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Issue:# 10 NEWSLETTER |
November, 2010 |
Welcome to the Cragus Group newsletter. Please feel free to contact us on [email protected]To add yourself to our mailing list, unsubscribe, or forward to a colleague, please see links at the bottom of this email. | |
UAE nears completion of New Companies Law
In September 2010, Sultan Bin Saeed Al Mansouri, the UAE Minister for the Economy has announced the final stages of the amendment of several laws aimed at improving the business environment within the UAE. Amended laws include the Companies Law, Auditors Law, Foreign Investment Law, Anti-Fraud law amongst others which are hoping to be made public by the end of 2010. Addressing the Chamber of Commerce, Al Mansouri told of hopes that the new regulations will address concerns regarding commercial regulations and arbitration, aiming to promote efficiency, transparency and investor confidence. Though there has been much debate over recent years over the long-awaited changes to the UAE company law, recent statements in the media indicate that there will not be any general change in the current 51 / 49 % (local / foreign) partnership rule for local LLCs. |
Qatar Financial Centre announces its Tax Regulations
On the 6th October 2010 The Qatar Financial Centre formally announced the enactment of its new tax regime and regulations seeking to improve and increase long term investment in Qatar, with a focus on financial firms.
The new regime which will retroactively be in affect from January 2010, provides that all companies registered within the QFC are subject to a 10% corporation tax on locally sourced profits, with the exemption of entities wholly owned by the government of Qatar.
The new self-assessment tax regime which has been developed over the last three years in cooperation with the Ministry of Economy and Finance, provides tax incentives for reinsurance, captive insurance and management profits and remains one of the lower taxing financial centers around the Gulf. Taxes must be filed before 6 months after the end of the accounting period and interest will be paid on undercharged tax at the discretion of the QFC. Personal income tax remains unchanged at 0%. |
UAE seeks to raise indirect / "hidden" taxes
As it looks to recover from the affects of the financial crisis on its real estate market and business environment, the media report that recent steps taken by the United Arab Emirates could be seen as attempts to raise income from its wealthier residents. The country looks to be raising indirect or "hidden" taxes as a means of staving off their debt problems.
The country is careful not to raise direct taxes in fears of driving out the expatriate community which would result in the large loss of business within the UAE. However, raising smaller, indirect or hidden taxes could be a way forward resulting in small though significant revenues for the government, with hopes that Dubai can lower its expected 2010 budget gap of approximately 6 billion AED; this is according to Philippe Dauba-Pantanacce, senior economist at Standard Chartered. Examples of the smaller revenue generating measures could arguably be seen in recent years with the introduction of identity cards at 100 AED, or road tarifs (following heavy investment by Dubai in its infrastructure). With approximately 4 and a half million residents being reported in Dubai the revenue of ID cards would translate to approximately $125 Million income. |
Jordan seeks Saudi help for Gulf free trade agreement
Jordan is apparently seeking the help of Saudi Arabia in their intentions to seek a free trade agreement with the GCC, and further more - aimed at improving technical cooperation between the two countries. Meeting in Amman at the beginning of October, it is reported that the two countries have also agreed to set up a joint agricultural transport firm as each seeks to ratify current unfavorable practices by each side respectively, and ways of resolving disputes in the future. |
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Bahrain sees Credit Rating Drop
 On August 23rd 2010, Moody's Investors Service lowered Bahrain's local and foreign currency government bond ratings to 'A3' from 'A2' following the countries apparent inability to meet contingent liabilities in the future, backed on insufficient tax revenues should oil receipts decrease.
Moody's also referred to "domestic political tensions", and further cited that since the development of other financial centres in the region (mainly Qatar Financial Centre, and Dubai International Financial Centre), Bahrain was also likely to face increasing competition in the banking sector. The downgrade marks Bahrain as the lowest in the six states of the Arab Gulf. |
Dubai, Spain Strengthen Economic Ties
On the 25th September, The Dubai International Financial Centre (DIFC) announced the signing of a Memorandum of Understanding (MoU) between the DIFC Authority and the Madrid Centro Financiero (MCF), the body in charge of the promotion of Madrid as an International Financial Centre.
The MoU will further strengthen ties between the UAE and Spain, having already established trade and investment links, the UAE being the largest destination of Spanish exports in the GCC. |
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DIFC Announces Amendments to PCC Regime
On the 23rd September, The Dubai International Financial Centre Authority announced amendments to existing Companies Regulations in accordance with the Dubai Financial Services Authority (DFSA) recommendations. The changes allow Protected Cell Companies (PCC) to be used by both public and private Umbrella Funds to reduce potential legal risks whilst ensuring that the CIR (Collective INvestment Rules) prohibitations relating to cross investments of one Sub Funds assets in other Sub Funds in the same Umbrella Fund are applicable to Umbrella Funds using the PCC Structure.
The amendments came into effect retrospectively as of 24th August 2010 ahead of the DFSA's earlier changes to the DIFC Collective Investment Funds regimes which were implemented in July 2010. | |
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Treaty updates
Tunisia and Saudi Arabia - on July 8th 2010, Tunisia and Saudi Arabia signed a Double Taxation
Cyprus and Kuwait - October 5th 2010 - Cyprus and Kuwait have signed a Double taxation treaty as they further seek to explore investment opportunities with a focus on energy and services.
Latvia and Kuwait - On 2nd September 2010 the Capital tax treaty between Latvia and Kuwait, signed on the 9th November 2009, was ratified.
Kuwait and Vietnam - On August 25, Kuwait and Vietnam held a meeting to discuss issues relating to double taxation and investment.
Bahrain and Mexico - On October 9, Mexico and Bahrain signed a Double Taxation Agreement in Washington
Bahrain and Malaysia - On October 14, Bahrain and Malaysia amended the protocol on their Double Taxation Agreement (DTA) relating to the mutual exchange of tax information.
Qatar and Panama - Panama and Qatar signed a new double tax treaty in New York on September 23
Mozambique and Macau - On October 11, the Double Taxation Agreement (DTA) between Mozambique and Macau was published
Mozambique and India - On September 30, India and Mozambique signed a Double Taxation Agreement (DTA)
Mozambique and Vietnam - On September 3, Mozambique and Vietnam, signed a Double Taxation Agreement (DTA) in Hanoi.
UAE and Switzerland - On October 5th, Switzerland and the UAE initialed their Double Taxation Agreement.
UAE and Hong Kong - July 20th, The United Arab Emirates ("UAE") and Hong Kong have signed an initial Double Taxation Agreement ("DTA") on commodities and services. |
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Latest regional competitiveness rankings
November will see both the 10th anniversary of Ras Al Khaimah Free Trade Zone in addition to the 10th edition of the World Free Zone Convention; this is a perfect time to reflect on the competitiveness of the Middle East and their respective countries. In terms of important investment indicators such as "Business Environment", "Business Risks", "Foreign Direct Investment" and "Taxation", Investment Consultant Associates (ICA), using their "LocationSelector" software, have released their competitiveness scores for Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
Based on this selection of location factors, Qatar, United Arab Emirates and Bahrain rank 1st, 2nd and 3rd respectively, and as such, represent a relatively favorable business climate for foreign direct investments. Given that most investors benchmark country level data before making a new investment decision, ICA's research further illustrates that Free Trade Zones might also be subject to this competitiveness score and business climate ranking. In terms of the Middle East, it is also interesting to see that the more diversified economies such as the UAE and Bahrain continue to rank high at the current time.
There is a relatively large gap between the top three countries and the next two (Saudi Arabia and Oman). Saudi Arabia scores best on Business Environment indicators, while scoring lowest on Business Risks (which is based on economic freedom, corruption perception and organized crime). Jordan and Kuwait are ranked 6th and 7th respectively and present the lowest competitiveness scores of the selected countries. Jordan is the least favorable with respect to tax, but ranked relatively high on inward Foreign Direct Investment volumes. Kuwait is still a relatively closed country if you compare the current inward FDI flows, and in addition to this, the country also scores relatively poor on business risks.
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Countries |
Rank |
Competitiveness Score | |
Qatar |
1 |
71.68 | |
United Arab Emirates |
2 |
68.73 | |
Bahrain |
3 |
68.54 | |
Saudi Arabia |
4 |
50.68 | |
Oman |
5 |
49.45 | |
Jordan |
6 |
41.88 | |
Kuwait |
7 |
37.50 |
This information has been kindly contributed by ICA. If you want to know more about LocationSelector, or have an interest in getting more details regarding the rankings, please visit www.locationselector.com or e-mail Mr Frank Peterse directly on [email protected]
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UAE, Ireland Sign DTA
On the 1st July, Ciarán Madden, Ireland's Ambassador to the United Arab Emirates, and Younis Haji Al Khoori, Director General of the UAE Ministry of Finance, signed a Double Taxation Convention (DTA) expected to come into effect from 2011.
The DTA, follows the OECD Model Convention, and also provides for no withholding taxes on dividends, interest and royalty payments, and allows for the exchange of information between the two countries relevant authorities to prevent tax evasion. |
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If you would like further information on The Cragus Group or tax matters relating to the Arabian Gulf or surrounding region, please contact:
Dominic Treays, Director of Practice Development, on [email protected]
Or visit our website www.cragus.com
Sincerely,
Gemma Eagle
Marketing Manager
The Cragus Group
[email protected] |
Copyright © 2010 Cragus. All rights reserved. Please note that all use of this newsletter is subject to the Cragus Terms of Use available at http://www.cragus.com/legal.php, including the disclaimers, qualifications and limitations of liability set forth therein. | |
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| About The Cragus Group
The Cragus Group is made up of hand-picked individuals from tax, legal and accounting backgrounds, with experience of international tax in the Middle East dating back 20 years. Primarily dealing with corporate international tax planning, they also provide advice on transfer pricing, tax controversy, legal structuring, oil and gas and general corporate advisory services. They serve a range of clients across the Middle East and Africa.
The Cragus Group consists of well known international tax advisors based in Dubai and a long standing network of trusted independent Member law firms, correspondents, and advisors of high professional reputation in Kuwait (Kuwait City), Oman (Muscat, Salalah, Sohar), Saudi Arabia (Jeddah), Qatar (Doha), UAE (Abu Dhabi, Dubai), and the USA (Washington DC).
Tax Leadership/Contacts:
Dominic Treays
Reggie Mezu
(Strategic Adviser)
Dr. Robert E. B. Peake
(Strategic Adviser)
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