Deloitte: Transfer pricing and BEPS to impact multinational groups operating in Saudi Arabia

Tax reform in the Gulf Cooperation Council (GCC) region is a matter of when, not if, and Saudi Arabia is not immune. The Kingdom, one of the leading economies in the region, and a member of the G20, is committed to the Base Erosion and Profit Shifting (BEPS) initiative and Organization for Economic Cooperation and Development (OECD) action plan. Measures are currently on foot for a reform of its taxation system with the proposed introduction of formal transfer pricing rules and other changes to the tax system such as the potential introduction of Value Added Tax (VAT) along with other GCC countries.

These were some of the many topics discussed at the recent Deloitte Saudi Arabian Income Tax & Zakat seminar in Al-Khobar, Jeddah and Riyadh, held annually. The seminars were attended by over 300 regional heads of tax, finance directors, CFOs, bankers and lawyers.

Deloitte speakers included transfer pricing specialists who detailed the impact that transfer pricing and BEPS will have on multinational groups operating in Saudi Arabia and other Saudi entities with cross border transactions.

The Deloitte seminar outlined the basics of the Saudi corporate income tax law including application of withholding taxes and capital gains tax. The seminar also covered recent changes and updates to the tax law and its by-laws with practical examples of how these impact companies doing business in Saudi Arabia. The application of Zakat on Saudi and GCC taxpayers was also discussed, including recent clarifications and circulars issued by the Department of Zakat and Income Tax and the appellate orders issued by the relevant authorities. The Deloitte speakers highlighted that formal Zakat regulations are currently being formulated by the authorities.

From an international tax perspective the seminar covered double tax treaties and the practical implications for entities when dealing with the DZIT on withholding tax and other treaty interpretation issues.

In addition to taxation issues, seminar participants also learned about the impending new Saudi Company Law (presented in conjunction with Dentons Saudi Arabia) proposed to take effect from May 2016.

Key speakers from Deloitte included Nauman Ahmed, Head of Tax for Deloitte Middle East and Saudi Arabia Tax Leader, Farhan Farouk, Senior Tax Director, Jeddah, Wissam Merhej, Senior Tax Director, Riyadh, and Adil Rao Transfer Pricing Lead for Deloitte Middle East.