The major tax development coming out of the GCC is the introduction of VAT in the six member jurisdictions: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The VAT system is intended to come into effect on January 1 2018.
In 2017, the Kingdom of Saudi Arabia's official gazette published the Unified Agreement on VAT. This provides the framework for the operation of VAT within the GCC. The different GCC countries will implement the framework through their own legislation.
The GCC's new rules means that VAT will apply to goods and services at a standard rate of 5%. Businesses in the GCC with an annual turnover of SAR 375,000 ($99,990) or the equivalent from any other GCC member state currency will have to register for VAT. Businesses can voluntarily register for VAT where their annual turnover is 50% of the registration threshold.
The application of VAT to some sectors including education, healthcare, real estate and local transport will be left to the discretion of GCC member states, that is, whether these sectors will be taxed at the standard rate, the zero rate or they will be exempt.
In relation to financial services, the standard rule is that these services are to be exempt from VAT. There will be the right to reclaim the input tax credit in line with specific rates set out by each member state. Each member state has the option to have a different VAT application for financial services.
VAT will also apply to oil and gas including the oil derivative sector at a standard or zero rate. This will be at the discretion of member states.
The benefits of VAT within the GCC are obvious: it can be an efficient and cheap way to collect taxes, and can impede fraud. It also provides a new stream of revenue for governments in the region, helping countries diversify their economies away from oil revenues. However, there are concerns about the implementation of VAT in the region. As VAT comes into effect in January 2018, there is little time for businesses to prepare if they have not already done so.
In July 2017, the Association of Chartered Certified Accountants and Thomson Reuters published the findings of a survey about the readiness of the GCC in its VAT implementation. The survey found that only 11% of companies understand the impact of VAT on their businesses; and 75% of businesses have not engaged a tax adviser on VAT implementation.
The Cragus Group Limited
Level 19, H Dubai Office Tower,
No.1 Sheikh Zayed Road,
Dubai 71985, United Arab Emirates
Tel: +971 (0)4 705 0310
Dominic Treays (email@example.com), Abdelhamid Attalla, Clarence Ellis, Reggie Mezu, Dr Robert Peake
International corporate tax planning, transactional, controversy, VAT, and transfer pricing; covering Middle East & Africa.
Ernst & Young Middle East
P.O. Box 140
9th Floor, East Tower Bahrain World Trade Center
Manama, Kingdom of Bahrain
Tel: +973 1753 5455
Tax Market Segment Leader
Tel: +973 1751 4768
Mob: +973 3917 4729
Ernst & Young –Tehran, Iran.
Tax Market Segment Leader
Tel: +966 13 849 9503
Mob: +973 39 970 541
Ernst & Young Kuwait
Baitak Tower, 18–21st Floor
Ahmed Al Jaber Street
P.O. Box 74
Tel: +965 2295 5000
Tax Market Segment Leader
Tel: +965 2295 5104
Mob: +965 9722 3004
MENA People Advisory Services Leader
Tel: +965 2295 5207
Mobile: +965 9722 4770
Ernst & Young
P.O. Box 1750, Ruwi 112
3rd and 4th Floor, EY Building
Al Qurum, Opposite CCC
Sultanate of Oman
Tel: +968 2455 9559
Tax Market Segment LeaderAhmed Amor Al-Esry
Tel: +968 2455 9502
Mob: +968 9946 5592
P.O. Box 164
24nd Floor, Burj Al Gassar Onaiza,
West Bay, Doha State of Qatar
Arabian Gulf, P.O Box 164
Tel: +974 44 574 111
MENA Indirect Tax Leader
Tel: +974 44 574 200
Mobile: +974 55 554 692
International Tax Services Leader and Tax Market Segment Leader
Tel: +974 44 574 201
Mob: +971 56 676 5710
Ernst & Young & Co. Riyadh
Al Faisaliah Office Tower – Level 6,
King Fahad Road, P.O. Box 2732
Riyadh 11461, Kingdom of Saudi Arabia
Tel: +966 1 273 4740
MENA Business Tax Services Leader and KSA Market Segment Leader
Tel: +966 11 215 9876
Mobile: +966 5 0518 8328
Ernst & Young & Co. – Al Khobar
9th Floor, Fluor Building,
PO Box 3795 Al Khobar 31952,
Tel: +966 3 849 9500
Ernst & Young & Co. – Jeddah
13th Floor, King's Road Tower,
King Abdulaziz Road (Malek Road)
P.O. Box 1994
Jeddah 21441, Saudi Arabia
Tel: +966 2 221 8400
MENA Global Compliance and Reporting Leader
Tel: + +966 2 221 8507
Mob: +966 59 372 2290
Ernst & Young Abu Dhabi
Nation Tower 2
Abu Dhabi P.O Box 136
United Arab Emirates
Tel: +971 2 627 7522
Tax Market Segment Leader and MENA Transaction Tax Leader
Tel: +971 2 417 4507
Mobile: +971 56 474 1665
Ernst & Young Dubai
28th Floor, Al Saqr Business Tower
Sheikh Zayed Road
P.O. Box 9267
United Arab Emirates
Tel: +971 4 332 4000
MENA Transfer Pricing Leader
Tel: +971 4 701 0566
Mobile: +971 501 812 093
MENA Law Leader
Tel: +971 4 701 0975
Mobile: +971 56 683 3634
MENA Accounting Compliance & Reporting (ACR) Leader
Tel: +971 4 312 9118
Mobile: +971 50 6526413
Gulf Business Associates provides business advisory services in the GCC region for the implementation of VAT, business strategy and transformation, ERP implementation,process improvement and automation. Our client base is spread across multiple industries, from retailers to providers of medical services.
Initiated in the UK, our operations are now expanding in the Middle East. We understand the challenges facing organisations in the Middle East and through our strategic partner network we bring technologies and tools to automate document handling and VAT processes within our clients' organisations.
Our transparent and collaborative approach coupled with our deep industry knowledge and wealth of experience are our key selling points and we pride ourselves on our ability to deliver a unique and tailored service to each of our clients.
Main number: +966 54 040 4137
|Corporate Income Tax||0%||A|
|Capital Gains Tax||0%|
A Oil and gas companies are subject to a special income tax. Oil and gas companies are subject to tax on income derived from the sale of finished or semi-finished products manufactured from natural hydrocarbons in Bahrain and from the sale of such raw materials if produced from the ground in Bahrain. The rate of tax is 46%.
|Corporate Income Tax||15%||A|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||0%||C|
|Branch Remittance Tax||0%|
A) Under Law No. 2 of 2008, for fiscal years beginning after February 3 2008, the tax rate is a flat 15%. Before the approval of this new law, Amiri Decree No. 3 of 1955 had provided that the maximum tax rate was 55%. The maximum rate under Law No. 23 of 1961, which applies to profits derived from the operations in the Divided Neutral Zone, is 57%.
B) This rate applies only to dividends distributed by companies listed on the Kuwait Stock Exchange.
C) Under Article 2 of the Bylaws, income derived from the granting of loans by foreign entities in Kuwait is considered to be taxable income in Kuwait, which is subject to tax at a rate of 15%. Previously, foreign banks that solely granted loans in Kuwait were not taxed on the interest income received with respect to these loans.
D) This income is treated as ordinary business income and is normally assessed on a deemed profit ranging from 98.5% to 100%.
E) Article 7 of the Bylaws provides that losses can be carried forward for a maximum of three years (as opposed to an unlimited period under the prior tax law) if the entity has not ceased its operations in Kuwait.
|Corporate Income Tax||15%||B|
|Capital Gains Tax||12%|
|Net Operating Losses (years)|
A) This tax is imposed on certain payments to foreign persons that do not have a permanent establishment in Oman. Companies or permanent establishments in Oman that pay these items must deduct tax at source and remit it to the Secretary General for Taxation.
B) Rate for oil companies is 55%.
|Corporate Income Tax||0%|
|Companies engaged in oil and other hydro-carbon production||30%||85%||A|
|Capital Gains Tax||20%|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||15%|
A) The withholding tax rates in Saudi Arabia range from 5% to 20%.
|Corporate Income Tax||0%||A|
|Capital Gains Tax||0%||A|
A) No taxes are levied at a federal level in the UAE. VAT scheduled to be introduced within the next few years.
Dominic Treays is the managing director of the Cragus Group. The firm was formed in 2006 and now comprises 13 partners in the region and four other fee earners in the Dubai office. Cragus differentiates itself from its competitors in that its management team has extensive in-house or industry experience.
Cragus handles international corporate tax planning advisory, and particularly tax controversy. It also works with local law firms which enables it to tackle real issues on the ground in the MEA region. Cragus is the only significant independent cross jurisdictional tax advisory firm in the GCC region. It acts as an MEA tax adviser for many global law firms and tax networks, as most of them do not have any tax practitioners based in the GCC.
The practice continues to grow as companies in the region are starting to take tax more seriously, in a region that does not have a strong history of taxation, relying on Cragus for the expertise many themselves lack.
Its clients include oilfield supply companies, two of the largest technology companies, luxury groups, governments, and one of the world's top five financial service providers.
Nauman Ahmed is the head of the tax department at Deloitte. In 2009, it established the international tax services centre (ITSC) for excellence in Dubai. The ITSC comprises 70 full-time tax professionals, led by Alex Law, who has worked for various Deloitte member firms for more than 14 years.
The ITSC offers clients and investors a range of tax services including structuring groups with inbound and outbound investments in the Middle East and abroad. It supports pan-Middle Eastern tax matters and provides a central hub for specialist tax value propositions across the Middle East.
Deloitte's indirect tax practice supports clients across the region in understanding the impact of VAT and working with them to prepare for VAT go-live. The team is led by Justin Whitehouse. He is supported by more than 50 VAT professionals located across the region. The firm is also helping government authorities prepare for VAT.
Among the work it has been involved in over the last year, Deloitte has been providing buy side tax assistance services to a US-based investor considering the purchase of an interest in an Oman-based oil field services group.
Tobias Lintvelt is the head of EY's international tax services. Its UAE office comprises five partners and 160 other fee earners. The MENA tax practice of EY has been operating in the Middle East since 1923.
For more than 90 years, the firm has developed to meet the legal and commercial developments of the region. The firm has close to 6,000 people across 20 offices and 15 Arab countries.
It helps clients with indirect tax matters including identifying risk areas and sustainable planning opportunities, meeting compliance obligations and business goals.
EY creates effective processes for clients to develop their day-to-day reporting for indirect tax, reduce attribution errors and costs and ensuring indirect taxes are managed properly. The firm supports VAT compliance outsourcing, identifies the right partial exemption method and reviews accounting systems.
Other services offered by the firm include tax policy and controversy. In this area, EY has a worldwide network of professionals which includes former government officials. EY also offers global reporting services.
The tax practice at KPMG comprises 10 partners and 153 other fee earners, led by Rasheed Al-Qenae. Since May 2016, Clare McColl, Rob Dalla Costa, Philippe Norre, Nimai Vijay, Justin McGettigan, Refat Obeidat and Faisal Tanvir have joined the firm.
KPMG provides a full range of tax advisory and tax compliance services. Its tax professionals includes English and Arabic speakers. The firm has domestic and international experience which enables it to identify local and cross-border tax issues that affect it clients.
The practice has been liaising with clients across different industries to prepare them for the introduction of VAT on January 1 2018. KPMG has also assisted clients with the technological aspect of VAT implementation. The firm's tax team in Oman has helped the Ministry of Finance with developing its incoming VAT system. This involves helping the Ministry understand the GCC framework agreement and providing comments, and drafting the VAT law and executive regulations.
The firm's recent advisory work includes working on the acquisition of an online retailer.
The tax practice at M/HQ has three partners and 13 other fee earners. Yann Mrazek is the head of the practice. Since May 2016, Magdalena Mozdzierz, Ankita Rustogi and Nidhi Sanghani Kamdar have joined the practice.
Due to the introduction of VAT into the GCC, the firm has recruited an indirect tax team comprising five tax professionals.
The practice advises corporate clients that include MNEs and family run businesses with tax planning and structuring requirements.
M/HQ has entered into a memorandum of understanding on strategic cooperation with the Dubai Foreign Direct Investment Bureau (Dubai FDI). The firm organises joint events with the Dubai FDI. The events are held in the UAE and abroad to raise the profile of the jurisdiction. The tax practice also offers advice on corporate migration across the UAE's jurisdictions.
One of the tax matters the practice handled in the last year concerned advising a privately-owned group with activities in the UAE and Europe on its restructuring.
The tax and legal practice at PwC provides a range of tax services including international taxation, indirect taxes, tax reporting and strategy, and M&A. The practice covers 14 jurisdictions across the Middle East.
Dean Kern heads up the department. Kern is based in Dubai and is also responsible for the firm's markets in the region. He has more than 33 years of experience in the US and now in the Middle East. He advises MNEs on tax structuring matters in and outside the GCC, and in corporate tax and financial reporting matters.
The firm's VAT team has three indirect tax directors: Jeanine Daou, Chadi Abou-Chakra and Nadine Bassil. The VAT team also comprises two indirect tax senior managers: Orhan Berberoglu and Joanne Clarke.
Other tax professionals at PwC include David Cox, who is a partner and the firm's financial services assurance industry leader. Cox's experience includes audits, financial accounting, compliance and risk management. Tom Emmett is a partner and he has 24 years of experience in M&A, enterprise content management and corporate brokering. Blaise Jenner is a partner based in Dubai and he leads the firm's accounting structuring team in the region.
Emile Bongers and Michael Molenaars lead the tax practice at Stibbe, which includes three other fee earners. The tax team are supported by their member firms in Amsterdam, Brussels and Luxembourg. Stibbe advises on investments by GCC members into and through the Netherlands and Luxembourg. It also advises on investments into the GCC, including investments from Japan and Korea that are structured through the Netherlands.
Molenaars joined the firm in 1992 and he has previously worked in the firm's New York and London offices. He advises on domestic and international taxation, corporate reorganisations, structured finance and investment fund structuring and formation. Bongers is a senior tax counsel and his services include international and domestic taxation, M&A and private equity transactions, corporate reorganisations, joint ventures and other (multiple) shareholder structures.
The tax practice at Withers offers clients a range of tax services including VAT and other indirect taxes, M&A, fund structuring, and tax controversy. The professionals that work in the Dubai office include: Stijn Janssen, Daniele Dal Corso and Ton van Doremalen.
Janssen is the head of tax practice. He advises clients on tax matters including structuring cross-border investments, group restructurings and M&A. His clients include MNEs, governments, private equity investment funds and sovereign wealth funds. Janssen has previously worked with a Big 4 firm in the GCC.
Van Doremalen is a tax director with the firm. He advises international clients on investing in the GCC. Van Doremalen's clients include Gulf-based family offices, private equity and sovereign wealth fund investors for their outbound investments. He specialises in international tax structuring. This involves using jurisdictions including the Netherlands, Luxembourg, the UK and the UAE.
Dal Corso is a tax associate at Withers. His experience includes corporate tax planning, and cross-border M&A.