Regional developments and economic pressures have impacted the taxation policies of almost all countries in the Mena region.
Most countries have lowered tax rates to encourage investment whilst fiscal policy dictates increased tax collections to strengthen public finances and fund social development, as Ernst & Young’s Mena Tax Conference 2012, held in Dubai stated.
Sherif El Kilany, -Mena Tax Leader, Ernst & Young- said “From a fiscal and tax perspective, the changes we are seeing are largely positive, with business and investment friendly tax laws and increased transparency of regulation and enforcement. The changes rightly factor in the impact of the Euro zone crisis which continues to cast a gloomy shadow. We see Mena countries proceeding with their resources investment, infrastructure development and economic growth plans with more realism than we have experienced in the past”.
A trend that could have considerable tax cost impact in the coming years is the increasingly rigorous tax assessment process and less attractive outcomes related to deemed profit tax declarations.
Throughout the region we see tax authorities either tightening on deemed profit assessments or discontinuing this tax filing option.
Tax laws in Egypt, Oman and Qatar, now provide the tax authority the right to review the pricing of the related parties’ transaction and compare it with fair market price.
Many countries, including Egypt and Qatar, have issued executive regulations that include accepted pricing methods and require tax payers to declare specific information for related parties’ transactions.
More complexity in tax laws relating to dependent agency, thin capitalization and transfer pricing is being introduced in countries like Egypt, Qatar, Kuwait and Oman.
Sherif added: “In Egypt, for example, if the debt equity ratio of any company exceeds 4:1, excess interest is not tax deductible. In Kuwait, interest paid to financial institutions outside Kuwait could be challenged. It is important to keep abreast of tax practice in various countries in the region as these practices constantly change and evolve”
The conference featured panel discussions where tax executives from global companies and Ernst & Young tax specialists exchanged experiences and views to highlight recent changes in tax regulations and practices in Egypt, Iraq, Kuwait, Libya, Oman, Qatar and Saudi Arabia, as Peninsula stated.
The impact of global economic crisis and political changes on the fiscal and tax policies in the region was discussed as were major issues faced by taxpayers in Mena countries. Presentations also included updates on regional transfer pricing policies and tax treaties.