Newsletter Archives - Page 9 of 57

Newsletter, Saudi Arabia

ZATCA Allows Customs Duty Refunds as Saudi Arabia Clarifies GCC Origin of Goods

March 1, 2022

Saudi Arabia Clarifies GCC Origin of Goods
Allows Customs Duty Refunds for Goods Imported from GCC Nations
Launches eService Platform

Saudi Arabia issued Ministerial Decision No. 3852 dated 2nd July 2021 on local rules of origin stipulating national rules of origin for the eligibility of preferential duty treatment of imported goods when imported from the Gulf Cooperation Council (GCC) into Saudi Arabia based on the GCC Unified Economic Agreement.

Goods produced in any of the GCC countries are considered as national products and should receive duty exemptions on import, the Saudi Cabinet decided.

Following the Cabinet Decision, new guidance has been issued by the Zakat, Tax and Customs Authority (ZATCA) specifying conditions that must be fulfilled before submitting any request for customs duty refund enabling verification of the Rules of Origin (RoO) for goods imported from GCC countries.

The requirements and conditions for the request of customs duty refund on goods of GCC origin are as under:

The importer needs to make a provision for a bank or cash guarantee amounting to customs duties and other taxes subject to the preferential treatment
The bank guarantee must be from a bank subject to the supervision and control of the Saudi Central Bank (SAMA)

Request for refund of customs duties must be filed by the importer within 90 days from the date of clearance of the goods of GCC origin on the condition that the request includes the following requirements:

Certificate of Origin (CoO)
Copy of the customs declaration eg. from Bayan, under Saudi Central Bank supervision
National certificate issued by the competent authority in the country of GCC origin
Valuation certificate for goods from the country of origin
Proof of payment for the value of the goods
Bill of lading
International Bank Account Number (IBAN)
Copy of invoices
Copy of Bank Guarantee

Besides the above-mentioned requirements, the value-added percentage following national laws of the country of origin must be certified by a Public Accountant from the country of origin, with a licensed and certified branch operating in Saudi Arabia.

Furthermore, all documents must be verified by ZATCA and other appropriate Saudi authorities by conducting visits to the GCC manufacturing facilities. The process of verification may also be delegated to a competent third party.

In the event of any objections on customs duty refund, the same needs to be done per Common Custom Law of the GCC nations.

Before applying for a customs duty refund, the importers must ensure that they comply with all the rules of the soil including ZATCA rules and regulations. Penalties may be levied if goods declared to originate from the GCC do not meet the requirements specified.

ZATCA has launched an eService platform for Customs Duty Refund on their website permitting an importer in Saudi Arabia to file a request for Customs duties or insurance fee refund. To make a valid claim for the refund, all importers need to provide a completed customs declaration along with all relevant documents for becoming beneficiaries of this service.

The Process of filing an online claim for a refund involves the following steps.

Logging on to the ZATCA website
Filling in the refund request information
Approving the acknowledgement, undertaking and application submission
Receiving notification by text message
Approval or Rejection of application

The customs declaration must be on or after the 3rd of July, 2021 and goods of GCC origin must be contained in the declaration. The refund shall be made in Saudi Riyal, SAR.

Newsletter, U.A.E

UAE Tax Registrants to Benefit from a 70% Discount on Tax Penalties as the Relief Period Extends

March 1, 2022

New Cabinet Decision Issued On 30.12.2021
One Year Extension of Grace Period Granted
Taxpayers to Benefit from 70% Discount on Penalties

Following a new Cabinet Decision No 108/2021, article 3 dated 30.12.2001, on Administrative Penalties for Violation of Tax Laws; the UAE Federal Tax Authority (FTA) has clarified to the taxpayers to benefit from the extended one year grace period for re-determination of administrative penalties on violation of tax laws until 31.12.2022. The earlier deadline as per Cabinet Decision No 49/2021 was 28.06.2021 and this new decision would make the amount of the total unpaid penalties outstanding until 28th June 2021 equal to 30% of such unsettled penalties, subject to fulfilling the conditions set by the Cabinet Decision.

In effect, the new Cabinet Decision should be seen as a replacement of the third Article of Cabinet Decision No. 49/2021 to provide an extended grace period for registrants to settle the outstanding payable taxes along with the 30% of administrative penalties up until 31 December 2022 and a 70% discount on tax penalties.

The Cabinet Decision effective from January 1st 2022, should be seen as an opportunity for businesses to benefit from the reduction of the administrative penalties, highlighted the FTA. The Cabinet Decision would reduce the burdens on business sectors and help improve their contribution to the growth of the economy of the country besides enhancing tax compliance.

Unsettled administrative penalties, not imposed before the effective date, will be reduced to 30% of the total unpaid penalties subject to meeting the below-mentioned conditions.

The unsettled penalty was imposed based on the old Cabinet Decision No. 40 of 2017
The unsettled penalty was imposed, in full, before the effective date of 28th June 2021, and
The tax registrant has met all of the following conditions

Paid the total amounts of the payable tax by 31 December 2021 with no payable tax due to the FTA. The tax authority must have received the amounts by 31 December 2021 irrespective of the tax amount being payable before or after 28 June 2021, and
Paid 30% of the unsettled administrative penalties before 28th June 2021 and no later than 31st December 2021

As per the new Cabinet Decision, FTA is responsible for determining the procedures for implementing the provisions for the re-determination of administrative penalties. FTA confirmed that administrative penalties imposed on the tax registrant will be redetermined within a maximum of 30 business days from the dates specified in the Cabinet Decision.

The review of records of some tax registrants is still underway to identify if there are eligible beneficiaries from the re-determination of administrative penalties scheme, FTA noted. The tax registrants who received notifications from FTA to provide supporting data must submit the required information urgently.

Tax Procedure Public Clarification, TAXP004 has been issued on 26 January 2022 by the FTA on redetermination of administrative penalties levied before the effective date of the Cabinet Decision No. 49 of 2021. With this new clarification, the earlier Public Clarification, TAXP002 stands replaced.

According to the new Public Clarification, FTA will again determine at the end of 2022, if the unsettled part of the administrative penalties which is 70% of the total amount of penalties originally levied, shall no longer need to be paid. The e-Services accounts of the tax registrants will be linked to this redetermination process by the FTA for accessing information.

Newsletter, U.A.E

Oman’s Budget 2022 Highlights Strong Economic Growth Optimism

February 22, 2022

Overview:
The entire global economy went haywire since the outbreak of the Covid 19 pandemic and Oman is no exception. Besides, a steep drop in revenues due to lower oil prices also posed serious fiscal challenges to the Omani government and adversely impacted the national economy. Natural calamities like tropical cyclone Shaheen causing widespread flooding in the country’s northern coast also added to the country’s economic woes.

Regardless, Oman has been on track to realize the country’s 10th Five-year Development Plan (“10th FDP) for deficit reduction objectives and achieve a surplus budget by 2025 as the government implemented a series of economic reforms in policies and measures during 2021. The introduction of VAT is the most notable that would help supply the state exchequer to address fiscal deficit issues, diversify the non-oil economy and enhance the nation’s competitiveness and sovereign rating.

“The policies and measures implemented by the Sultanate of Oman recently have begun to show results,” highlighted Dr Saeed bin Saqri, the Minister of Economy. The government has made huge changes to the business, legal, and tax frameworks in the country for continued economic development through fiscal sustainability & economic diversification.

As per the report of the Ministry of Economy, the country is optimistic about an accelerating economy during 2022 and expects to register 5.8% overall growth. The steadily recovering investment climate in the country also suggests continued economic growth during the years of the 10th FDP.

The Fitch ratings, a global leading provider of credit ratings, commentary and research, recently revised Oman’s economic outlook from negative to stable on the back of the government’s commendable progress with implementation of its medium-term fiscal plan (MTFP) for balanced and surplus budgets and lower debt to GDP ratios leading towards reduced risks of defaults.

Standards and Poor (S&P) also forecasted the country’s economic growth to accelerate during 2022 on the back of higher global oil prices, increased oil and gas production and a growing non-oil economy. It also revised Oman’s economic outlook from stable to positive.

“We expect Oman’s real GDP to grow by 1.7 per cent this year and then accelerate to 3.1 per cent on average in 2022-2023 as oil and gas production ramps up after OPEC production limits are eased,” S&P highlighted in a research update released during last October. The growth in the non-oil economy would be mainly driven by the logistics, fisheries, agriculture, tourism and manufacturing sectors.

As the country witnessed economic normalization due to the lifting and easing of Covid-19 related restrictive protocols and boosting up of vaccination drive with almost 84% population double vaccinated, the non-oil revenue during January to October 2021 grew almost 40% Year on Year (YOY) primarily led by the introduction of VAT in April.

Budget 2022
Oman’s 2022 State Budget (RD 1/2022) was approved by His Majesty Sultan Haitham bin Tarik on 1st January 2022 through a Royal Decree and was officially published on 2 January in the State Gazette. The nation’s General Budget was documented based on Oman Vision 2040 and the 10th FDP and in close alignment with the objectives of medium and long-term plans and objectives of fiscal policy measures. The budget deficit projected was the minimum in the last 11 years, OMR 1.5 billion and down 32% YOY.

The revenue growth sharply outpaced the growth in state spending and the government mostly maintained spending on basic services like health, education and social welfare. Any additional revenue accrued from higher oil prices than that very conservatively assumed will be used to lower fiscal deficit and loan repayment, as per the budget highlights.

The Ministry of Finance (MOF) emphasized in its budget report saying, “The State’s General Budget for the financial year 2022 is consistent with the objectives of the Tenth Five Year Development Plan.” It also said, “The 2022 budget aims to achieve a set of economic and social development objectives.”

The budget outlined the economic and social guidance for 2022 and was centred on nine measures including sustainable levels of public spending; improving non-oil revenue contributions; prioritising projects involving the productive sectors; distributing government subsidies to low-income households for demand generation; maintaining spending on basic services; enhancing digital transformation; continuing improved sovereign credit ratings to boost up investor confidence; support training programmes and those linked to job schemes, while boosting job creation; and extending all necessary support for small and medium enterprises for doing business in Oman.

Oman 2022 budget projected total revenue OMR 10.6 billion while the projected expenditure was OMR 12.1 billion with a projected deficit of OMR 1.5 billion. The 32% lower fiscal deficit is primarily due to higher oil and gas receipts.

The MOF said that a cautious approach was taken and the budget was estimated based on an oil price of USD 50 per barrel. The government has considered the ongoing uncertainty of the global oil prices because of the new Covid-19 variants such as Omicron.

International institutions including the International Energy Agency (IEA), the International Monetary Fund (IMF) and credit rating agencies (Fitch, Moody’s, Standard & Poor’s, and other global agencies) however forecasted the average oil price to be hovering between USD 53 and USD 84. The budget estimated an increase in revenue by 23% to OMR 10.6 billion against OMR 8.6 billion in 2021.

The Takeaway
In all likelihood, Oman is set to witness higher economic growth this year in the light of a better and stronger performance of its hydrocarbon sector with improved natural gas production and higher crude oil output. Besides, the continued structural reforms by the government are expected to bolster foreign direct investment through new company formation in Oman.

The second half of FY 2021 witnessed higher growth momentum as increased revenue contributions came in from the non-oil sector due to the easing of Covid-19-related restrictions and VAT and excise tax implementation. The economic stimulus package announced during late November also supported the economic turnaround on the back of improved domestic demand. As revenue generation increased sequentially supporting government coffers, the estimated fiscal deficit narrowed sharply by more than 70% by the end of 2021 as against 2020.

Last but not least, the Omani government’s recent announcements of several projects towards fueling the digital transformation drive, improving fiscal performance management and enhancing SMEs and startups in the private sector will aid in achieving all-around economic prosperity.

Newsletter, U.A.E

RAKEZ Unveils Dual Licensing Structure to Woo Investors

February 8, 2022

In an attempt to uphold its position as one of the most business-friendly and innovative UAE free zones, Ras Al Khaimah free zone (RAKEZ) has rolled out Dual Licensing in January 2022 after introducing a women entrepreneurship package and gaming license programme. The newly announced licensing structure is strategically designed to attract more foreign investment in the country through new company formation in Dubai UAE.

The Group CEO of RAKEZ, Ramy Jallad noted, “We are always keen to provide our clients with the best solutions. We launched the Dual Licence structure for this very reason – to offer them the best of both free zone and mainland benefits, all without the need to incorporate a separate company. This package opens up a new market for their business, and substantially expands their accessibility and reach; all whilst reducing the red-tape requirements of the past.”

Dr Abdulrahman Alshayeb Alnaqbi, Director General of RAK DED, remarked, “We are pleased to collaborate with RAKEZ on yet another great initiative for the benefit of global investors who chose Ras Al Khaimah to base their operations. We will continue to work together to further elevate Ras Al Khaimah’s investment landscape and make it even more welcoming and dynamic than it is today.”

Dual License, launched in collaboration with Ras Al Khaimah Department of Economic Development (RAK DED) will allow investors to operate in both mainland and free zones from one office without requiring an additional mainland facility. This is a cost-effective business solution and will grant investors 100% foreign ownership including bidding rights for government contracts.

RAK DED is the authorized entity responsible for issuing licenses for Ras Al Khaimah mainland companies. It will issue a trade license to the free zone companies that wish to extend their activities in the mainland and make products and services offerings. A company holding a Dual license will be recognized as a ‘Branch of a free zone company’ with a legal identity as its parent company. The scope of business activities of the mainland branch should be similar to that of its parent entity in the free zone.

UAE mandates all mainland companies to have a physical office for opening bank accounts. A trade license is only issued on submitting the lease agreement to the respective DEDs of each emirate and after banks verify the physical office address for approving bank account opening. A free zone company in RAKEZ holding a Dual license can however start a mainland branch without any physical office space in the mainland and can carry out business activities on the mainland from its office in the free zone.

The Dual license has come as a ‘new year present’ offering considerable benefits to the investors. Once a RAKEZ Dual License is obtained, free zone companies can have wider access to the mainland customers to distribute products and offer services. As per rule, free zone companies are only allowed to conduct business activities within the free zone premises.

The dual license helps companies to avoid additional cost burdens on mainland office rentals and maintenance and provides complete access to the mainland without paying any such fixed costs and overheads. Daily operational costs are also avoided as there is no need for separate administrative and accounting setups.

RAKEZ Dual License however puts some restrictions on the business activities and only allows activities permitted by RAKEZ and RAK DED. Activities falling outside its domain and requiring ministerial approval are not allowed.

With the introduction of the Dual Licensing, the entire landscape of business setup in Dubai free zone and UAE has been completely transformed offering tremendous cost benefits to foreign investors. However, before opting for this license entrepreneurs and investors must carefully consider the restricted activities and seek the advice of corporate service providers based in Dubai UAE.

GCC, Newsletter

Economic Recovery in GCC will Gather Momentum During 2022: Economists Suggest

February 8, 2022

Economists believe that the GCC economies are all set to achieve higher and stronger economic growth in 2022 on the back of higher oil prices and the expansion of their non-oil sector. These two factors will primarily inject increased growth momentum in their economies through higher public financing and improved demand and employment generation.

Fiscal policy changes are playing a pivotal role in faster economic recovery in some countries through fiscal balancing and increased public financing and investments. VAT has been introduced in Saudi Arabia, Oman and Bahrain.

As per IMF forecast, the GCC as a whole will come back to a fiscal balance in 2023, for the first time since 2014. Oman has already reported the lowest budget deficit this year as a result of significant reforms besides higher oil prices.

Most of the sectors besides tourism, hospitality and transportation registered stronger recovery and were seen largely back to pre-covid level and in most of the countries. Saudi Arabia’s non-oil GDP also succeeded in exceeding its pre-pandemic level during last year. The financial services sector boomed across the region due to higher and easy liquidity and reduced risks of defaults due to government intervention.

Many GCC countries have been at the forefront to take rapid and timely mitigation measures against the covid 19 pandemic and UAE, Bahrain and Qatar are among the highest globally in rolling out of vaccines. Stringent government policies on mobility restrictions also supported the GCC nations in their fight against the virus to protect the economy.

Inflation is often a barrier to stronger economic growth prospects and though a major concern globally, does not appear to be too much of a concern for the GCC nations during 2022.

The UAE, Saudi Arabia and other countries in the GCC have also provided economic support through various initiatives and stimulus packages besides implementing strategic structural reforms and reducing budget deficits.

Emirates NBD, one of the leading banks in Dubai and UAE in its report said, “We expect this approach to continue in 2022. Saudi Arabia, the region’s largest economy, has pencilled in a 6 per cent decline in spending in the 2022 budget even as revenue projections were increased.”

“With Brent oil forecast to average just under $70 per barrel in 2022 and GCC oil production expected to rise, we expect Saudi Arabia, the UAE and Qatar to post budget surpluses this year, while Oman and Bahrain are likely to see their budget deficits narrow further,”

As per the Chief Economist of Emirates NBD, the Gulf economies are projected to grow 5.1% on average this year after recovering to 2.3% in 2021 from a 4.9% contraction during the previous year when the pandemic started.

“The recovery in the GCC economies gained momentum in the second half of 2021 as travel restrictions eased, tourism rebounded and domestic demand strengthened,” the report from Emirates NBD highlighted.

Newsletter, Saudi Arabia

USD 3 Trillion of Investment Target into The Kingdom Over Nine Years: Saudi Investment Minister Says

February 8, 2022

Saudi Arabia is planning to attract $3 trillion of investment into the country’s economy over the next nine years as part of the National Investment Strategy (NIS) to drive economic growth and sustainable development. The Public Investment Fund including other global and local firms will play the most valuable role. The investment minister recently remarked.

In his address during Riyadh Future Minerals Forum on 13th January 2022, Investment Minister Khalid Al Falih said, “The kingdom is striving to be ‘the most investor-friendly destination and increase the participation of the private sector to ‘our large and growing economy, to 65 per cent.”

To promote investment contribution to the GDP, the Kingdom is planning for a global best in class investment law to attract more domestic and foreign investors for doing business in Saudi Arabia. The new law shall address the needs of both local and foreign investors. “It will be a global best-in-class law, it will be enacted this year, sooner than later,” the Minister highlighted.

Commenting on the crucial role the international investors play to support the country’s economic growth by establishing their business setup in Saudi Arabia, Mr Al Falih emphasized, “not only bring in the capital but bring in that know-how and best practices which benefit Saudi partners and the economy.”

To complement Saudi Vision 2030, the Kingdom of Saudi Arabia, the largest economy in the Arab world is steadily diversifying from an oil-based to the non-oil economy and is developing projects across key priority sectors including real estate, petrochemicals, manufacturing, transport and hospitality to drive investment and enhance demand and employment generation.

His Royal Highness Crown Prince Mohammed bin Salman noted last year that the Public Investment Fund is making huge investments infusing billions of dollars into the country’s economy to drive growth. USD 40 billion fund injection has been planned yearly during 2021 and 2022, HRH Crown Prince highlighted.

The Investment Minister added, “The kingdom will be – in terms of its regulatory system and judicial system – one of the best places to do business. We are already good by the way international investors and domestic investors have been finding investing in the kingdom to be stable, predictable and secure, but we are not happy with being very good and we want to be the best. And we believe that our regulations and reforms are taking us in that direction.”

The Kingdom witnessed higher FDI flow into its economy in recent times as also revealed by the issuance of new foreign investor license data registering the highest number of 478 new licenses during the first quarter of the previous year since 2005.

The NIS includes many initiatives including the expansion of the country’s railway network and plans to increase it with 8000 Kms of the new track thus tripling the sizing of the existing network. The investment minister informed.

“New rail will criss-cross the Kingdom and add to the network we already have,” Khalid Al-Falih told the Future Minerals Forum in Riyadh.

There is approximately 3,650 km of track on the Saudi rail network presently and it also plans to build more internal railway networks to jump-start its investment in the infrastructure sector, highlighted the Minister.

To realize Saudi Vision 2030 several socio-economic structural reforms have been rolled out in the Kingdom and approval of new privatisation and agriculture laws including a new mining law in January 2021 feature amongst them.

Newsletter, Singapore

Singapore Private Trust Companies: An Ideal Structure for Asset Protection and Succession Planning of Family Businesses

February 8, 2022

Family businesses play the most pivotal role in the Asian economy and almost 85% of the companies in the Asia Pacific region are owned by family groups. Moreover, more than 20% of the top 750 global family businesses ranked by revenue are based in Asia with total revenue of approximately USD 2 trillion.

Trusts, unlike companies and not being a legal entity, have provided an effective structure for holding valuable assets for the beneficiaries and transitioning from the settlor to the trustee like a family business, for a long time. The absence of rigid formal requirements for the creation and operation of trusts, and the high flexibility of trust structures, make them particularly useful for estate and succession planning.

Trusts are being used for holding and passing on family wealth for centuries and providing great advantages of asset protection and disposal of family assets without lengthy probate procedure. Such trusts when combined with a Singapore Private Trust Company (PTC) provide a structure for enabling founders to take continued rapid commercial decisions about their business effectively without sacrificing the validity of the trusts. These private trust companies commonly known as family trust companies form the foundation of the Singapore family office.

If the settlor is willing the board of the PTC can consist of the settlor, members of his family and professional trusted advisors and the settlor and his family members have direct involvement in the decision making processes. A Singapore PTC vehicle thus allows members of succeeding generations of the family to be involved in the management of the PTC providing Management succession planning.

To avoid personal ownership issues, a Purpose Trust is often used to create an entity with no individual owning the structure. Typically, a separate non-charitable purpose trust is used, with the purpose of the trust being to hold the shares of the PTC and especially when control and confidentiality are concerned. The benefit offered is that the Trust can then be used to ensure the board of the PTC is properly controlled. This trust type is formed to hold assets for a purpose and without providing a benefit to any specific individual.

Though Singapore does not have legislation allowing non-charitable purpose trusts, it is possible for the shares in a Singapore PTC to be held by a trust in another jurisdiction with appropriate provisions for the non-charitable purpose trusts formation.

PTC can also hold other assets, such as real estate, private equity and hedge funds appropriate for the family and diversify to optimize assets as and when necessary. As PTCs have no motive for profit-making with no conflicts of interest, the entity can reduce costs of trust administration while ensuring the needed risk management as per the risk appetite of the family. PTC structure with high liquid assets can also invest in and facilitate the best Singapore company incorporation.

There is often slowness or reluctance on the part of the Independent professional trustees in approving certain assets for holding or entering into major transactions or Singapore PTC however provides greater choice to determine investments to be made with the trust fund based on knowledge of family members acting as members of the board.

Continuity of business is assured with a Singapore PTC because even if the administrator changes, PTC remains as a trustee.

In Singapore, the ownership of Singapore companies and PTCs are publicly available on the company register. However, certain confidentiality is maintained and ownership information about trusts is generally not available. A Singapore PTC owned by a purpose trust in a jurisdiction allowing a non-charitable purpose trust structure will maintain confidentiality about the owners of the PTC and the asset holdings of the trust.

As several family businesses in Singapore are focusing on leadership succession, besides wealth succession, a Singapore PTC structure can be beneficial as it familiarizes the family members with the wealth and business interests owned by the trust and provides appropriate instructions to the members in managing such assets.

The island nation with its current trust law and trusted legal system, world-class infrastructure, high level of digitization, openness to foreign talent, attractive tax regime and political stability has come up as a global hub for corporate and financial services activities. The city-state now has become home to many sophisticated wealth management entities including the Single Family Office in Singapore.

India, Newsletter

Omicron Won’t Derail Economic Growth and Job Prospects: Says RBI

February 8, 2022

Narrating the recent Omicron surge as “a flash flood than a wave”, the Reserve Bank of India’s (RBI) report claimed the country’s economy to be on strong footing despite the rapid surge of new and more transmissible covid 19 cases. The near term economic prospects remain unaffected, reported RBI.

“On the vaccination front, India has made rapid strides. On the Omicron variant, the recent data from the UK and South Africa suggest that such infections are 66 to 80% less severe, with a lower need for hospitalisation,” the recently published RBI Bulletin noted.

Community Mobility indicators revealed that in January 2022, the public movement dropped in some cities but was higher compared to covid 2nd wave and remained above its pre-pandemic level. There has been an increase in electricity generation which reached pre-pandemic levels, RBI said.

As the new year 2022 arrived, covid recovery in India faced headwinds as in the rest of global economies due to a rapid surge of Omicron cases. However, business and consumer confidence haven’t been dented that severely and acted as the silver lining for the nation’s economy, RBI highlighted.

The RBI said that the trajectory of Omicron, the new Covid-19 variant, is on a declining mode and the average demand conditions look strong and resilient with consumer and business confidence remaining upbeat including an increase in aggregate bank credit levels for doing business in India.

“Nonetheless, amidst upbeat consumer and business confidence and an uptick in bank credit, aggregate demand conditions stay resilient, while on the supply front, rabi sowing has exceeded last year’s level and the normal acreage,” the RBI reported.

The RBI report mentioned that reduction in inflation may not fade away too quickly and it is being monitored closely. There are signs of improvement as supply chain disruptions are slowly easing and burgeoning shipping costs are steadily reducing, RBI said.

There are signs of recovery and expansion in manufacturing and several categories of service sectors, India’s Central Bank reported. It also highlighted saying, “Overall economic activity in India remains strong, with upbeat consumer and business confidence and upticks in several incoming high-frequency indicators.”

The RBI re-emphasized that the new covid variant caused much less hospitalization and sounded optimistic on the near-term economic prospects and financial markets. India’s digital payment ecosystem is also in rapid expansion mode as opposed to a clouded and uncertain global economic outlook. “Inflation continues to mount across geographies amidst disruptions in production, supply chains and transportation,” the report mentioned.

There are widening differences observed in monetary policy stances of different countries due to economic uncertainty caused by higher inflation, disruptions in production, supply chain and transportation, the RBI noted. On the positive side, this also opens a window of opportunity to mobilize all resources on enhancing the global recovery, it added.

As per the Commerce and Industry Ministry report, India has registered the highest-ever annual FDI inflow of USD 81.97 billion during FY21 as several foreign investors preferred company formation in India.

Newsletter, Saudi Arabia

Riyadh Strategy 2030 to be Set in Motion In 2022: Saudi Press Agency Reports

February 8, 2022

As reported by the Saudi Press Agency (SPA), the board of directors of the Royal Commission for Riyadh City (RCRC) convened a board meeting on 27th December 2021 to review Riyadh Strategy 2030 in light of the preparedness for its launch and decided to delay the launch of the 2030 strategy for the Kingdom’s capital due to the mammoth work involved and some of the key elements remained to be addressed.

His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince, Deputy Prime Minister, and Chairman of the Board of Directors of the RCRC chaired the meeting.

The strategy for the Kingdom’s capital is to be put in motion during 2022 and further announcements would be made accordingly, the report cited. The Riyadh strategy 2030 to transform Saudi’s capital into one of the world’s top city economies was seen entering the final phase of implementation as the Saudi Crown Prince directed government officials to keep working on the executive plans of the strategy and directed all national and city-level government institutions to conclude the implementation of plans of the strategy before its launch, reported SPA.

As per the report, all government entities would be working closely with the RCRC and would present detailed plans and documentation of the initiatives and projects relevant to their respective sectors. Before setting the strategy in motion, detailed budgets would be proposed and responsibilities defined for ensuring a robust, integrated and full proof governance framework for implementing the strategy. The Crown Prince deliberated unveiling of a more detailed strategy soon.

Businesses willing to expand their operations through company formation in Saudi Arabia need to be in close touch with the RCRC, the entity responsible for implementing the Riyadh strategy, to explore and unlock potential partnership deals.

Prince Mohammed noted during the recently held Future Investment Initiative (FII) conference from 27-28 January emphasizing that the Riyadh Strategy will transform the capital into one of the world’s top ten city economies that would double its population to 15–20 million people. The strategy will also increase the number of visitors to more than 40 million by 2030, he also highlighted.

Built on six main pillars, Riyadh Strategy 2030 includes national human capital development and attracting best foreign talents, economic growth across various sectors, improvement of quality of life of its citizens, word-class measures for improving spatial impacts on urbanisation, effective governance and best utilization of resources of the city, and global branding for improving the city’s competitiveness, the SPA report revealed.

26 sectoral programmes will take the strategy implementation to fruition and include over 100 initiatives and 700 pioneer projects across various sectors. The initiatives and projects will cover different parts of the city and help transform Riyadh into one of the best cities globally to live in.

During the implementation phase, RCRC will monitor and measure more than 50 performance benchmark indicators, based on global leading cities, the SPA report highlighted.

As Riyadh Vision solidifies, foreign companies considering doing business in Saudi Arabia need to get proactively associated with the RCRC that can help address any future regulatory issues.

Newsletter, U.A.E

UAE to Introduce Federal Corporate Tax from June 2023

February 3, 2022

On January 31, 2022, the Ministry of Finance announced that the United Arab Emirates (UAE) will introduce a Federal Corporate Tax on business profits effective from June 1, 2023. The new tax regime has been introduced with the aim to incorporate best practices globally and minimize the compliance burden on businesses.

The statement mentions that the tax will be levied on all corporations and commercial activities in the UAE with a few exceptions. The new regime implies a standard statutory tax rate of 9% for taxable income exceeding 375,000 UAE dirhams ($102,000). Furthermore, to promote the growth of small businesses and start-ups, there will be a 0% tax rate for taxable income up to 375,000 UAE dirhams ($102,107.50). Having said that, the legislation is yet to be issued and the details for the corporate tax regime are subject to finalization.

The announcement brings a significant shift for a nation that’s long attracted businesses from around the globe because of its status as a tax-free commerce hub.

IMC Group has summarised the key aspects of the announcement which are as follows:

Corporate tax will be payable on the profits of UAE businesses as reported in their financial statements prepared in accordance with international accounting standards, with minimal exceptions and adjustments. The corporate tax will be applicable to all persons including individuals and legal persons undertaking business activities under a commercial license in the UAE. It also includes entities operating in the banking sector.

Entities subject to corporate tax are allowed to carry forward excess losses and utilize them as of the effective date.

The corporate tax will be applicable to all businesses and commercial activities with the following two exceptions:

Entities engaged in the extraction of natural resources will be exempt and will remain subject to taxation at the Emirate level.
Entities operating in free zones without any business conduct with mainland UAE will continue to receive tax incentives on complying with all the regulatory requirements. However, they would be required to register and file a corporate tax return.

Other key elements of the announcement

Foreign investors who do not carry on business in the UAE will not be subject to corporate tax.

There are no withholding taxes on domestic and cross-border payments.

UAE businesses will be exempt from paying tax on capital gains and dividends received from their qualifying shareholdings.

Corporate tax will not apply to qualifying intra-group transactions and reorganizations.

In order to give relief from double taxation, foreign taxes will be allowed to be credited against UAE corporate tax payable.

The corporate tax regime provides generous loss utilization rules and will allow UAE groups to be taxed as a single entity provided certain conditions are met or to apply group relief in respect of losses and intragroup transactions and restructurings. Besides, businesses will not be required to make advance tax payments or prepare provisional tax returns.

Transfer pricing and documentation requirements will apply to UAE businesses with reference to the OECD Transfer Pricing Guidelines.

Key takeaways

The introduction of the new corporate tax regime is bound to help UAE achieve its strategic ambitions and incentivise businesses to establish and expand their activities in the country. The move is expected to bring UAE in line with other competitive economies around the world.

However, the potential implications can be far-reaching. But for now, the tax and finance teams need to focus on developing a roadmap to prepare for the implementation of corporate tax. For that, it is imperative to get a deeper and thorough understanding of the rule and laws pertaining to corporate tax in order to completely assess the implementation plan. This might require many structural and organizational changes such as a change in legal structure, tax function, business model, accounting, contracting and transfer pricing, etc. Our tax experts at IMC Group can help you assess the potential impact of corporate tax in the UAE and how it may affect your business. As a part of our services, we can assist you with the following:

Access the qualitative impact and perform readiness assessment covering systems, governance and technical aspects
Access the quantitative impact and perform modeling work
Offer knowledge sharing and conduct training for your in-house tax and finance teams
Offer implementation support with respect to tax, accounting and systems perspectives.

There will be further announcements from the Ministry of Finance toward the middle of the year to help businesses prepare for the introduction of corporate tax and become fully compliant.

Keep watching this space for more updates on corporate tax in the UAE.

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