Experts put spotlight on Mena tax issues
Dubai, December 8, 2013
Leading advisory firm Ernst & Young hosted a conference in Houston, Texas to discuss the recent developments with regard to tax policy and foreign investments in the Mena region.
The 'Mena Tax Seminar' was attended by executive tax and financial professionals from oil & gas, technology and engineering multi-national companies based in the US and Europe.
Presentations on tax updates for Saudi Arabia, Kuwait, Qatar, Oman, Egypt, Libya and Iraq were led by EY partners at the conference.
Sherif El-Kilany, the Mena Tax Leader, EY, said: “As these countries have implemented new tax regimes and expanded their commercial laws relating to inward investment in recent years, businesses will be taking a closer look at where they can capitalize on these changes. The tax landscape in the region is continually evolving and each year tax authorities are considering new tax exemptions aimed at creating a competitive tax environment within the region.”
Some of the Mena tax regimes and tax policy trends discussed at the conference included: the lowering of regional corporate tax rates, considerations for tax exemptions, tax treaty networks, compliance with transfer pricing and thin capitalization rules, withholding tax for non-residents, Value Added Tax (VAT), customs and sales tax in the region.
Over the last eight years, many countries in the region, including all GCC countries, have substantially reduced corporate income tax rates to attract and encourage the growth of businesses to create employment opportunities and provide new sources of income for the economy.
In order to promote foreign direct investment, many countries including Egypt, Kuwait, Qatar and Oman provide tax incentives and exemptions for companies establishing business in free zones, said E&Y experts.
These incentives may include tax exemptions, customs duty exemptions on importation, and allocation of land and real estate to the investors for set up of business, they added.
According to them, companies doing business in Mena can benefit from the extensive double tax treaty arrangements entered into by the various countries in the region.
The conference also emphasized that compliance with tax laws is crucial to successfully doing business in Mena.
Not understanding the tax laws and the tax authority’s approach and guidelines on the tax deductions for certain expenses like bad debts, head office expenses and interest costs can lead to increased tax costs, the experts warned.
"For example, in countries like Oman and Qatar, specific rules such as thin capitalization rules are applied to limit unreasonable tax deductions for interest payments. There has also been an increased focus by the tax authorities on transfer pricing regulations to ensure that business transactions between related parties are conducted at an arm’s length."
"Such transactions should reflect the same terms of trade and pricing that would have applied between independent non-related businesses," they stated.
To ensure that foreign companies doing business without a business facility or presence in the country are subject to tax on incomes earned from the country, tax authorities in Mena have increased scrutiny and the enforcement of compliance with withholding tax lawsm, said the E&Y experts.
In the future, in observance of the GCC agreement, most GCC countries are considering plans to introduce VAT type indirect tax systems within the next few years, they added.-TradeArabia News Service