations after they normalized relations last year.

In October, the UAE finance ministry announced that it had secured a preliminary deal with Israel to prevent double taxation.

Once approved by ministers and parliament this year, the tax convention will be Israel's 59th and will come into effect on January 1, 2022. It is the first tax deal signed since Israel's normalization of relations with the UAE and Bahrain last year. Likewise, Israel has attempted to strengthen ties with Morocco and Sudan.

The treaty is essentially based on the OECD model, according to Israeli Finance Minister Israel Katz, who added that now it “provides clarity and advantageous circumstances for business activity and will boost economic relations” with the UAE.

Tax deductions, dividends, and royalties are all regulated under the agreement.

As per Israeli Foreign Minister Gabi Ashkenazi, the deal would allow for major development of investment and commerce, which will benefit both nations' economies.

Since a normalization agreement was struck in September, Israeli and Emirati banks and some other enterprises have signed cooperation agreements and established direct flights.

The Bank of Israel is anticipated to hold short-term interest rates steady this week for the ninth time in a row, citing increased inflation and the belief that a speedy COVID-19 vaccine deployment will boost economic development.

When the decision is published on Monday, all 17 analysts surveyed by Reuters predict the monetary policy committee (MPC) will retain the benchmark rate at an all-time low of 0.1 %.

Now next policy action is largely expected to be a hike in interest rates, but not until at least 2022, with a few forecasting for 2023. “No adjustment in monetary policy is foreseen, but the Bank of Israel is likely to strike a highly upbeat tone, given the substantial fall in mortality and also the full openness of the economy,” said Leader Capital Markets chief economist Jonathan Katz.

With 55% of individuals properly vaccinated, the number of active COVID cases in Israel has declined to around 400, enabling the economy to open fully and the unemployment rate to 7.9%.