Proposal for 'Gulf Union'
On Tuesday 20th of December, the Gulf Cooperation Council (GCC), concluded its two day summit in Riyadh. The GCC consists of six members: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz Al Saud, ruler of Saudi Arabia, presented a proposal for a 'Gulf union'.
"I ask today that we move from a phase of co-operation to a phase of union within a single entity, to achieve joint welfare and stave off threats..................Our summit opens in the shadow of challenges that require vigilance and a united stance," King Abdullah is reported as saying in his keynote speech.
Regional media have reported that this proposal is being welcomed by other GCC members as a positive move forwards.
"A special Gulf authority comprising three nominated representatives from each GCC member state will be set up to study all aspects of the strategic move that calls for forging a single regional alliance," said Abdullatif bin Rashid Al Zayani, the Secretary General of the GCC. Representatives are expected to be announced in February 2012.
It is unclear what if any form this 'union' might take, whether it might accelerate the previously proposed single currency, the implementation of VAT, affect foreign investment laws, or indeed if the intention is purely for defence purposes in light of an increased Iranian concern and a decreased US military presence in the region; though many have sighted this as being a positive move following a year which began with the so called 'Arab Spring'. Certainly it can be said that the proposal for the 'Gulf Union' was unexpected, and could well be a very interesting development for regional investors. | |
No New Taxes in 2012 for UAE
In November Younis Haji Al Khouri, Undersecretary of the Ministry of Finance announced that no new taxes will be introduced in 2012. The announcement comes following on going speculation of the imposition of VAT in the GCC, which is now said to be implemented no earlier than 2013, though estimates now put the date as far back as 2015.
The tax will not be applied until all GCC member countries, which include Kuwait, Bahrain, Saudi Arabia, Qatar, the UAE and Oman, have the necessary administrative systems in place, and whilst some members are more ready than others, there is no consensus currently as to a viable implementation date. | |
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Russia and UAE Sign Agreement on Sovereign Wealth Funds Tax exemption
Russian Deputy Finance Minister Sergei Storchak and UAE Undersecretary of the Ministry of Finance Younis Haji al-Khouri have signed an agreement exempting UAE sovereign wealth funds and investment entities from paying tax on investments in Russia.
Previously UAE official investors in Russia had to pay a 20% tax on stock profit, a 15% tax on profits from investment and a 20% tax on capital gains.
The agreement is hoped to increase investment in the country in order to deal with the current high level of capital outflows which is expected to exceed $80bn this year. | |
Qatar strengthens its international and regional position
Qatar has kept its position of 30th place announced by the Global Financial Centers Index (GFCI 10) with an increase in 39 points, meaning that Qatar is now ranked as the leading centre in the Middle East.
In March earlier this year Qatar also rose from four places in the worlds  rankings from 34th to 30th, consolidating its international and regional profile of being an attractive platform for investors both in Qatar and on the broader GCC stage, specifically with the Qatar Financial Centre (QFC) as one of the significant contributing factors.
Qatar's economy continues to perform against a backdrop of international and regional pressures with its expected real GDP predicted to grow by over 20% this year.
Dubai's position decreased by eight places to become the 36th leading financial hub, Bahrain fell six places to 55th and Riyadh rose four place to 66th. | |
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Egyptian government scraps capital gains tax
On June 8th the Egyptian government announced its intention to scrap a planned 10% capital gains tax on dividends and reevaluations of assets in mergers and acquisitions.
Finance Minister Samir Radwan announced the effects would not take place until July 1st in order to continue the encouragement of the stock exchange. | |
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Japan - Saudi Arabia income tax treaty enters into force
On the 1st September 2011 the Japan-Saudi Arabia income tax treaty and protocol entered into force having been signed on the 15th November 2010. The treaty will generally apply from the 1st January 2012.
Under the treaty dividends are taxable at a rate of 5% if the beneficial owner is a company that holds, during a period of 183 days ending on the date on which entitlement to the dividends is determined, at least 10% of the voting power or shares of the payer company: in other cases a 10% rate applies.
Interest may be taxed at a rate of 10%.
Royalties paid for the use of industrial, commercial, or scientific equipment are taxable at a 5% rate, and a 10% rate applies in other cases. | |
Kuwait signs deal with Canada to promote investment
26 September 2011
Canada and Kuwait have signed an agreement to protect and promote investment between the two countries. Canadian Prime Minister Stephen Harper and the Prime Minister of Kuwait, Sheikh Nasser Al-Mohammed Al-Ahmed Al-Jaber Al-Sabah, witnessed the signing of the Canada-Kuwait Foreign Investment Promotion and Protection Agreement (FIPA).
In 2010, bilateral trade between Canada and Kuwait reached $129 million, with exports totaling $97 million. | |
Expat Pension Fund Proposed in Dubai
As of November 2011, the Dubai Department of Economic Development (DDED) is currently considering the implementation of a pension fund for the 1.79 million expatriates currently residing and working in Dubai.
No details have been announced as yet as to whether contributions would be mandatory under the scheme however the DDED has confirmed that both employees and employer would be liable to pay into it.
Speaking to the regional media, Ali Ibrahim, Deputy Director of Planning and Development at the DDED reported that although discussions on the scheme were in the preliminary stages, a team had been set up to study the possible beneficial effects, and a report would be produced on the outcome of the study. | |
Saudi Arabia, Ireland Sign Accord on Avoidance of Double Taxation
The agreement was signed on October 19th on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income.
Saudi Deputy Minister of Finance Dr. Hamad Bin Suleiman Al-Bazi said that the agreement is a legal framework that defines tax relations between the two countries.
This is the 28th agreement signed by the Kingdom with other nations. | |
Isle of Man and UAE Strengthen ties
The UAE and Isle of Man recently held key meetings to discuss improving and opening up levels of cooperation and new business opportunities between the two countries.
Colin Kniveton, Chief Executive of the Department of Economic Development, in the Isle of Man, met with various UAE bodies including the Dubai Economic Department, the UAE Insurance Authority and the UAE Central Bank, and highlighted the significance of the UAE to the Isle of Mann's economy, with several companies already established in Dubai and many more who wish to do so.
Kniveton paid tribute to the UAE economic model and said that welcoming economic and investment policies of the UAE provided many incentives for foreign companies to establish themselves in the Middle East. | |
UAE and Switzerland sign Double Taxation Agreement
On October 1st 2011, HE Younis Haji al Khouri, Undersecretary of the Ministry of Finance, and HE Wolfgang Amadeus Bruelhart, Ambassador of Switzerland, signed a double taxation avoidance agreement aimed at increasing the factors of production and investment opportunities between the two countries.
HE Al Khouri said: "The UAE has signed this agreement with Switzerland as part of its efforts to solidify joint financial and investment efforts with other countries, and to enhance its local economy. | |
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UAE to Improve Bankruptcy Law
The UAE Ministry of Finance is expected to introduce new legislation in regard to bankruptcy and financial restructuring, specifically in relation to the cover provided to individuals as well as businessmen and professionals.
The legislation will clarify what a debtors obligations are regarding both commercial and non commercial debt as well as providing additional protections which uphold both the rights of the debtor and the creditors.
Younis Haji Al Khouri, the Undersecretary at the Ministry of Finance, said that the new law is expected to promote growth in the UAE's economy by aiding companies who face themselves in debt, without diminishing their productivity. | |
Kenya and the UAE sign Income Tax Treaty
On the 21st November 2011, Kenya and the UAE signed an income tax treaty on the avoidance of double taxation.
The agreement was signed by the UAE's Obaid Huamid Al-Tayer, Minister of State for Financial Affairs and Kenyan Deputy Prime Minister and Minister of Finance, Uhuru Kenyatta.
Under the treaty all UAE's national airlines, as well as students, sovereign funds and income and capital in both the public and private sector, will be exempt from taxes in Kenya.
The agreement also announced the reduction on tax on dividends by Kenya from 20% to 5%.
Further details are expected to be made public in due course. | | |
Other Tax Treaty Updates
Algeria; Mauritania
Officials from Algeria and Mauritania signed an income tax treaty
December 11th in Algiers
Bahrain; Australia Sign TIEA
Representatives from Australia and Bahrain signed a tax information exchange agreement.
December 15.
Bahrain; Denmark
Exchange of information agreement between Bahrain and Denmark approved by Bahrain
22 November 2011
Bahrain; Faroe Islands
Exchage of information agreement between Bahrain and Faroe Islands approved by Bahrain
22 November 2011
Bahrain; Finland
Exchange of information agreement between Bahrain and Finland approved by Bahrain
22 November 2011
Bahrain; Greenland
Exchange of information agreement between Bahrain and Greenland approved by Bahrain
22 November 2011
Bahrain; Iceland
Exchange of information agreement between Bahrain and Iceland approved by Bahrain
22 November 2011
Bahrain; Mexico
Bahraini Crown Prince Salman bin Hamad Al Khalifa on December 11 issued Law 39 ratifying the pending Bahrain-Mexico income tax treaty and its accompanying protocol and Law 40 ratifying the pending Bahrain-Seychelles income tax treaty and protocol.
Bahrain; Norway
Exchange of information agreement between Bahrain and Norway approved by Bahrain
22 November 2011
Bahrain; Sweden
Exchange of information agreement between Bahrain and Sweden approved by Bahrain
22 November 2011
Jordan; Uzbekistan
The Jordan-Uzbekistan income tax treaty, signed in Amman on November 23, 2010, entered into force on July 13, and its provisions generally will apply from January 1, 2012
Kuwait and Canada sign Foreign Investment Promotion and Protection Agreement
The agreement, which will enter into force after ratification, aims to promote comprehensive protection for investors in both countries and ensure similar treatment to domestic investors.
26th September 2011
Qatar Ratifies Tax Treaty With Albania
Qatari Amir Hamad bin Khalifa Al Thani on December 13 issued a decree ratifying the pending Albania-Qatar income tax treaty that was signed in Tirana on October 18.
Qatar; Ireland
Representatives from Ireland and Qatar initialled an income tax treaty on December 16.
Qatar; Jersey
Initial Income Tax Treaty. Officials from Jersey and Qatar initialed an income tax treaty
December 13
Qatar; Portugal
Portugal and Qatar signed an income tax treaty in Doha
December 12th
Qatar; Romania
Amending protocol to IPA between Romanic and Qatar signed
Rwanda Ratifies East African Community Income Tax Treaty
The Rwandan Senate on December 13 adopted a law ratifying the pending East African Community income tax treaty.
Tunisia Enacts New Tax Framework for Venture Capital Investment Companies
Tunisia recently enacted Decree Law 100, which provides a special tax deduction for companies that reinvest their profits in shares of venture capital investment companies or in funds managed by such companies.
23 November 2011 | |
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| Letter from Geneva: WTO update | |
Historic break through and systemic failure were all in a week's work for the 8th World Trade Organization Ministerial Conference, which met last week in Geneva. Russia, after 18 years of often difficult negotiation, finally gained membership in the global trade body. Russia's accession was the sole bit of bright news at the conference, however, as closure to the Doha Round, launched in 2001, remained as elusive as ever.
Trade ministers once again failed to agree on a means to close out negotiations on goods, services and other disciplines. The split ove r trade liberalization between the developed and developing world these past ten years has only widened, as leading emerging markets blocked an attempt by the EU and US to carve out a separate negotiating track for like-minded countries to conclude agreements on trade in goods. Instead, the so-called "single undertaking" process of near unanimity enshrined in the WTO remains intact, and with it go any reasonable chances for a truly global trade agreement.
The fractures in the WTO model will only continue to push countries bent on further market liberalizations to conclude deals with limited numbers of countries, instead of pursuing a fully multilateral deal through Geneva. Indeed, trade negotiations outside the WTO have picked up pace in the past year, as economies desperate for growth, but no longer able to tolerate teh glacial progress of WTO negotiations, have struck out in search of partners.
The United States now pursues the Trans-Pacific Partnership FTA. the so-called TPP already includes 8 active negotiating countries, and last month Japan, Canada and Mexico professed their desire to gain access to the talks as well. Lack of progress at the WTO, coupled with the Eurozone financial crisis, has now led Washington and Brussels to initiate formal exploratory talks aimed at vetting a potential US-EU FTA. The TPP and an EU-US FTA have the blockbuster potential to reshape global trade dynamics, and to fence in China with higher commercial standards in what would become two of the largest trading blocs in the world.
Russia's leadership, for all its internal difficulties, appears to understand what is at stake. WTO membership has been linked to the country's economic modernization program, and as a key driver of industrial diversification. Moscow and Brussels, too, have announced their intent to puruse a potential EU-Russia FTA, folllowing Russia's implementation of its WTO accession accords. The Russian Duma is expected to ratify WTO accession between March and May of 2012, at which time Russian markets will be more open than at any time in history. Many observers believe the legal remedies offered by the WTO's dispute settlement provisions will be a key factor in maintaining Russia firmly on a course for market liberalization, rather than retreating once more into protectionist devices.
Sadly, it appears that it is only through issues such as Russian accession that the WTO maintains a critical degree of viability. But we should no more expect the WTO to return to the glory days of the Uruguay Round successes of 1994 than we should expect snow in Dubai this holiday season.
This contribution was gratefully received from Eric Shimp - Special Advisor to UAE regarding the UAE-USA FTA Negotiations, and Policy Advisor, Alston & Bird, LLP. Washington DC.
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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 © 2011 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
Dr Robert Peake
Mark Stevens
(Strategic Adviser) | |
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