Despite the rapid economic and social development in countries across North Africa, the Middle East and South Asia, many companies may be wary of exploring new business opportunities in these jurisdictions due to the complexities with local laws governing foreign businesses and taxation.
To respond to this, KPMG will launch a new guide – the Middle East, North Africa and South Asia (MENASA) Tax Guide 2014-15 at the KPMG Middle East Tax Summit in Dubai on 9 December. The guide will be available online, free of cost and will provide a quick and easy summary of the main regulations affecting foreign companies in 19 countries across the region.
Drawing on the experience of local KPMG tax and business specialists, the guide covers the practical aspects of setting up and running a business in each country, including acceptable types of business entities, legal formalities for forming companies or branches, accounting and audit requirements, direct and indirect tax regulations and transfer pricing agreements.
The countries covered include Afghanistan, Algeria, Bahrain, Bangladesh, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Pakistan, Qatar, Saudi Arabia, Sri Lanka, Tunisia, the United Arab Emirates (UAE) and Yemen.
Ashok Hariharan, Head of Tax for the KPMG Middle East and South Asia region, said: “The Middle East, North Africa and South Asia is a diverse and rapidly growing set of countries, with each constituent nation having its own distinct and characteristic cultural, economic and financial stance.
“This can make foreign investment seem daunting, and the picture is further clouded by moves by governments to adapt both to growing international interdependence and to the emergence of important international tax initiatives like the Base Erosion and Profit Shifting program from the OECD.
“In these complex and rapidly changing times, a simple guide like this can provide corporations with the confidence they need to expand their business into new territories.”
The guide will reveal, for example, that in the UAE, a legal framework has always been in place to tax all corporate entities, but at the moment these laws are only enforced on foreign oil companies and branches of foreign banks.
Theoretically, any foreign corporation in the UAE may be taxed, except those in the almost forty ‘Free Trade Zones’ primarily located in Dubai, where it is common for companies to enjoy a tax holiday for 50 years from the date of incorporation.
The guide explains the tight foreign exchange regulations in Algeria, where, for example, dividends can only be transferred if they arise from production of goods or services, and not if they arise from trading.
It provides much detail on the generous tax treatment of gifts in Bangladesh, and points out that Oman is one of the very few Gulf countries which permits majority foreign participation (up to 70 percent) in local companies.
Nilesh Ashar, International Tax Leader for KPMG in the UAE, said: “Given that a number of multinational companies operate their regional activities from the UAE (Dubai in particular), increased investment activity in the MENASA region is bound to have a positive economic impact on the UAE, in terms of movement of capital, trade and personnel into or through the UAE.”