0. Managing Tax Affairs in Emerging Markets Jayne Stokes Khadija Idboujnane
April 2014

1. General tax landscape

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 industry
Other countries have a greater need for wider tax revenues
Taxing authorities are evolving and continue to become more sophisticated
Move towards simplified tax regimes and reduced corporate tax rates
Increased implementation of withholding taxes (“WHT”)
Introduction of transfer pricing rules
Increase 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 payments
13 out of 15 countries in the Middle East region have WHT regimes
UAE and Bahrain are the exception
New 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 countries
The UAE has the highest with c.60 DTTs
Palestinian Ruled Territories and Iraq have the lowest with no DTTs concluded
Increasing number of DTTs being agreed in the region
Qatar has agreed 12 DTTs in the past 18 months

4. Top rates of WHT in the MENA region
Top Rate of Withholding Tax per country
WHT Percentage
Source: Deloitte Middle East Tax Handbook 2013

5. Challenging times ahead in the Middle East
Transfer pricing (“TP”) in the Middle East
The new frontier – OECD based rules
Egyptian experience
Documentation requirements
Egypt
Kuwait
Qatar
Saudi Arabia
Formal TP rules exist, broadly based on OECD Guidelines, and require detailed documentation to support the arm’s length principle
No formal TP rules, however, inter company transactions considered in some circulars
2011 law introduced TP principles into the tax code
No formal TP rules, however, tax laws provide for prevention of tax avoidance

6. Considerations for Emerging Markets

7. Considerations for emerging markets
Legislation
Historical tax legislation; updates not consolidated in existing legislation
Practical application not always consistent with legislative position
Changes to legislation not well communicated to taxpayers
Practical difficulties
Manual processes
Limited guidance on interpretation
Unclear on process requirements
Tax compliance and risks
Rulings and decisions by Tax Authorities not binding
Pay now, argue later principle
Developing judicial system
Shortage of skilled technical resource

8. Positive developments within the region

9. Positive developments within the region
Developing awareness of taxpayers issues
Demand for technical training for tax authorities
Participation in working groups alongside taxpayers and tax professionals
Tax authorities increasingly open to dialogue with taxpayers
Increasing 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 practices
Increasing interest to expand the tax treaties network

10. Questions and answers

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