Tax reform in the Gulf Cooperation Council (GCC) region is a matter of time and Saudi Arabia is not immune, according to the Deloitte statement issued Wednesday.
Saudi Arabia is committed to the Base Erosion and Profit Shifting (BEPS) initiative and Organisation for Economic Cooperation and Development (OECD) action plan.
“National tax laws have not always kept pace with global corporations, fluid movement of capital, and the rise of the digital economy, which leaves gaps and mismatches that can be exploited to generate double non-taxation,” according to the OECD website.
BEPS refers to tax planning strategies that exploit the gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.
“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,” Deloitte stated.
These were discussed at the recent Deloitte Saudi Arabian Income Tax and 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.
The Deloitte seminar outlined the basics of the Saudi corporate income tax law including application of withholding taxes and capital gains tax. Meanwhile, a report published by international consulting firm Alix Partners said that a mix of international and local financial factors could spell a difficult operating environment for GCC corporations in the upcoming period.
The report said factors included the decline in oil prices, a drop in other commodity prices, low global interest rates, a declining gross domestic product (GDP) in China, the recession in Brazil, and emerging markets. Put together, the report said these factors could lead to a “possible downturn” in GCC.