- Article
- February 14, 2017
The Central Bank and United Arab Emirates (UAE) Government, considers it extremely important that monies earned by illegal means abroad are not circulated in the financial system of the country for the benefit of the criminals. To combat with it terrorism Central Bank has issued circular no. 24/2000 including other amendment resolution issued from time to time, which reflect the recommendations relating to stopping the financing of terrorism issued by the Financial Task Force (FATF) established by the countries of the Group of Seven.
Money Laundering:
It refers to a transaction aimed at concealing and / or changing the identity of illegally obtained money, so that it appears to have originated from legitimate source, where in fact it has not. Also, it includes monies destined to finance terrorism or criminal acts.
Recent Amendment:
On 14 December 2016 resolution was passed by the central Bank amending the circular no. 24/2000 to include mandatory physical checking of the identity documents.
Bank Account and for investment in other financial institution requirement as provided by the central bank is as follows consequent to the said amendment:
- All information and necessary documents like full name of the account holder, the current address and place of work
- Physically checking of the UAE ID Card or the passport in case of a natural person and or Physical verification of the Trade License in case of a legal person, as applicable and keeping copies thereof initialled by the account opening officer under a true copy of the original signed off.
- Also, in relation to legal person to obtain an incorporation certificate, renewal licenses and details of all the details of all the shareholders holding more than 5% of the public shareholding companies.
- the cooperative societies or charitable or social or professional societies the Bank cannot open a bank account except where the original certificate is submitted signed by H.E. Ministry of Social Affairs.
- All changes in the information provided during the Account opening process need to be regularly updated.
- It is strictly prohibited to open accounts with assumed name or numbers.
Reporting of Unusual Transactions:
The central bank has mandated to inform all the unusual and suspicious transactions aiming at Money laundering to the Central Bank in the prescribed form – by all the Banks, moneychangers and financial institutions, including their Board Members, Managers and employees personally.
Further, the compliance officer of the concerned financial institution is responsible for contacting the central bank to report the money laundering, reporting unusual transactions, sending reports and maintain the reports properly in relation to the same.
Period of Keeping Documents, Records and Files:
To the Bank and institutions to which the circular apply are required to keep the records and make it available to the Central Bank Examiners for investigation for a minimum of 5 years. Including the Bank account opening documents which should be maintained for 5 years after closing of the Accounts.
Training:
The central Bank as via the said circular made the law strictly and stopped the Banks from applying their internal procedures for the aforesaid subject in relation to identification. Further Compliance Officer in each Bank, Money changer or any financial institution is entrusted with the responsibility of providing training to the staff responsible for receiving cash or overseeing the accounts and related reports for money laundering and holding workshops from time to time for the same.
Also, the penalty in accordance with prevailing laws and regulations has been provided in case Bank fails to report the unusual transactions and where the central Bank becomes aware after verification of Money laundering activities.
As the Banking and financial business is evolving in terms of electronic connection so are the sophistication of Banking Methods to evade money laundering.
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- Article
- February 13, 2017
Introduction
Taxes – a word alien to this part of the world will longer be so. The last few years have seen various new developments related to taxation in whole of Gulf region and the United Arab Emirates (UAE) is not an exception.
Implementation of Common Reporting Standards (CRS)
Nations across the world have recognized the need to exchange the information to keep an eye on these tax evasions. The organization for Common Economic Cooperation and Development (OECD) have developed Common Reporting Standards (CRS) with the assistance of G20 nations, the European Union and other stakeholders. It is majorly following the principles laid down by United States’ Foreign Accounts Tax Compliance Act (FATCA). Like FATCA, it also inflicts financial institutions around the world to collect and share certain specified information related to account holders with their home country’s authorities.
The UAE also committed to exchange important financial information related to individuals and legal entities to curtail tax evasions. The MoF has stated on various occasions that CRS shall be completely applicable to UAE by the end of 2018. Ministry of Finance (MoF), UAE has recently issued a comprehensive guidance note for implementation of CRS in UAE. As per the same, the banks and other financial institutions shall be collecting the information about their clients. The major cut off dates for the same are:
2017 : An Year of Change in UAE for tax and investment Purposes
As per data available on 10th January, 2017 the UAE has entered tax treaties with 73 nations and investment protection treaties with 37 countries, many of which shall come into force within the year 2017.
The Harmonized Commodity Description and Coding System (HS) is a tool used by most nations around the world for custom tariffs in international trade. It is also accepted by GCC nations for a collection of international trade data. An amended version of this system shall come into force in UAE from 1st January, 2017.
It is indicated at various occasions, that the rules related to the implementation of Value Added Tax (VAT) shall be introduced very soon and a full-fledged VAT and excise legislation shall come into force by 2018.
Conclusion
The rulers of the UAE have shown their commitment towards the treaties and maintain a cordial business relations with nations around the world. In the line of the same, they have issued effective rules for exchange of information about the identified and high value account holders with the appropriate jurisdictions to ensure minimal tax evasions and curtail unfair use of legal entities for tax avoidance.
- Article
- February 10, 2017
Introduction
Economy of Kingdom of Saudi Arabia (KSA) has faced the worst hit of a sharp fall in oil prices and to deal with the situation efficiently and overcome the menace, the Government has launched various development and transformation programs to divert the economy from its dependence on oil. Mr. Salman, King of the nation has informed about the Government plan to inject 200 billion Saudi Riyals (SAR) (approx. 53 billion USD) in a period of coming four years between 2017 to 2020 to boost investment by the private sector during the introduction of Budget of KSA for 2017.
The Plan
A reform and transformation program launched last year anticipates the capacity of the private sector to invest tens of billions USD over the coming few years on various projects for schools, housing, communication, power stations and industrial zones. But, the willingness of the private sector to invest in the conventional oil dependent economy is a major challenge for this program.
An official document released with Budget 2017 on 22nd December, 2016 mentioned that the incentive program is proposed to promote private sector investment to boost growth and development programs. An investment of approx USD 53 billion is proposed during 2017-2020. It further mentions about the establishment of an investment fund that will provide capital for investment into development programs, but do not provide the details about incentives being offered or source of finance for the fund. However, it clearly states that incentives shall be granted to the sectors providing support to development programs of the nation and creation of jobs for Saudi nationals.
This initiative is aimed to successfully diversify the economy from oil and create new source of revenue for the Government. It shall also promote private sector to invest in various social development programs of the Government to ensure a sustainable growth of the economy.
This document further states that the Government is increasing the fee charged from companies for employing expats above the number of Saudi workers. Further, an additional fee shall be payable on all dependents of expat workers, which will gradually be increased to 400 SAR per dependent by 2020. This shall obviously have an adverse effect on companies’ ability to invest.
The Bottom Line
Considering the present scenario, it will be a challenging situation, but once, the details of the incentives are revealed by the Government, a better outlook for corporates can be envisioned.
If you are looking to expand your business in Kingdom of Saudi Arabia or set up your company in Kingdom of Saudi Arabia, you can reach us on [email protected]
- Article
- February 6, 2017
Introduction
On Sunday, 1st January, 2017 Oman released its state Budget which clearly states Government’s decision to cut spending and reducing the trade deficit. The whole Gulf region is dealing with the crisis because of the sharp fall in oil prices resulting in increased trade deficits of all the countries in the region. Moreover, Oman is not having rich oil and fiscal reserves like neighbor countries; therefore, there is a pressing need to divert prime source Governmental income from oil to other sources of revenue. This article aims to share some key highlights of Oman State Budget 2017.
Highlights
- The State budget 2017 expects the average price to be around USD 45 per Barrel for the year considering the last year low of 24 USD per barrel.
- Ministry of Finance at Oman mentioned that it is planning to maximize revenues from sources other than oil and shall be changing regime of Income Tax, excise duty on various goods like tobacco and alcohol and amendments in fee for hiring expat employees.
- It also states that new openings in the public sector will be limited in the year 2017 with an objective to reduce the burden of public sector salaries on the State Budget. The private sector will have to create jobs. Further, the private sector will also have to bear the extra baggage of increased fees for hiring expats and taxes levied by the Government. A cut in tax exemptions and subsidies and increased power tariffs will affect private sector revenues substantially.
- State budget suggests an increase in income tax rates to 15 percent for later years, which shall add to the revenues to Government in the future but burn a hole in the pockets of tax payers.
- The royalty payable to the Government by Oman Telecommunications and Ooredoo Oman, two of the major telecommunication firms in Oman have been raised to 12 percent from the existing 7 percent. This resulted in a sharp fall of shares of both the firms immediately after the announcement.
- The State Budget 2017 also indicated Government’s intentions to promote public private partnership and sell states’ share in many companies. This shall be started by selling state’s share in Muscat Electricity Distribution Co., which is targeted to be completed in the first half of 2017. It also mentioned governments’ intentions to make the best use of public private partnership to reduce burden of public sector and promote private sector investments in development projects. It is also proposed to enact a law for public private partnership in near future.
- This budget also projected increase in foreign borrowing to 133 percent, which shall be the prime financing tool for governmental expenses in covering the deficit for the year 2017.
- The budget 2017 recognizes the Government’s commitment towards “Tanfeedh” an initiative launched in 2016 which is expected to create more than 30,000 jobs for Omani citizens and to support GDP growth by more than 1.3 billion Omani Riyals.
- The budget also states that legislation for Value Added Tax (VAT) is already prepared and shall be placed for review and approval of appropriate authority very soon. It is expected that VAT shall be applicable in all GCC countries by the end of 2018.
- It also recognizes the needs for efficient tax collection mechanism and monitoring of compliance processes.
Bottom Line
The state budget of Oman, 2017 shows the governmental strategy for reducing dependence on oil revenue and diversification towards other sources of revenue. It also lays down special emphasize on public private partnership for encouraging sustainable developments and growth of employment opportunities in the country. However, some provisions may not be welcomed by the private sector because of their adverse impacts on revenues of the private sector. Government of Oman clearly stated its focus will be reducing government expenditures and increasing revenues from different sources to reduce fiscal deficit for a long lasting and sustainable growth of the nation which shall definitely bring desired results in near future.
- Article
- February 2, 2017
Introduction
The Kingdom of Saudi Arabia (KSA) is the largest exporter of oil in the world and has second largest crude reserves in the world. It is curtailing its renewable power target as it is planning to use more natural sources of power e.g. Natural gas, Solar and wind energy. The higher targets were established for renewable power when the crude prices were three times higher than their current levels, a few years ago. The Minister of energy of Kingdom of Saudi Arabia has agreed that the energy mix has shifted towards gas and therefore, the higher targets from renewable sources are no more required. It will also be in line with the ambitious “Saudi Vision 2030.” The Minister also revealed that OPEC and Non OPEC producers are unlikely to extend the earlier agreements for cut in production beyond June, due to the high level of expectations and compliances involved in the agreements and considering the situation have improved in the last few months and the same is expected to continue in coming years.
The Plans
KSA is picking up the pace on its renewable energy drive. As per a Statement given by minister of energy of KSA on 16th January, 2017, at an energy industry event in Abu Dhabi.
- The Kingdom will be launching a renewable energy program in the next couple of weeks and shall be investing between USD 30 billion to USD 50 billion to achieve its target of producing abundant electricity from renewable to power to serve energy needs equivalent to three million homes, within the next six years.
- It is planning to make substantial investments in nuclear energy and planning to connect with neighboring countries likes Yemen, Jordan and Egypt for the same.
- The KSA shall connect with Africa for the exchange of non – fossil source of energy as hinted by the minister.
- Some geothermal and waste projects will also form part of the nation’s renewable energy program.
- KSA is also planning to reach Europe at later stages of this program to take advantage of Peak demand and arbitrage in the region.
- Riyadh shall start the bidding process for projects under the program which aims to produce ten Giga watts of water. The Minister also invited the global industry to participate in this project.
- The country will also be making a substantial investment in nuclear energy and is looking at constructing two nuclear reactors to generate electricity up to 2.8 Giga Watt. However, this is still at very initial stages. But, a significant investment in nuclear energy for civilian purposes can be seen in the near future.
Conclusion
Reducing the nations’ dependence on oil for the generation of power was an important part of Saudi Vision 2030. The aim was to protect the nations’ economy from the effects of fluctuating oil markets. The initiatives of the ministers in this regard are commendable and shall achieve the desired objectives for the Kingdom. On the other hand, it gives great opportunities for international industry to participate and take benefits from ambitious projects of the Kingdom.
- Newsletter
- January 31, 2017
Singapore says it will continue to participate in other free trade initiatives, as members of the Trans-Pacific Partnership (TPP) consider new options after new US President Donald Trump ditched the trade pact that he said kills American jobs. The Ministry of Trade and Industry (MTI) told The Straits Times that the Republic will also have to “discuss the way forward” with TPP partners.
“Each of the partners will have to carefully study the new balance of benefits,” MTI said in a statement. Countries from Singapore to Mexico are now considering their next move, after Mr Trump signed an executive order to withdraw the US from the 12-nation TPP that together accounts for 40 per cent of world trade. He also vowed to renegotiate a free trade agreement with Canada and Mexico.
Australia and New Zealand said they still hope to salvage the TPP despite the US withdrawal. But the deal cannot go into effect in its current form without US participation, MTI said.
“Singapore is committed to pursuing a rules-based trading system and greater regional integration,” it added. “The agreement that the TPP parties has negotiated is one such pathway to achieve stronger trade linkages that will promote growth opportunities and job creation in all the member countries.”
The MTI spokesman said Singapore will continue to participate in regional initiatives such as the Regional Comprehensive Economic Partnership (RCEP) and the proposal for a Free Trade Area of the Asia-Pacific. RCEP is an Asia-Pacific trade liberalisation initiative led by China that includes the 10 Asean members as well as Australia, New Zealand, Japan, South Korea and India.
Meanwhile, the Singapore Business Federation (SBF) called on the Government to join and encourage other TPP member countries to push for the implementation of the TPP, with or without the US. “Without the US, the TPP continues to provide substantial benefits for businesses as the US market is already quite open,” noted SBF chief executive Ho Meng Kit.
Singapore already has a bilateral free trade pact with the US, as well as with all of the other TPP countries except Canada and Mexico. This means the about-turn by the US “might not have much detrimental impact on Singapore”, noted DBS economist Irvin Seah.
The Trump administration’s shift towards greater protectionism could hurt more, he said, adding: “This will deal a big blow to global trade liberalisation. It is negative for Singapore because we are a small, open, trade-dependent economy.”
Other TPP partners have also expressed their keenness to make the deal work. Australia’s Trade Minister Steve Ciobo, for one, told ABC Radio that a TPP without the US was “very much a live option”. Japan, another TPP member, has been pressing other signatories to push on with the pact too, while suggesting it will try to change Mr Trump’s mind before next year, the deadline for the deal’s ratification.
Prime Minister Shinzo Abe’s top adviser Yoshihide Suga told CNBC: “We believe we still have an opportunity to convince the US about the importance of free trade.” But Professor Kamel Mellahi of Warwick Business School said: “The survival of the TPP trade deal is inconceivable. Plus, many Asian countries have an alternative in China’s proposals.”
- Article
- January 31, 2017
The British Virgin Islands has confirmed that it will implement the OECD’s base erosion and profit shifting (BEPS) minimum standards as a BEPS Associate member.
The BVI has said it will participate in the new “Inclusive Framework” announced by the OECD. As a member of the framework, the BVI is committing to implement the OECD’s proposed minimum standards on harmful tax practices, tax treaty abuse, country-by-country reporting, and dispute resolution.
The BVI Government said it will formalize its membership of the BEPS Inclusive Framework group in the first quarter of 2017, once its application process is completed. The territory’s Government has already said it will take forward legislative proposals to introduce country-by-country reporting, a core element of BEPS.
- Newsletter
- January 31, 2017
Bahrain has signed an agreement to implement the US Foreign Account Taxpayer Compliance Act with the United States.
FATCA, enacted by the US Congress in 2010, is intended to ensure that the US obtains information on accounts held abroad at foreign financial institutions (FFIs) by US persons. Failure by an FFI to disclose information on their US clients will result in a requirement to withhold 30 percent tax on payments of US-sourced income.
The Intergovernmental Agreement will provide for a simplified framework for Bahraini financial institutions to comply with the US FATCA, through a centralized agency, and remove any legal restrictions on the collection and exchange of the relevant information.
- Newsletter
- January 31, 2017
The EFTA states – Switzerland, Liechtenstein, Norway, and Iceland – and India recently discussed how to push for the conclusion of a bilateral free trade agreement.
The free trade negotiations started in October 2008, with 13 rounds being held until November 2013. Chief negotiators decided to resume negotiations in 2016 after taking stock of their status and held a 14th round of negotiations in October 2016.
The two parties held a 15th round of negotiations in New Delhi on January 11-13. Experts from both sides held targeted discussions on outstanding issues regarding trade in goods, trade in services, rules of origin, and intellectual property rights. They also reviewed the state of play of all other topics under discussion.
Both sides agreed to continue negotiations with a view to concluding an agreement in the near future. The next round of negotiations will be held in Geneva in spring 2017.
- Newsletter
- January 31, 2017
The Kingdom of Saudi Arabia (KSA) National Budget 2017 sees a progressively lower budget deficit with the aim of achieving break even by 2020. The government has considered taxes as one of the sources for additional revenue with the introduction of certain new/revised levies on expatriates and, most notably, the Value Added Tax (VAT). Whilst these reforms will result in additional revenue for the government, it may increase the cost of doing business in KSA.
Expatriate Levy
Currently, companies pay a levy of SAR 200 per month per expatriate employee, but only for expatriate employees that exceed the number of Saudi employees. From next year, this fee will be increased gradually (from January every year) until 2020. Furthermore, for expatriate employees not exceeding the number Saudi employees, the fee will no longer be waived but will be levied at a discounted rate.
In addition, a new fee on dependents of expatriate employees will be levied. This fee will be applicable from July 2017. The fee will be SAR 100 per dependent per month and will increase gradually every year until 2020.
The potential plans to levy income tax and or remittance tax on expatriate employees has been placed on hold for now.
Value Added Tax (VAT)
The Saudi National Budget 2017 revealed that KSA signed the GCC (member states comprising Bahrain, KSA, Kuwait, Oman, Qatar and UAE) unified framework agreement for VAT in December 2016. The Saudi National Budget 2017 also confirmed the implementation of VAT in KSA from January 2018.
The current indication is that most goods and services will be subject to VAT at 5%. Certain goods and services may be either zero rated or exempt from VAT. More details on applicability of VAT will be available once the GCC framework and KSA VAT law is published.
Excise Tax on harmful goods
Excise tax will be implemented on certain products that are viewed to be harmful to individual’s health.
Excise Tax of 50% on soft drinks (at this stage, there is no indication on whether it will apply to all or specific soft drinks), and 100% on tobacco products and energy drinks will be imposed from April 2017. This will result in these specific products becoming costlier and potentially achieving the objective of reduced consumption.
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