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DUBAI | ABU DHABI | RAS AL KHAIMAH
Tax authorities worldwide have placed greater emphasis on implementing measures related to Base Erosion and Profit Shifting (BEPS), disclosure requirements such as DAC6 and CBC reporting, as well as taxation of digital business models. This has made it increasingly challenging for multinational companies to navigate the constantly evolving tax regulations and administrative obligations throughout all stages of a cross-border project or activity. It is important to consider the relevant tax regulations and administrative requirements, along with associated costs, during the project offer phase, as they may impact the structure and execution of the project, whether it is a short-term or long-term venture.
To remain competitive in today's market, organizations must have a tax strategy that is flexible and aligns with their corporate objectives. This involves establishing strong policies for cross-border operations, complying with local statutory and reporting requirements, and planning for an effective tax rate to achieve efficiencies that align with the company's risk profile.
We support in identifying the tax implications and other impacts of cross-border projects, as well as assist clients in structuring their activities in the most cost-effective way to minimize tax expenses and risk exposure.
We advise clients to factor in the relevant tax considerations early in the project planning phase, and integrate them into their financial calculations. In addition, we can provide support during contract negotiations or reviews, specifically related to tax clauses and other tax-relevant aspects of contracts.
Here are some of the concerns that company management might have with regard to a cross-border project or activity:
- What is the optimal structure for operating companies and where should the holding company be situated, taking into account factors such as tax efficiency, sustainability, and how to be attractive to foreign investors in the future?
- What are the regulations for tax residency and substance in a specific jurisdiction?
- Are there any risks of creating a deemed permanent establishment in a jurisdiction?
- What are the tax costs and benefits of entering into a new market?
- What are the tax, accounting and regulatory requirements?
- How should the operations be financed in a tax efficient way?
- Are there any tax incentives available if the operations are established in a particular jurisdiction?
- What is the impact to the effective global tax rate considering a foreign subsidiary's local income tax, foreign withholding taxes and the foreign tax credit in home country?
Tax professionals of BOT-APT have advised clients on the following areas to help them navigate the complex global tax environment:
- Managing intricacies of multiple tax laws and regulations
- Analysis of country-specific and permanent establishment tax implications
- International group restructuring
- Support in international tax reporting and global compliance management
- Group Tax Health checks
- Strategic planning for global capital structure, including efficient cross-border finance, repatriation, and cash access
- Evaluation of withholding tax implications for cross-border transactions
- Development of entry and exit strategies
- Support for transfer pricing planning and documentation requirements
- Transaction Structuring
- Transaction Advisory
- Withholding Tax Advisory
- Tax Treaty Interpretation and Advisory
- AML Advisory
Economic Substance Advisory
The UAE issued Cabinet of Ministers Resolution No. 31 of 2019 on April 30, 2019, to tackle the Council of the European Union's observations and avoid potential exclusion from the EU's list of non-cooperative tax jurisdictions. The resolution outlines economic substance regulations, and subsequent clarification was provided through Ministerial Decision No. 215 of 2019.
The introduction of economic substance regulations in the UAE has led to increased compliance obligations for entities that engage in certain "Relevant Activities" within the country. These entities must now report their compliance with the regulations, which involve meeting tests related to state core income generation, direction and management, personnel, assets, premises, and expenditure in the UAE, on an annual basis. Failure to demonstrate economic substance could result in penalties and even license revocation in cases of repeated non-compliance. As a result, affected entities must assess their need to meet substance requirements and consider restructuring their operations accordingly.
- Assess group structure to evaluate the relevance of economic substance regulations.
- Conduct a gap analysis to determine the current level of compliance with the requirements, which may involve a review of contracts, asset details, expenditure, and employees deployed in the UAE, as well as evidence of direction and management in the UAE.
- Identify remedial options, such as injecting additional substance or restructuring the entity's business, operations, or holdings, to comply with the regulations.
- Develop policies for entities to meet the economic substance tests.
- Prepare and submit annual notification requirements for entities authorized to perform a 'Relevant Activity' in the UAE.
- Prepare and submit economic substance reports for entities carrying out Relevant Activities in the UAE and earning income from them.
- Conduct training sessions to educate staff on the requirements.