2 Misconception there is no tax in the Middle East Countries rich with natural resources in the Middle East derive revenues from taxation of the Oil & Gas industryOther countries have a greater need for wider tax revenuesTaxing authorities are evolving and continue to become more sophisticatedMove towards simplified tax regimes and reduced corporate tax ratesIncreased implementation of withholding taxes (“WHT”)Introduction of transfer pricing rulesIncrease in the number of double taxation treaties
3 WHT and double tax treaties in the Middle East WHTs are increasingly being introduced into legislation to increase taxing revenues on cross border payments13 out of 15 countries in the Middle East region have WHT regimesUAE and Bahrain are the exceptionNew complexities to cross-border projects, but also opportunities for effective tax planning, including the application of Double Tax Treaties (“DTTs”)There are currently more than 500 DTTs agreed by MENA countriesThe UAE has the highest with c.60 DTTsPalestinian Ruled Territories and Iraq have the lowest with no DTTs concludedIncreasing number of DTTs being agreed in the regionQatar has agreed 12 DTTs in the past 18 months
4 Top rates of WHT in the MENA region Top Rate of Withholding Tax per countryWHT PercentageSource: Deloitte Middle East Tax Handbook 2013
5 Challenging times ahead in the Middle East Transfer pricing (“TP”) in the Middle EastThe new frontier – OECD based rulesEgyptian experienceDocumentation requirementsEgyptKuwaitQatarSaudi ArabiaFormal TP rules exist, broadly based on OECD Guidelines, and require detailed documentation to support the arm’s length principleNo formal TP rules, however, inter company transactions considered in some circulars2011 law introduced TP principles into the tax codeNo formal TP rules, however, tax laws provide for prevention of tax avoidance
7 Considerations for emerging markets LegislationHistorical tax legislation; updates not consolidated in existing legislationPractical application not always consistent with legislative positionChanges to legislation not well communicated to taxpayersPractical difficultiesManual processesLimited guidance on interpretationUnclear on process requirementsTax compliance and risksRulings and decisions by Tax Authorities not bindingPay now, argue later principleDeveloping judicial systemShortage of skilled technical resource
9 Positive developments within the region Developing awareness of taxpayers issuesDemand for technical training for tax authoritiesParticipation in working groups alongside taxpayers and tax professionalsTax authorities increasingly open to dialogue with taxpayersIncreasing initiatives to modernise the processes (e.g. introduction of e-filing, e-payment)Collaboration between tax authorities of countries in the region to share best practicesIncreasing interest to expand the tax treaties network
11 This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates and related entities, shall not be responsible for any loss sustained by any person who relies on this presentation.
Your consent to our cookies if you continue to use this website.