With Bahrain, Saudi Arabia and the UAE having introduced Value Added Tax, and other Gulf Cooperation Council members states to follow suit over the next year, businesses are operating in a new tax regime in the Middle East. Our Middle East Tax Newsletter aims to provide you with updates, insights and practical guidance on the tax implications of doing business in the region.

Below are the most recent tax-related developments from across the GCC.

Bahrain 

Non-residents can now register for VAT in Bahrain. Non-residents that carry out supplies that are deemed to take place in Bahrain (such as electronically supplied services) and are provided to customers that are not registered for VAT, are required to register for VAT within 30 days from the first supply they make. No registration threshold applies.

 

Saudi Arabia (KSA)

Multinationals should carefully consider their procurement and service arrangements. The KSA’s General Authority of Zakat and Tax (GAZT) recently published its guide on the VAT treatment of Professional Services, in which, among other things, the VAT treatment of global contracting arrangements is set out. In some cases VAT in the KSA may be due twice in addition to any VAT charged on the services outside the KSA.

Publication of transfer pricing bylaws. The GAZT has issued its transfer pricing (TP) regulations (together with FAQs), which can be viewed here: https://www.gazt.gov.sa/en/transfer-pricing.

 

United Arab Emirates (UAE) 

Disclaimer in Public Clarifications. The United Arab Emirates’ Federal Tax Authority (FTA) has now included a disclaimer in its Public Clarifications (including the ones previously issued) stating that: “The Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.

VAT position of holding companies.The UAE has not published any specific guidance on the VAT position of holding companies. However, by issuing its Public Clarification on the VAT treatment of Bank Interest and Dividends and its guidance on Input Tax Apportionment and Financial Services, holding companies should clearly carefully consider their VAT recovery position.

 

Saudi Arabia and United Arab Emirates Tax Treaty

The Double Tax Treaty between the UAE and Saudi Arabia has been ratified by both countries, and was issued this week. The treaty will particularly impact the tax treatment of cross border payments between both countries. More details to be discussed in the next newsletter.

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To speak to us in relation to any tax issues in the Middle East, please feel free to contact one of the lawyers below, or your usual Baker McKenzie contact.

Author

Reggie Mezu is a Senior Special Counsel in Baker McKenzie Habib Al Mulla, based in Dubai. He has practiced tax for nearly 30 years in the Middle East, Africa and Europe, including in the UAE for 15 years. Reggie regularly advises clients on tax planning, corporate structuring, cross-border transactions, double tax treaties, reform and development of fiscal frameworks, general advice, and most recently, the new value added tax (VAT) regime in the Gulf region.

Author

Bastiaan Moossdorff is a Senior Associate in Baker McKenzie Habib Al Mulla, based in Dubai. He specializes in indirect tax and has practiced indirect tax for more than 7 years in the Netherlands, the UK, the UAE and the KSA. Bastiaan has multi-jurisdictional and multi-disciplinary academic qualifications in law, accountancy and taxation.

Author

Laya Aoun-Hani is a senior associate in the Corporate & Commercial practice of Baker McKenzie Habib Al Mulla, based in Dubai. She specialises in corporate and commercial transactions, including joint ventures, distribution agreements, company structuring and restructuring, mergers and acquisitions, employment and all related matters. Laya also has particular experience in all compliance and VAT matters.

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