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Newsletter, Saudi Arabia

A Guide for Setting up a Company in Saudi Arabia

June 17, 2019

Are you thinking of doing business in Saudi Arabia? Do you know that the Saudi Arabia General Investment Authority (SAGIA) has forecasted a 70 percent rise in new foreign investor licences in first quarter of 2019 as compared to Q1 of 2018? In fact Saudi Arabia, which is the biggest economy in the Gulf region, has worked towards becoming a regional hub for global investments and invite more businesses and companies to the private sector, as per its Vision 2030 objective of making its economy more diversified.

A Saudi business solutions provider recently issued a report on international investments in Saudi Arabia and listed all the legal entities that foreign investors could operate as in the Kingdom. So if you are planning company registration in Saudi Arabia or foreign company registration in Saudi Arabia, do consider one of the following.

A limited liability company (LLC), which is a private equity established between two or more partners (there can be a maximum of 50 partners) or shareholders who are responsible for the company’s debts according to their contributed capital.
A single member limited liability company (SMLLC) is typically an LLC formed only by one individual. This individual holds complete authority and can accept the position of the company’s director, general shareholders’ assembly and board of directors. The owner is responsible according to the amount of capital he/she has put into the company.

Foreign companies are permitted to set up their branch office in Saudi Arabia where the parent company assumes full accountability of the office’s actions.
A joint stock company (JSC) is a business where the capital is divided into negotiable shares. It would have a name that indicates its goal or purpose and a JSC is usually run by a board of directors. As per its memorandum of association, there could be a minimum of three members and a maximum of eleven.

The Saudi Arabia General Investment Authority (SAGIA) has forecasted a 70 percent rise in new foreign investor licences in quarter 1 of 2019 as compared to Q1 of last year. The highest investments per sector were seen in manufacturing industry, construction, IT, and professional science and technology fields.

The National Transformation Programme, which is an action plan launched by the Saudi government to reduce the Kingdom’s economic reliance on oil. This five-year plan basically has three key objectives: reforms in public sector and fiscal reforms, economic expansion and diversification and improving the business environment, and other social reforms.

The report highlights some of the significant licences that are available for global companies who are thinking of investing here.

Service licences are obtainable for a variety of services, such as management consulting, tourism, training, information technology, insurance and reinsurance, health, education, logistic services, advertising and media, organizing exhibitions, financial services, catering and food services, aviation and handling services.

Service licences are categorised into two groups: specialized activities requiring an approval by some government agencies for services like health, insurance, transportation, and some non-specialized activities, in which no such approval is needed.

Industrial licences are obtainable for heavy and light industries and also for transformative industries.
Licences for a scientific or technical office are intended for global companies who have a collaboration with a Saudi agent for distributing their products in the country and they want to open an office to offer scientific or technical services to various agents, distributors and also to customers of those products.

A temporary certificate to present a proposal to government projects could be requested by companies that want to bid for government projects by duly filling and submitting an application to SAGIA.
A real-estate licence is meant for global companies who are dealing in property and specifically where the total project cost is not less than SAR 30 million with regards to land and construction and also the investment done outside the borders of the cities of Mecca and Medina.
A trading licence is offered to all foreign entities who want to undertake wholesale or retail trade inside Saudi Arabia.
A licence for public transport is needed by foreign companies who want to offer public land transport services like buses or metros operating within the kingdom.
A consulting licence specifically for engineering offices is meant for international companies who wish to offer engineering consultation services operating in the country with a 100 percent possession.
An entrepreneur licence is offered to those who want to set up pilot projects that are accredited by either Saudi universities or some business incubators.
An immediate licence is meant for international companies who wish to open their headquarters in Saudi Arabia for engaging in investment activities with immediate effect and submit documents meeting the requisite standards for the activity.
A licence for agents who handle recruitment and hiring of domestic labour services especially is meant for global companies who are dealing in domestic labour placement services and also short-term employment agency activities specifically for home services in the country.
Licencing of the university colleges and also constant universities is available to international companies who want to conduct some such educational activities in the nation.

So if you are considering VAT registration in Saudi Arabia and need professional help, do get in touch with us at IMC Group

Newsletter, Singapore

Enterprise Singapore and MAS to Bring Global Investors to Start-ups

May 13, 2019

The start-up’s in Singapore can now expect more opportunities for company formation in Singapore and collaborations with global investors as Enterprise Singapore is working with the Monetary Authority of Singapore (MAS) to accelerate funding.

They are doing this through highly selected and organised deal-making sessions. The first of these kind of sessions was kicked off recently as segment of the international launch for Slingshot 2019, a global start-up pitching contest organised by Enterprise Singapore. Over 100 start-ups got a chance to network with approximately 50 investors, venture capitalists and corporate funds.

The collaboration with MAS is part of a wider strategy by Enterprise Singapore to strengthen the local start-up ecosystem by adopting a market-led approach, bringing together academia, government and the private sector to create solutions that address market needs in Singapore and the region.

The Organisation for Economic Co-operation and Development (OECD) has predicted that Asia is going to account for over half of global gross domestic product (GDP) by the year 2050.

Edwin Chow, who is the assistant CEO of Enterprise Singapore, said that Enterprise Singapore would intensify its commitments with local and overseas partners to facilitate start-ups to scale up more rapidly.

He also said that the targeted platforms that the start-up’s get for connecting with investors and customers serve as precious opportunities for them to access resources like financing, and also open avenues for co-innovation along with leading corporates.

The other steps announced actually build on the current initiatives. For example, 17 additional accredited mentor partners will be brought in to the Startup SG Founder programme to offer extra mentorship and start-up capital to the first-time businesses or entrepreneurs. This will take the total number of mentors to 45, who are expected to coach around 200 start-ups in the coming year.

The new mentors in the list include the Singapore University of Social Sciences (SUSS), talent incubator Antler, and South-east Asia’s largest medical device business, Advanced MedTech.

Enterprise Singapore is also closely functioning with the Economic Development Board to bring at least four new cities to the Global Innovation Alliance (GIA) network in 2019. The GIA is basically a network of domestic and overseas partners in all the key innovation hubs.

Besides, Enterprise Singapore has also been affiliating with different government agencies since the year 2017 to launch calls for proposals from start-ups firms to handle the challenges across urban solutions, logistics, trade and construction. There is a pipeline of 24 calls for proposals in 2019.

Newsletter, U.A.E

UAE’s Focus on Artificial Intelligence to Spur Further Growth

May 13, 2019

A new research shows that the UAE is steadfast in adopting all the latest technologies and that is why it remains far ahead of the global average in terms of artificial intelligence (AI) maturity.

Microsoft’s AI Pulse report has shown that the companies in the UAE were a lot more proactive in implementing AI solutions, as compared to global peers. Around 70 percent of the double-digit expansion companies in the UAE plan to use AI in this year for improving their decision-making, as against 46 percent globally. Also, 45 percent of the UAE’s single-digit expansion companies plan on AI adoption for better decision-making in 2019, again going far ahead of the global average of 31 percent.

AI Pulse is a global initiative by Microsoft that is especially designed to enable in forming the desire and intentions of senior executives globally towards AI. Respondents’ firms were divided into the following categories: high-growth firms, which have double-digit growth and lower-growth firms, which have single-digit growth. The AI maturity of all the companies was then categorised as either: waiting, exploring, experimenting, formalising, or integrating. It was established that about 38 percent of high-growth firms globally are either at the ‘formalising’ or ‘integrating’ levels; however, only 17 percent of lower-growth firms were seen at those levels.

UAE leaders were surveyed in February this year and it was found that almost 47 percent of higher-growth organizations and 15 percent of lower-growth companies in the country has reached the ‘formalising’ or ‘integrating’ stages. With higher-growth firms, this proves a considerably higher AI maturity as compared to the global average.

Experts feel that UAE businesses are currently on the right path in terms of the adoption of AI solutions and the government sector is leading the momentum.

Regarding leadership issues, the report proved that the respondents were typically split over business priorities, as no clear preferences emerged out of the poll. Having said that, the UAE leaders continued to show a greater degree of conviction, with 38 percent choosing the evaluation of success as their top priority for time investment. The prioritisation of business goals and initiatives was tied between the UAE leaders for second place with the handling of facts and information, each getting validation from 30 percent of UAE respondents.

Besides, most firms in the UAE think that AI will have intense effects on various aspects of future leadership, like in overall control, solving challenges, and offering a direction for the workforce. Almost 78 percent of double-digit growth organizations globally and 70 percent of other firms encourage the re-skilling measures to make sure that they are ready for the AI future, almost 97 percent of the UAE leaders said that they supported these measures.

Newsletter, U.A.E

The Ties Between UAE and India in the Best-ever Phase

May 13, 2019

The UAE-India ties have been fortifying over the past few years as UAE’s investment pouring into India crossed the $10bln mark.

The financial, political and cultural ties between UAE and India are in their golden phase as the bilateral trade and investments have been growing each year.

Sheikh Nahyan bin Mubarak Al Nahyan, who is the UAE Minister of State for Tolerance, acclaimed the bilateral ties of friendship and trust between these two countries. He also pointed towards the important role of sustainable knowledge-driven economy, new innovations and also dialogue in accomplishing peace and constant progress.

Navdeep Suri, who is India’s ambassador to the UAE, felt that the growing ties between these two countries are mirrored in many incidents like awarding of Sheikh Zayed Award to the Indian Prime Minister Narendra Modi and then UAE inviting the India’s foreign minister Sushma Swaraj for addressing the Organisation of Islamic Countries conference held at Abu Dhabi recently. The ambassador also appreciated Abu Dhabi’s role in establishing the Hindu temple in the UAE.

Vipul, the consul general of India in Dubai, said that the bilateral financial, political and cultural ties between these two nations have been consolidating further over the past few years as UAE has been investing in India and the mark has now crossed $10 billion.

Vipul was addressing the 37th annual conference of The Institute of Chartered Accountants of India (ICAI) in the Dubai Chapter. He also said that the two countries have been collaborating together and making millennium strides in various industries like food processing, defence, space, etc. industries and foreign company registration in India has been on an all-time high.

This annual conference was organised under the title of “Accelerating Millennium Strides – transforming by power of knowledge.” About 2,000 members of the ICAI – Dubai Chapter – were present in the annual conference. Vipul also mentioned that India has been at vanguard of global expansion as it is now touted as the most-rapidly growing economy in the world.

He stressed how India was working to remove poverty and making millennium strides in all the areas, be it science, technology, culture, and many other sectors. And the same is true for the UAE. UAE’s focus also been on spreading tolerance, happiness, making new collaborations and fostering technology. The UAE also is a great example of how people can work and dwell in coherence in a multicultural society.

So if you are thinking of setting up your business in UAE or looking for business setup consultants in Dubai, do get in touch with us and we would be glad to assist you.

Bahrain, Newsletter

Hundred Start-up’s in Arab Chosen to Benefit from Bahrain’s Robust Financial Offerings

May 13, 2019

A new structured program would enable the start-ups in Arab to briskly enhance their businesses and fetch a wider spectrum of assistance in Bahrain.

Bahrain recently announced rolling out a brand new program that is going to aid about 100 Arab start-up companies, which are modelling the Fourth Industrial Revolution, at the World Economic Forum (WEF), held recently in Jordan. This structured programme would allow these Arab start-up companies to scale up their businesses rapidly, thus, getting an access of a wider range of support in Bahrain.

Here is the press release about this announcement. Please click this link to view a list of all the 100 start-up businesses from across the Arab World: https://widgets.weforum.org/arabstartups/

The special advantages given to these 100 Arab start-up companies include:

An entry to the market of Bahrain for all businesses that have been marked under the 100 Arab Start-Ups banner – and also going back to the ones that were selected in the year 2017
The applications to be fast-tracked for establishing a presence in Bahrain
Creating a special concierge service for 100 Arab Start-Ups to assist these start-ups to steer through and reap benefit from Bahrain’s ecosystem
A chance to pitch and get the required funding from Bahrain’s Sovereign Wealth Fund, and from the VC partners of Al Waha Fund of Funds and even from the family offices in the Kingdom

Khalid Al Rumaihi, who is the chief executive of the Bahrain Economic Development Board, said that the 100 Arab start-ups moulding the Fourth Industrial Revolution is a very good initiative and they would jointly make sure that it not just an annual event but a continuous source of assistance and aid to the most-promising businesses so that they can become world leaders in their chosen fields. These firms or businesses would outline the future and therefore, more new prospects that Bahrain can offer along with some special incentives are being opened to provide the best-possible and comprehensive support. In affiliation with the World Economic Forum, with this programme, the best-possible support is being offered to the best chosen businesses.

As per data from MagniTT (a firm selected twice by the 100 Arab Start-Ups initiative), there has been a 31 percent rise in investments as compared to 2017 and a new record was established for regional start-up funding in 2018.

The foreign investment continued to be stable in the year 2018 as about 30 percent poured in from outside the Arab territory, while fintech shot over e-commerce as the top-most industry because of an 8 percent rise in deals since 2017.

A selection committee of professionals and experts on the start-up ecosystem worked along with the World Economic Forum and the EDB for screening and selecting the 100 start-ups.

With the support and presence of TM King Abdullah II and Queen Rania Al Abdullah, this meeting assembled over 1,000 top leaders from government, civil and business society, along with leaders from the Levant and North Africa, Gulf Cooperation Council (GCC) countries, and major global stakeholders from Europe, East Africa, and the US.

Newsletter, U.A.E

China Announced Key Investments in Dubai During Sheikh Mohammed’s Visit

May 13, 2019

Thinking of company formation in Dubai? It’s the right time to go for it as China will be doing some major investments in Dubai now.

His Highness Sheikh Mohammed bin Rashid Al Maktoum, who is the Vice-President and Prime Minister of the United Arab Emirates and the Ruler of Dubai recently visited Beijing for the second phase of the Belt and Road initiative.

Some key deals have been signed and investments were also announced on his China visit. Making this announcement public on Twitter, Sheikh Mohammed mentioned that a 60 million square feet station will be launched at the new Silk Road in Dubai for Expo 2020.

The Chinese company Yiwu plans to pump in an investment of about $2.4 billion to use this station for storage and transporting the Chinese goods from Jebel Ali to the rest of the world via New Silk Road.

The Chinese President Xi Jinping was seen shaking hands with UAE Vice President and Prime Minister Sheik Mohammed bin Rashid al Maktoum when they met on a bilateral meeting of the Second edition of Belt and Road Forum at the Great Hall of the People on April 25, this year in Beijing, China.

He proclaimed another project that would be launched in Dubai for $1 billion. It is named as ‘vegetable basket’, which is funded by the China-Arab investment fund. It would be importing, processing and then packing various agricultural products, and animal products and marine products and then export them to the whole world via the new Silk Road.

He joined 40 other state leaders and delegations who came from 150 countries and global organisations, like the International Monetary Fund, the United Nations, and other such entities covered by the initiative which was launched by President Xi Jinping.

Sheikh Mohammed mentioned that the UAE would have a key role to play in improving global cooperation and reinforcing regional ties with the world. He said that the UAE is looking forward to strengthening its international ties in various fields; thus hinting towards this year being an ideal time for best company formation in UAE.

He emphasized on UAE’s continuous efforts to foster positive communication and plan combined action for forming the foundations of sustainable development.

Newsletter, U.A.E

Expo 2020 Dubai is likely to Add AED122.6b to UAE Economy Between 2013-2031

May 13, 2019

Expo 2020 Dubai is slated to contribute a whopping AED122.6 billion of gross value added (GVA) to the UAE’s economy between the time period of 2013–31. It is also expected to aid up to 905,200 full-time equivalent (FTE) job-years in the United Aran Emirates in 2013–31, which is equivalent to almost 49,700 FTE jobs every year in the UAE over this period.

Najeeb Mohammed Al-Ali, who is the Executive Director of the Dubai Expo 2020 Bureau, said that Expo 2020 Dubai is a very important long-term investment for the future of the Kingdom, which is going to contribute over 120 billion dirhams into the economy between the period of 2013 and 2031.

This is going to hearten millions around the globe to visit the UAE in the year 2020, while encouraging travel and tourism and aid economic diversification for times to come after the Expo. It will also leave behind a sustainable financial legacy that would help in ensuring that the UAE continues to be a leading hub for business, investment and also leisure.

This expo is projected to draw almost 25 million visitors and participants from over 190 countries from the time-period of October 2020 to April 2021. In this duration, it is estimated that the World Expo would contribute about 1.5% of the UAE’s yearly forecasted gross domestic product (GDP).

Besides that, the small and medium-sized enterprises (SMEs) are predicted to get almost AED 4.7 billion as investments in the pre-Expo phase, aiding about 12,600 job-years, and also helping to fulfil the Expo 2020’s goal to promote innovation and encourage small businesses.

During the Legacy period, that is between the month of May 2021 to December 2031, the Expo site would be redeveloped to District 2020, which is going to comprise tenant firms and an expanded Dubai Exhibition Centre (DEC).

District 2020 is strategically planned to promote the UAE’s future vision by aiding sustainable financial development, thus, going a step closer to an innovation-driven economy and nurturing a business environment to assist major growth industries like logistics and transport, construction and real estate, travel and tourism, and education.

More than 80 percent of the Expo built environment is intended to be preserved for District 2020, and ultimately expanded into a city that covers over four million square meters. District 2020 businesses would be focused on innovation and new technology, comprising a blend of corporations and SMEs. The DEC is also going to be a major facility in the site.

The financial effect of the Legacy period is majorly anticipated to be driven by the expansion activity and operations of District 2020 along with the incremental outcomes of DEC’s expansion.

To conclude, there is going to be a ‘direct’ rise in economic activity, while there would be ‘indirect’ advantages of enhanced supply chain demand and ‘induced’ profits from amplified spending by employees of companies involved in Expo 2020.

Expo 2020 Dubai will be the first World Expo that will take place in the Middle East, Africa and South Asia (MEASA) region in the 168 years of history of the event. Close to over 200 participants, which will include of nations, corporations, firms, educational institutions and multinational organizations, would gather in Dubai between the month of October 2020 to April 2021 to discover the Expo 2020’s theme of ‘Connecting Minds, Creating the Future’.

Newsletter, Singapore

South East Asia Magnetises Ambitious Indian Entrepreneurs to Launch their Ventures

April 16, 2019

South East Asia is a major business hub for Indian entrepreneurs with global ambitions. With every passing year more and more Indians are turning eastward to launch their business. Whether it is for the global expansion of their existing business or to set up a new business, there are several reasons why many Indian are considering to set up in South East Asia. In fact, it is an ideal location for companies all over the world to set up a new business or expand their market.

South East Asia’s start-up ecosystem, highly efficient infrastructure, sizeable collective market, greater ease of doing business, huge consumer demand, stable political environment, attractive tax regime, efficient regulatory systems and many more factors contribute to making it a fantastic gateway for start-ups looking to go global. Moreover, the business-friendly environment and easy access to venture capital also attract many Indians to South East Asia. The region provides the most conducive environment for companies looking to expand in the region.

Industry sources reveal that every 1 out of 7 start-ups in South East Asia is launched by Indians or Indian-origin CEOs. Apart from the above mentioned reasons, another major reason for company formation in Singapore and other South East Asian countries is the government support. The government in South East Asia actively extends help to new entrepreneurs by assisting them in mentorship, quick regulatory clearances, seed funding and a hands-on approach to solve any problems they face. The government promotes these newly launched ventures by offering salary subsidies, growth funding and conducive business environment.

Setting up a business in South East Asia is very easy and straightforward. It welcomes with open arms investors, entrepreneurs and professionals who can complement its economy. Moreover, Singaporean authorities are extremely fast and efficient. Company registration in Singapore takes just a few hours, right from getting the registration number to signed MoUs, everything is quick and efficiently handled.

The attractive tax rate in South East Asia is also a major reason to draw Indians as it is almost half of that in India. This helps the Indian entrepreneurs retain their earning and price their products more competitively. South East Asia also gives the advantage of huge customer demand. If you look at Singapore alone, the population base is around 5.6 million, which is quite good to serve.

Bottom Line

South East Asia enjoys one of the top-most positions in the global economy and continues to be every entrepreneur’s dream destination. The above mentioned factors make South East Asia the world’s top region when it comes to doing business.

Seeing an opportunity, we, at IMC Group have set up our own office in the region to cater to the growing needs of businesses. We offer a range of company registration services in Singapore right from conducting an initial market survey to acquiring various business licenses, getting government approvals, conducting company incorporation formalities, preparing necessary documentation, assisting with payroll, accounting and finance and much more. We offer one-stop business solution to entrepreneurs looking to set up their business in Singapore.

Get in touch with us for more information on how we can help you!

Source URL: https://economictimes.indiatimes.com/nri/nris-in-news/why-many-indians-are-moving-to-se-asia-to-launch-their-ventures/articleshow/68878843.cms

Newsletter, Singapore

Latest Updates to the Singapore Employment Act

April 15, 2019

There have been some major changes which have come into effect on 1 April 2019, and thus, various businesses in Singapore should act accordingly and update their HR policies and processes.

Singapore’s Ministry of Manpower (MOM) announced some key changes to the Employment Act (EA) last in November 2018. There are four main areas that are impacted by these changes, which have come into effect from 1 April 2019. All the professionals, managers, executives and technicians (PMETs) will account for more than half of Singapore’s workforce, which is continuing to expand. The EA changes intend to keep the systems and procedures relevant and up-to-date as per the workforce trends.

Extension of some fundamental provisions for protecting more employees

Till now, the main provisions of the EA did not cover managers and executives (M&Es). However, with PMETs accounting for over half of the workforce now, which is forecasted to go up to two-thirds by 2030, it was obvious that the EA was not able to keep up with the changes in the workforce demographic. Thus, the key provisions are being stretched to include M&Es.

For facilitating this, the earlier S$4,500 per month salary cap has been removed starting 1 April, getting additional 430,000 M&Es within the protection area of the key provisions of the EA. This comprises a minimum of seven to 14 days of annual leave, plus paid public holidays, sick leave, on-time salary pay-outs and protection against any wrongful dismissal. However, public servants, seafarers and domestic staff will not be included under the EA main provisions because they are covered under separate laws owing to the characteristically diverse pattern and nature of work.

Extension of part IV

EA’s Part IV is being amended to profit from an additional 100,000 workers by enhancing the monthly salary cap from S$2,500 to S$2,600, and by further enhancing the monthly basic salary cap which is used to calculate the per hour overtime rate from S$2,250 to S$2,600. This is basically a recognition of the rise in the median wage level prevalent in Singapore, which will mainly get the employees whose salaries have gone up beyond the cap, back under this EA provision. This amendment applies only to non-workmen (white-collar employees who are not in M&E positions). The earlier monthly salary cap applicable for workmen (blue-collar employees who are involved in manual labour) still remains at S$4,500.

Improvement of the employment dispute resolution framework

For centralising all the employment dispute resolution, the settlement of wrongful dismissal claims would be now moved from MOM to the ECT or Employment Claims Tribunal. In addition, the length of service needed for M&Es to be eligible for protection from any wrongful dismissal will be reduced from the current 12 months to half, which is six months. Very shortly, the new tripartite guidelines would be issued by MOM to explain what could be defined as wrongful dismissal.

Improved flexibility for the employers

There will be two key amendments which will enhance the flexibility that firms have in operating their businesses.

First, there would be enhanced flexibility in terms of compensating employees who work during public holidays. All the employees who are earning up to S$4,500 every month and the non-workmen who are getting up to S$2,600 every month could be remunerated either by compensation of an extra day’s salary or by getting one extra day off. In case of M&Es and for workmen earning over the cap of S$4,500 and non-workmen earning more than S$2,600, the business could offer the salary of extra day, a one-day off or time off which is less than a full day.

As of now, firms can only make any salary deductions for reasons like absence from work or causing a damage to goods delegated to the employee or for some loss. But from 1 April 2019, this has been changed and companies are now permitted to make some other deductions if the employee agrees to the deduction in writing and the owner or employer permits such deductions to be annulled at any juncture by the employee without having to apply any penalties.

What should employers do now?

These EA amendments need immediate action by businesses and they should update their HR policies, processes and practices. All the employee handbooks, any employment agreements and other organization policies would have to be reviewed and updated, and then published.

India, Newsletter

India Decides to Sign BEPS Multilateral Instrument which will Curb Tax Avoidance

April 15, 2019

The Indian Union Cabinet has recently approved India’s signing of the multilateral instrument (MLI) for implementing the tax treaty procedures in the OECD/G20 base erosion profit shifting (BEPS) action plan. A ceremony for signing this deal is going to be held in Paris in June this year.

The Cabinet’s decision and further action was anticipated because of India’s active contribution in the BEPs project and in the MLI drafting.

Though India has recently done some amendments in the tax treaties that were a concern to the government, like those with Singapore, Mauritius and Cyprus, and applied domestic general anti-avoidance rules (GAAR), the MLI is still important to India as an instrument to avoid any tax treaty abuse, including any instances of artificial avoidance of the permanent establishment status. The Indian government’s confirmation of their plan to sign again goes to prove India’s viewpoint towards restraining the base erosion globally.

The OECD has developed the BEPS Action Plan to deal with the use of aggressive strategies of tax planning used by multinational firms that falsely transfer the profits to low tax jurisdictions which have limited or no economic activities. BEPS Action Plan 15 envisions MLI’s development for implementing the measures related to tax treaty under the BEPS Action Plan.

The MLI is definitely a milestone development as it strives to modify more than 3000 bilateral tax treaties. When comparing with the protocols, which directly modifies the text of the treaties, the MLI is envisioned to be applicable along with the current tax treaties, amending their application to the required extent for implementing the measures related to BEPS.

An important aspect of the MLI is that it functions on the reciprocity principle. This means that any provision under the MLI is applicable to a bilateral tax agreement that happens between any two nations or jurisdictions, only in case both the parties agree to it. To bring this reciprocity into effect, the MLI allows for reservations against specific MLI provisions (except the ones related to application of BEPS minimum standards). Typically, if any one of the parties make a reservation against any MLI provision, then it is applicable symmetrically between the reserving party and all other concerned parties.

For the MLI to be brought into force, global law related to multilateral treaties should be complied with. Generally, the first step is signature, then ratification or acceptance and approval from each involved party, as per their respective law requirements applicable in that country.

Therefore, signature is only the initial step towards stating consent to be bound by the MLI.

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Bottom Line

Extension of some fundamental provisions for protecting more employees

Extension of part IV

Improvement of the employment dispute resolution framework

Improved flexibility for the employers

What should employers do now?

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