Post on 03-Feb-2022
transcript
2Deloitte & Touche Bakr Abulkhair & Co.
Concept of residency
• Corporation
� Registered in the Kingdom; or
� Headquartered in the Kingdom
• Headquartered (at least 2 out of 3)
� Board of Directors decision is taken in KSA
� Key management (CEO, CFO etc.) are resident in KSA
� Majority revenue derived from Kingdom
3Deloitte & Touche Bakr Abulkhair & Co.
Significant powers given to the DZIT, e.g.
• Not accept any transaction that does not have tax effect
• Readjust transactions whose substance does not reflect its real form
• Arbitrary assessment (under certain circumstances)
• Reallocation of revenue and expenses between related parties etc.
General Anti-avoidance Rule (GAAR)
4Deloitte & Touche Bakr Abulkhair & Co.
- WHT on recharges from related parties - Important
• WHT @ 5% or 15%?
- WHT on related parties transaction (Technical services) - Important
Withholding tax
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• Refund approach
• Exemption approach (July 2013)
Refund of Withholding Taxes – claiming treaty benefits
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a) Internal reorganization
DZIT view – Subject to CGT
b) Conversion of a branch: Should not be subject to CGT
c) Parent changing location of HQ: Not subject to CGT
Capital Gains Tax
7Deloitte & Touche Bakr Abulkhair & Co.
d) Change for shareholding at top level in a multi-layered structure
DZIT view – If this change does not result in change in articles of association of Saudi LLC, then no CGT is applicable
Capital Gains Tax - Continued
8Deloitte & Touche Bakr Abulkhair & Co.
a) How will the gain be calculated?
b) What is the cost base?
Capital gain tax on sale of branch:
Capital Gains Tax - Continued
9Deloitte & Touche Bakr Abulkhair & Co.
Taxation in divided ex-neutral zone - Khafji Joint Operations (KJO)
• Land
� Khafji – Kingdom of Saudi Arabia
� Wafra – Kuwait
• Marine area
� Kuwait – 50% of the Kuwait tax
� Saudi (PE / Branch) – 50% tax
� Saudi (LLC) – DZIT opinion: tax on 100% profit
Other Important Issues
10Deloitte & Touche Bakr Abulkhair & Co.
- Application of CGT and WHT on GCC nationals/ corporations
- Reimbursement of tax/zakat from shareholders
- Contract Information Form (CIF)
- Import purchases reconciliation
- Salaries reconciliation between GOSI certificates and Company books
- Wage Protection System
- Application of withholding tax on non-deductible expenses
Other Important Issues - Continued
11Deloitte & Touche Bakr Abulkhair & Co.
- Statute of limitation:
a) Corporate tax
b) Withholding tax
- Group Zakat return filing
- New electronic Zakat filing and payment system is prone to errors
- Tax residency certificate for employees
Other Important Issues (Continued)
12Deloitte & Touche Bakr Abulkhair & Co.
Transfer pricing
• The new frontier (in the region)
• Egyptian experience
• Africa: OECD based TP rules in Kenya, Tanzania, Uganda
• Documentation to substantiate positions
Treaty abuse
• Beneficial ownership
• Substance / residence
GAAR Codification
• In the making…
Audit and investigation
• Systematic, based on rule-of-law and open to fair judicial scrutiny
• Arbitrary…
Other Important Issues (Continued)