May 2017 MIDDLE EAST TAX FACTS 2017

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1 May 2017 MIDDLE EAST TAX FACTS 2017

2 CONTENTS BAHRAIN 3 EGYPT 18 JORDAN 29 KUWAIT 40 LEBANON 52 OMAN 68 QATAR 79 SAUDI ARABIA 85 U.A.E. 94

3 BAHRAIN TAX FACTS 2017 BDO 17 th Floor Diplomat Commercial Office Tower Diplomatic Area PO Box 787 Manama, Kingdom of Bahrain Tel: Fax:

4 Bahrain Tax Facts CONTENTS 05 Corporate Income Tax 06 Personal Income Tax 07 Social Insurance and Other Contributions 09 Withholding Tax 10 Other Duties and Fees 15 Bi-lateral Tax Treaties

5 Bahrain Tax Facts CORPORATE INCOME TAX CORPORATE TAX There is no corporate taxation system in Bahrain with the exception of profits arising from the extraction of petrochemical products. Corporate income tax on the profits of companies engaged in the exploration, production or refining of oil and gas in Bahrain is levied at a rate of 46%. Taxable income for oil and gas companies is on net profits, which consist of business income less business expenses. FILING REQUIREMENTS Oil and gas companies are required to file an estimated tax declaration on or before the 15th day of the third month of the tax year. Tax must be paid in 12 monthly installments. CARRY FORWARD LOSSES Taxable losses of oil and gas companies may be carried forward indefinitely. Carry back is not permitted.

6 Bahrain Tax Facts PERSONAL INCOME TAX There is no personal taxation system for income, capital gains, gifts or inheritances in Bahrain and, furthermore, no requirements to file any form of tax return.

7 Bahrain Tax Facts SOCIAL INSURANCE AND OTHER CONTRIBUTIONS SOCIAL INSURANCE Social insurance contributions are payable for Bahrainis at a rate of 18% of basic wages of which 12% is the employer's contribution and 6% is the employee contribution. The contribution payable for employing expatriate employees is 3% and is payable by employer. Unemployment insurance at a rate of 1% is also payable by both Bahrainis and expatriate employees. The base for the calculation of social insurance contributions cannot exceed BD 4,000 per month. In case the salary exceeds BD 4,000 per month, the amount of contribution will be calculated only on BD 4,000. Social insurance contributions are also payable to the Social Security Authorities in Bahrain, for any GCC national employed in Bahrain. The contribution that is payable shall be the rate which is payable by the respective GCC national in his/her respective country. In addition to the contribution payable towards the respective GCC country s social security, the contribution payable in Bahrain also needs to be paid (considering the GCC national as an expatriate employee). EXPATRIATE EMPLOYEE MONTHLY FEE Each entity that is registered with the Labour Market Regulatory Authority (LMRA) is required to pay BD 5 for the first five expatriate employees and at the rate of BD 10 for excess expatriate employees employed in Bahrain. According to Ministerial Decision No. 29/2014 a new health charges are levied as follows: The Employer is committed to pay the ministry of health against the cost of health care services the following charges: BD (72) per year for each expatriate employee. BD (22.5) per year for each Bahraini employee. Ministry of Health will collect the above amounts from LMRA when issuing or renewing work permits for expatriate employees and from Social Insurance Organization for Bahraini employees.

8 Bahrain Tax Facts SOCIAL INSURANCE AND OTHER CONTRIBUTIONS Cont d END OF SERVICE BENEFIT Expatriate employees at the completion of their employment contract are entitled to an end of service benefit which is calculated on the following basis: Fifteen days salary for every year of service for the first three years of continuous service; One month's salary for every year of service thereafter. Bahraini employees are entitled to indemnity for the salaries exceeding BD 4,000 per month as per the calculated stated above for the expatriate employees. -

9 Bahrain Tax Facts WITHHOLDING TAX There is no withholding of taxes on the repatriation of profits or dividends, royalties, license fees or group charges. However, if the investor operates in other countries in the region, the withholding tax rules in those countries will need to be taken into account in the regional business structure.

10 Bahrain Tax Facts OTHER DUTIES AND FEES TOURISM LEVY Persons using hotel facilities are normally charged a government levy of 10% and a 10% service charge is generally added to the total bill amount. VALUE ADDED TAX Bahrain has announced that as per the terms of agreement with the other GCC Member States, VAT will be introduced from the year The expected rate of tax is 5%. Certain areas like education, pharmaceuticals, basic food products etc are expected to be excluded from the purview of VAT laws. The VAT legislation is currently in its draft stages. MUNICIPAL TAX Municipal tax is payable by individuals or companies renting property in Bahrain. The rate of the tax varies according to the nature of the property, namely; unfurnished/ furnished residential or commercial property. However this is generally 10% of the monthly rental.

11 Bahrain Tax Facts OTHER DUTIES AND FEES Cont d CUSTOM DUTY There are no customs duties on trade in locally manufactured goods between Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Qatar, Saudi Arabia, Oman and the United Arab Emirates) where the local shareholding is at least 51% and value added in goods produced exceeds 40%. On all other imports, custom duties are levied at a rate of 5%, with the exception of tobacco products (100%), liquor (125%) and duty free of imports of vegetables, fruits, fresh and frozen fish, meat, books, magazine and catalogues. Restricted Illegal Drugs Weapons, explosives and ammunition Knives and deadly weapons Plant and plant products Animal and animal products Live Swine Cats, dogs and other animals without a valid permit Indian Paan and Derivatives Advertisement material for all types of Cigarettes Children s Toy Guns capable of firing projectiles Goods of Israeli origin or bearing Israeli trademarks or logos Printed publications, photographs, pictures, books, magazines sculptures and mannequins which contradict Islamic teachings, decency, or immorality Raw Ivory, Ivory articles and Rhinoceros Horn Counterfeit money and goods

12 Bahrain Tax Facts OTHER DUTIES AND FEES Cont d Pornographic material All arms, ammunition and explosives being imported into the country will require a No Objection Certificate from Ministry of the Interior. The following items will require a No Objection Certificate from Ministry of Municipalities & Agriculture Affairs - Animal or vegetable fertilizers, Meat and meat products, Fish and Seafood products, Fruit and Vegetables, plants and soil. Other food products and required medicines will need special permission from the Ministry of Health. Birds being imported will need a permit from the Veterinary Quarantine in Bahrain. Cats and dogs will also need a permit from the Veterinary authorities inside the country alongside a rabies inoculation certificate proving the animal s vaccination against the disease. Radios and broadcasting equipment entering the country will need a no objections certificate to be issued by the Telecom Regulation Authority. All antiques will need a no objection certificate from the Ministry of Information in order to leave the country.

13 Bahrain Tax Facts OTHER DUTIES AND FEES Cont d LAND REGISTRATION TAX There is a land registration fee payable to the government on the transfer of real estate property. The fee for Registration of Sales Agreement of property is as follows: From BD1 to BD70, %, with Discount 1.25%* From BD70,000 to BD120,000-2%, with Discount 1.8%* From BD120,000 and above - 3%, with Discount 2.7%* * Survey and Land Registration Bureau of the Kingdom of Bahrain offers a 10% discount calculated on the total registration fees, if the registration process begins within two month from the execution of the Registration and Sales Agreement. Fees for Sale of Property Memorandum without the Benefit Rights 1% of the Property Value Fees for Sale of Property Benefit Rights 1% of the Property Value Property Exchange Fees 3% of the Value of the Larger Property Exchanged Endowments of H.M. The King BD5 Endowments between Spouses and BD5 Relatives to the 4th Degree Endowments other than those mentioned above, provided that the value of the endowed property does not exceed BD5 BD 10,000

14 Bahrain Tax Facts OTHER DUTIES AND FEES Cont d LAND REGISTRATION TAX Cont d Endowments other than those mentioned above and the value of the endowed property exceeds BD 10,000 Registration Fee BD5 Fees for Endowments (Waqf) BD5 to Charity and Relations Bequest BD5 Property Division BD5 Mortgage BD5 Mortgage Release BD5 Replacement Ownership Documents BD5 Applying Property Border Markers BD5 Objection of Registration BD1 Copy of a Map BD1 Granting Document Access BD1 Copy of a Certificate BD1 Application Form BD1 1% of the Property Value * Survey and Land Registration Bureau of the Kingdom of Bahrain offers a 10% discount calculated on the total registration fees, if the registration process begins within two month from the execution of the Sales Agreement.

15 Bahrain Tax Facts BI-LATERAL TAX TREATIES With the object of strengthening and developing economic relations on a regular basis, and for the creation of favorable conditions to attract foreign investments, the Kingdom of Bahrain has signed with a number of countries four types of agreements which are classified as follows: No. Subject/Type of the Agreement Description 1 Promotion And Protection Of Investments 2 The Avoidance Of Double Taxation And The Prevention Of Fiscal Evasion With Respect To Taxes on Income 3 Reciprocal Exemption With Respect To Taxes On Income Arising From The Business Of International Air Transport 4 Economic, Trade, And Technical Co-operation These agreements aim to promote and protect the investments of the nationals and enterprises of one contracting party in the territory of the other contracting party by providing an appropriate legislative environment to stimulate and increase investment, trade and industrial activity. The Agreement also provides adequate guarantees to nationals or enterprises of the other contracting party to transfer their profits, dividends and other current income. The investments will not be subject to expropriation except for a public purpose and against prompt and adequate compensation This agreement aim primarily to eliminate the double payment of taxes by nationals and enterprises of a Contracting State in the territory of the other. It also aims to create an appropriate economic environment to attract capital between the two contracting parties. These Agreement aim to establish a reciprocal exemption from taxes on income, profits and gains derived from the operation of aircraft in international traffic and custom duties on equipments and materials imported by the air transport enterprises of the two contracting parties. These Agreement aim to develop economic, trade and technical co-operation in accordance with the laws of each contracting party and create appropriate conditions to develop co-operation on the basis of reciprocal interests. This allows the free inflow of goods, capital, and services and the free movement of individuals and investments between the two contracting parties.

16 Bahrain Tax Facts BI-LATERAL TAX TREATIES Cont d THE CURRENT STATUS OF BILATERAL AGREEMENTS: - The number of bilateral agreements (Double Taxation Agreements and Agreements for the Promotion and Protection of Investments) which were signed and entered into force is The number of Memorandum of Understanding which were signed and entered into force on Economic, Trade, and Technical Cooperation is 32. Bahrain has signed agreements that aim primarily to eliminate the double payment of taxes by nationals and enterprises of a Contracting State in the territory of the other. It also aims to create an appropriate economic environment to attract capital between the two contracting parties with the following countries: Algeria, Austria, Belarus, Belgium, Bermuda, Brunei, Bulgaria, China, Czech Republic, Egypt, Estonia, France, Georgia, Isle of Man, Iran, Ireland, Jordan, Lebanon, Luxembourg, Malaysia, Malta, Mexico, Morocco, Netherlands, Pakistan, Philippines, Seychelles, Singapore, South Korea, Sri Lanka, Sudan, Syria, Thailand, Turkey, Turkmenistan, Uzbekistan, United Kingdom and Yemen. Note: Some of the above treaties are not yet in force. Bahrain has an inheritance tax treaty with France. In addition, a US-Bahrain Free Trade Agreement (FTA) has been entered into between the two countries. This agreement gives customs duty exemption to all US industrial and agricultural products. Particulars of the Tariff Elimination as explained in the FTA are as follows: The Agreement provides for the elimination of all customs duties on originating goods no later than 10 years following the entry of the FTA into force. The Agreement is comprehensive and covers all tariff lines. When the FTA became effective, 96% of Bahrain industrial and agricultural products gained duty-free access to the United States markets. Tariffs on the remaining products, which are not currently produced in Bahrain, have been phased-out according to the following staging categories:

17 Bahrain Tax Facts BI-LATERAL TAX TREATIES Cont d Category A: Immediate duty-free access (96% of industrial and agricultural products). Category B: Duties will be eliminated in 10 equal annual stages (1% of industrial and agricultural products). Category C: Goods that are already duty free and will continue to receive duty-free treatment. Category D: Duties will be eliminated in 5 equal annual stages (3% of industrial and agricultural products). Bahrain is to provide immediate duty-free access on all US industrial and agricultural products, except 80 products on which the duties will be phased-out over 10 years.

18 EGYPT TAX FACTS 2017 BDO Egypt Consulting Ltd. 1, Wadi El Nile St., Mohandessin, Giza Cairo. Egypt P.O.Box.: 110/12655 Tel: Fax:

19 Egypt Tax Facts CONTENTS 20 Corporate Income Tax 22 Salary Tax 24 Social Insurance 25 Value Added Tax ( VAT) 27 Stamp Tax 28 Withholding Tax on Local Transactions

20 Egypt Tax Facts CORPORATE INCOME TAX RATES OF CORPORATE TAX In general, the standard rate of corporate tax is 22.5% applied to the company s taxable profits; starting the fiscal year Capital gains generated are considered as part of the company s taxable income. However, capital gains generated from sale of publicly listed shares on the Egyptian Stock Exchanges, are subject to 10% Capital gain tax, rather than corporate tax rates. However, the application of the Capital gain tax from listed shares had been temporarily exempted for two years starting from 17 May Also, please note that a decision has been made lately (1 November 2016) by the Supreme Council for Investment for further postponing the execution of this tax for another 3 years, bearing in mind that a law for such decision had not yet been issued. THE CORPORATE TAX YEAR The rate of corporate tax is fixed in respect of the corporate tax year or the financial year. The company has the right to choose the date of year-end to issue its annual financial statements, regardless of the calendar year. Each year has to be accounted for separately. The first year is to start from the date of incorporation to the end of the following financial year (long period). DEDUCTIBLE EXPENSES The general rule is that only expenses that are wholly and exclusively incurred in earning the income of the business are deductible. The cost and expenses have to be supported by proper documents. ACCOUNTING METHODS AND BUSINESS PROFITS A company s taxable income is based on its accounting profits, computed according to the Egyptian Accounting Standards, which is, to a great extent, compliant with the International Financial Reporting Standards (IFRS), while taking into consideration that the taxable net profit should be computed based on actual revenues and costs. FILING REQUIREMENTS The corporate tax return must be filed along with all supporting documents (e.g. Audited financial statements), within four months from the accounting year end, e.g. 30 April, for 31 December year-end.

21 Egypt Tax Facts CORPORATE INCOME TAX Cont d CARRY FORWARD LOSSES In General, losses (on a year by year basis) are carried forward for deduction from subsequent profits for up to five years. DIVIDENDS Dividends distributed are currently subject to taxes. For Shareholders owning more than 25% of company s shares, the dividends they receive will be subject to 5% dividends tax, while shareholders owning 25% or less of shares will be subject to 10% dividends tax. PAYMENT TO NON-RESIDENTS The amounts paid to foreign entities against services rendered, are subject to withholding tax at a rate of 20%, even if it is paid to an entity that is resident of a country that has a double tax treaty with Egypt. It is the overseas recipient's responsibility to apply to the Egyptian Tax Authority for refunding the balance between the 20% withheld taxes and the rates on royalties and interest, as per the treaty, should that exist. N.B. Please note that Egypt possesses Taxation Avoidance Treaties with 58 other countries.

22 Egypt Tax Facts SALARY TAX BASIS OF TAXATION The salary tax is the liability of the employee not the employer. However, the employer is responsible to withhold and remit the salary tax on behalf of the employee on a monthly basis. Salary tax is applicable to the following: All earnings due to the employee resulting from his/her work with third parties with or without a contract, periodically or non-periodically, whatever the names, forms or reasons of those earnings, and whether they are for works performed in Egypt or abroad and paid by a source in Egypt, including wages, remunerations, incentives, commissions, grants, overtimes, allowances, shares and portions in profits, as well as the monetary privileges and allowance in kind of all types. Earnings due to the employee from a foreign source for works performed in Egypt. Salaries and remuneration of chairmen, board and directors of incorporated companies in return for their executive roles. RATES OF SALARY TAX The employee s taxable income is subject to progressive rates as follows: First L.E. 6,500 Zero% Between L.E. 6,500 and L.E. 30,000 10% Between L.E. 30,000 and L.E. 45,000 15% Between L.E. 45,000 and L.E. 200,000 20% More than L.E. 200, % NB: There is discussion lately around changing the brackets stated above. However, so far, and as at the date of this report, the above is what applies. TAX ON PAYMENTS TO NON-RESIDENTS The non-resident employee is subject to salary tax in the same treatment of residents and according to the above mentioned progressive rates, unless the non-resident employee is a resident of a country that has a double tax treaty with Egypt. In such case the double tax treaty provisions will prevail.

23 Egypt Tax Facts SALARY TAX Cont d FILING REQUIREMENTS Employers are required to submit a quarter salary tax return to the Tax Authority within one month from the end of each calendar quarter, in addition to an annual reconciliation. Taxes are to be withheld monthly and paid to the Tax Authority during the first 15 days of the following month. BENEFITS-IN-KIND Benefits in kind that are given to the employees shall be determined on basis of the market value. However, the value of the following benefits in kind shall be estimated as follows: Benefits Cars expenses (used by the employee) Mobile expenses Employees' loans with interest rate less than 7% Tax Treatment 20% of the total car expenses is subject to salary tax. 20% of the total mobile invoices is subject to salary tax. The difference between the interest rate 7% and the employees loan interest (if it s less than 7%) is subject to salary tax. Company's stocks granted at a value less than the market value of the stock. Life insurance premium paid by the company The value of the benefit shall be determined on the basis of the difference between the market value of the stock on the date it is obtained and the value reckoned for the workers. The benefit shall be determined at the premiums paid by company. TAX EXEMPTION Personal allowance of L.E. 7,000 (over and above the zero-rated L.E. 6,500 of the annual salary). Social insurance subscriptions and Private insurance funds. Life insurance installments and Medical insurance. The following fringe benefits: employees meals, medical care, employees' group transportation, employees' uniform, housing allowed by the employer to the employees related to performing their work. Employees share in profit distribution.

24 Egypt Tax Facts SOCIAL INSURANCE Social insurance applies to Egyptian nationals in full time employment, unless a social security totalization agreement provides otherwise. Employees pay a portion of their wages through employer withholding, in addition to another portion borne by the employer. SOCIAL INSURANCE RATES The rate of Social Insurance is as follows, showing the employer and employees portions: Amount Employer % Employee % Basic salary up to L.E. 1,240/month* Monthly amounts in excess of L.E. 1,240 for other payments such as overtime or representation allowances, up to L.E. 2, (*) The ceiling of the basic insured salary will be changed as of July FILING REQUIREMENTS The company is required to settle social insurance contributions (employee portion & employer portion) to the Social Insurance Authority within 15 days of the following month. Semi-annual social insurance form 2 has to be submitted in January and July of each year.

25 Egypt Tax Facts VALUE ADDED TAX (VAT) On 7 September 2016, VAT Law No. 67 of 2016 was issued. It replaces the Sales Tax Law No. 11 of 1991 and its amendments. The effective date of the VAT is 8 September 2016, the date after the law was published in the official gazette. In principle, VAT applies to all provisions of goods and services, other than some goods and services that are listed in an exemption schedule. The VAT replaces the sales tax. TAX RATES The VAT tax rates are as follows: A 13% standard rate applies to most supplies of goods or services. This rate is set to increase to 14% on 1 July A schedule annexed to the VAT Act lists goods and services that are subject to special rates in addition to the standard rate. A schedule annexed to the VAT Act also lists goods and services that are subject only to special rates. SCOPE OF THE TAX VAT applies to the following transactions: The supply of taxable goods and services up to, or in excess of, the registration threshold. Importation of taxable goods into Egypt, regardless of the status of the importer. The imported services that are preformed for customers and clients in Egypt. The supply of taxable goods and services that are listed in the Schedules attached to the VAT law. EXPORTED GOODS AND SERVICES Both exported goods and services are subject to sales tax at a rate of zero%. REGISTRATION THRESHOLD Any individual or juridical person who sold taxable goods or services with turnover during the 12 months before 7 September 2016 of at least EGP 500,000 must register for the VAT. Importers of taxable goods or services are not subject to the registration threshold, which means all importers must register. Suppliers of taxable goods and services that are listed in Schedules attached to the VAT law, are also not subject to the registration threshold, i.e. all such suppliers/ service providers must register.

26 Egypt Tax Facts VALUE ADDED TAX (VAT) Cont d NON-RECOVERABLE INPUT TAX No input tax credit is allowed in the following situations: With respect to specific taxes imposed by the schedules attached to the VAT law. Where input tax is recorded as a cost. On exempted goods and services. VAT FILING AND PAYMENTS Generally, a VAT return must be filed within two months of the end of a tax period in which VAT is due. However, a VAT registrant s April VAT return must be filed before 15 June. Remittances of VAT are due at the same time VAT returns are filed. A VAT return must be filed even if there are no sales in that period.

27 Egypt Tax Facts STAMP TAX Stamp tax is generally imposed on the following: Documents: a wide range of documents including certificates and declarations, judicial documents, Advertisements, licenses, utility bills. Contracts: all types of contracts Transactions: wide range of transactions such as banking transactions (i.e. loans, deposits, accounts and documents), insurance premiums, transportation Services, lotteries, company registrations, etc. There are two types of stamp duty rates. The first is a fixed amount that is imposed on documents, contracts, etc. The amount of fixed stamp duty is specified in the legislation and varies according to the document in question. The second is a proportionate rate and this, generally, applies to transactions. The proportionate rate is calculated as a percentage. A stamp tax shall be due on withdrawals of credit facilities extended by banks, as well as on loans and advances granted by banks during every quarter, in addition to the opening balance in the same quarter. The payable tax shall be one thousandth of such balance of every quarter. Banks shall be obliged to settle such tax to the Tax Authority within a period no later than seven days after the end of each quarter. Both the bank and the customer shall bear the tax on an equal basis. There are many percentages and amounts paid according to the Stamp Tax Law. However, below are the important items: Amount Duty (LE) Contracts Certificates 1.00 per page 1.00 per page Amount Rate % Advertising in news papers & TV. 20% FILING REQUIREMENTS There are various dates of filing, such as: Stamp tax return for advertising has to be submitted within 2 months from the date of publishing an advertisement. The stamp tax on loans has to be settled on a quarterly basis.

28 Egypt Tax Facts WITHHOLDING TAX ON LOCAL TRANSACTIONS BASIS OF TAXATION All entities, including projects established as free zone companies, are obliged to withhold a tax percentage from every amount paid exceeding L.E. 300 on the account of the corporate tax of the vendor. RATES OF WITHHOLDING TAX Transaction Rate Services 2% Construction 0.5% Supplies 0.5% Individual professional fees 5% FILING REQUIREMENTS Entities are obliged to settle the withholding tax due before end of April, July, October, and January of every year. Also entities that are subject to applying the withholding tax system are obliged to notify the Tax Authority about the value and transactions of the following activities: Sale of industrial products and local or imported Agricultural Crops to the private sector. Rental of places for industrial and commercial activities. Entities are obliged to submit the notification form before the end of April, July, October, and January of every year.

29 JORDAN TAX FACTS 2017 BDO Samman & Co. 256, King Abdulla II St, Jandaweel, Amman JORDAN P.O.Box.: , Tel: / Fax:

30 Jordan Tax Facts CONTENTS 31 Corporate Income Tax 33 Employees Tax 35 Social Security 36 General Sales Tax (GST) 38 Stamp Tax 39 Withholding Tax on Resident Entities

31 Jordan Tax Facts CORPORATE INCOME TAX RATES OF CORPORATE TAX Starting from 01 January 2015, the standard rate of corporate income tax rate is (20%) which is applied to all types of business activities, except the following business activities: Rate 35 % Rate 24 % Rate 14 % Rate 0 % Banks Insurance and Reinsurance Industry Agriculture Communication Mining for Major Materials Electricity Distribution Electricity Generating Financial Companies Financial Leasing Financial Intermediation THE CORPORATE TAX YEAR The rate of corporate tax is fixed in respect to the corporate tax year or the financial year. The company has the right to choose the date of year-end in-order-to issue its annual financial statements, regardless of the calendar year. Each year has to be accounted for separately. The first year is to start from the date of incorporation till the end of the following financial year (long period), but the maximum for the period is eighteenth months. DEDUCTIBLE EXPENSES The general rule is that only expenses or deductions must be acceptable from a tax point of view, in-order-to be deducted from the taxable income. The Income Tax Law stated the deductible expenses which cover most expenses used to generate income. In addition, costs and expenses should be supported by proper documents.

32 Jordan Tax Facts CORPORATE INCOME TAX Cont d ACCOUNTING METHODS AND BUSINESS PROFITS Generally, the company s taxable income is based on its accounting profits and computed according to the International Financial Reporting Standards (IFRS). FILING REQUIREMENTS The corporate tax return must be filed along with all of its supporting documents (e.g. audited financial statements) within the next four months from the accounting year end (e.g. April 30 th, for the calendar year ending in December 31 st ). CARRY FORWARD LOSSES - For tax years before January 1, 2015, the Losses incurred can be carried forward to be deducted from taxable income in later years. (until all losses are used). - For tax years beginning January 1, 2015, the Losses incurred can be carried forward to be deducted from taxable income for a maximum of five years. - Losses could not be carried backward DIVIDENDS There is no withholding tax on the payment of dividends, whether the recipient is a resident or non-resident. PAYMENT TO NON-RESIDENTS The amounts paid to foreign entities against services rendered are subject to a withholding tax rate of 10%, even if it is paid to an entity that is resident of a country that has a double tax treaty with Jordan. It is the overseas recipient's responsibility to apply to the Jordanian Tax Authority for refunding the balance between the 10% withheld taxes and the rates on royalties and interest, as per the treaty, that should exist.

33 Jordan Tax Facts EMPLOYEES TAX BASIS OF TAXATION The salary tax is the liability of the employee not the employer. However, the employer is responsible to withhold and remit the salary tax on behalf of the employee on a monthly basis. Salary tax is applicable for the following: All earnings due to the employee resulting from his/her work with third parties with or without a contract, periodically or non-periodically, whatever the names, forms or reasons of those earnings, and whether they are for work performed in Jordan or abroad and paid by a source in Jordan, including wages, bonuses, remunerations, incentives, commissions, overtimes, allowances, appropriations, as well as the monetary privileges and allowance in kind of all types. Earnings due to the employee from a foreign source for work performed in Jordan. Salaries and remunerations of chairman, members and directors of the board of directors in the associations of capital in return for their administrative work. RATES OF SALARY TAX The taxable employee s income is subject to progressive rates, as follows: For each Dinar of the First JOD 10,000 7% For each Dinar of the Second JOD 10,000 14% For each Dinar exceed that 20% TAX ON PAYMENT TO NON-RESIDENT Amounts paid to non-residents (who live in Jordan for less than 183 days in any 12 months) from any source are subject to 10% taxes without any deductions.

34 Jordan Tax Facts EMPLOYEES TAX Cont d E FILING REQUIREMENTS Taxes are to be withheld monthly and paid to the Tax Authority by the 30 th day after the date of deduction or vesting date (withholding). TAX EXEMPTIONS - Personal exemption amount is JD 12,000, and another JD 12,000 for dependents regardless of their number. - Add to the above, there are another exemptions (deductible expenses) a maximum of JD 4000 as the following: University education Rental cost Interests on housing loans Technical services Engineering services Legal services This means a total of JD 28,000, is allowed per family regardless whether the tax returns were submitted separately or jointly for couples. The above exemptions are only awarded to residents (person & dependents)

35 Jordan Tax Facts SOCIAL SECURITY In general, Any non-monthly salary or pay is subject to social security contributions except for few categories from which we list a few examples:- - Children s education allowance - Uniform allowance (cash or in-kind) - Laundry allowance - Entertainment allowance - Paid vacations allowance - Other SOCIAL INSURANCE RATE The rate of Social security is as follows, showing the employer and employees portions: Social Contributions Rate % Employer Employee 7.25 As of 1 January 2014, the upper limit of salary is JOD 3,000, which it is considered as basis of calculation for social contribution even if the salary was increased after that date. FILING REQUIREMENTS The company has to pay social security (employee portion & employer portion) to the Social security Authority within 15 days of the following month. Annual social insurance form (included all employees) has to be submitted in March of each year.

36 Jordan Tax Facts GENERAL SALES TAX (GST) RATES OF SALES TAX General sales tax rates range from 0% to 16%. Sales tax rates differ based on tables that show the specific rate depending on the nature and type of the product or service. Sales tax rate of 16 % is imposed on most of goods & services. Certain products and services are tax exempt and other products and services are subject to zero tax rate. The zero tax rates are mainly divided into two types: Any goods and services which are exported outside Jordan or supplied to free zones, cities and duty free shops. Any goods and services that are sold to parties subject to zero tax rate by Sales Tax Law. INVOICES DETAILS The following are the details that must be included in the customer invoice: Invoice number starting from one. Invoice date. Customer name. The company's address in Jordan Sales tax registration number. Kind of the expense or product. BASIS OF TAXATION The earlier of the following shall be considered as the tax point, and the company has to settle the sales tax accordingly: Date of invoice issuing. The delivery date of commodity or rendering the services. The payment date of commodity value or return of services, whether being wholly, partially, an amount paid on account, settlement of account, on credit or any other means of payment.

37 Jordan Tax Facts GENERAL SALES TAX (GST) Cont d DEDUCTIBLE SALES TAX All the inputs should be for work purposes. Otherwise, the company can't deduct the inputs' sales tax. The company can deduct the inputs' sales tax within three years from the inputs invoice date. FILING REQUIREMENTS GST return should be submitted to Tax Authority every two months. The two months period shall be treated as a single tax period. Sales tax must be forwarded to the Tax Authority within thirty days following the end of the tax period. For example: (All transactions of Jan. & Feb. should be filled in the tax return by the end of March at most, in which the balance of sales tax should be settled (before the end of March). If the input sales tax exceeds the output, then it will be carried forward to the next period).

38 Jordan Tax Facts STAMP TAX Stamp tax is generally imposed on the following: Contracts: All types of contracts. Documents: A wide range of documents including certificates, declarations and judicial documents. Advertisements, licenses and utility bills. Transactions: A wide range of transactions such as banking transaction (i.e. loans, deposits, accounts and documents), insurance premiums and transportation. Services, lotteries, company registrations etc. Stamp duties are applied in different rates according to the Stamp Tax Law. However, below are the important items: TYPE RATE/VALUE Contract with amount Contract without amount 10 JOD Insurance premiums 0.1% Immovable property Facilities contracts (JD 500 JD 1,000) Facilities contracts (more than JD 1,000) Customs declaration 2 JOD 3 JOD 10 JOD The following are examples of the exempted categories from stamp duty: Farmers' loans contracts. Compensations contracts according to Labor Law. Transactions of banks remittances.

39 Jordan Tax Facts WITHHOLDING TAX ON RESIDENT ENTITIES BASIS OF TAXATION According to Law, resident corporate taxpayers have to withhold 5% tax upon paying service fee or wages to the following categories of persons: - Auditors - Experts - Engineers - Advisors - Doctors - Insurance Agents - Lawyers - Arbitrators - Insurance Brokers - Shipping Brokers - Realtors - Speculators RATES OF WITHHOLDING TAX Transaction Individual professional fees ** Interest & profit of deposits ** Rate 5% Prizes (more than JD 1,000) 15% Import of goods ** 2% ** These withheld amounts shall be considered as tax advance payment for the residents (company) which can be reduced from the due tax at the end of the tax period. FILING REQUIREMENTS Tax must be forwarded to the Tax Authority within thirty days from payment or maturity date, whichever is earlier. Otherwise, the tax shall be collected as tax due on taxpayer from the date it should be remitted.

40 KUWAIT TAX FACTS 2017 BDO Al Nisf & Partners Al Shaheed Tower, 6th Floor Khaled Ben Al Waleed Street, Sharq P.O. Box 25578, Safat 13116, Kuwait Tel: Fax:

41 Kuwait Tax Facts CONTENTS 42 Corporate Income Tax 50 Other Taxes

42 Kuwait Tax Facts CORPORATE INCOME TAX RATES OF CORPORATE TAX Tax is levied at a flat rate of 15%. INCOME SUBJECT TO TAX Any income earned from carrying out business or activities in the State of Kuwait, either directly or through an agent, is taxable. An agent is a person or entity authorized by a principal to carry out business or activity on behalf of and for the account of the principal under a binding agreement. Income earned by any entity from the following is deemed to be earned from the State of Kuwait and therefore taxable in Kuwait. i) Income earned from any activities or businesses wholly or partially executed in the State of Kuwait, whether the contract has been concluded inside Kuwait or abroad. ii) iii) iv) Royalty, franchise, license and similar fees earned from Kuwait. Commissions or fees earned in cash or in kind from representation or brokerage agreements relating to Kuwait. Profit from any industrial or commercial activity in the State of Kuwait. v) Profit from sale or transfer of assets including sale of shares in a company whose assets are principally formed of immovables in the State of Kuwait (profits from sale of shares listed on the Kuwait Stock Exchange are however not taxable). vi) vii) viii) Income earned from lending of funds in the State of Kuwait. Profit from purchase and sale of goods or property in the State of Kuwait including rights associated with tangible or intangible assets. Income earned from having a permanent office in Kuwait where sale and purchase contracts are concluded including place of work from where activity is carried out or contracts concluded (irrespective of whether such place of work is owned, leased or belongs to a third party).

43 Kuwait Tax Facts CORPORATE INCOME TAX Cont d ix) Profit from leasing of any movable or immovable property for use in the State of Kuwait. x) Profit from rendering of services in Kuwait including fees from administrative, technical or consulting services (irrespective of whether the contract is wholly or partially performed in the State of Kuwait or signed inside Kuwait or abroad). Capital gains from trading in securities on the Kuwait Stock Exchange is exempted from tax. Further, with effect from 10 November 2015, any income from securities, bonds, sukuks and all other similar securities listed on the Kuwait Stock Exchange is exempted from income tax. Any income earned by individuals (natural persons) is not taxable in Kuwait. Entities which are fully owned by Kuwaitis are not taxed. Also, entities which are registered in the Gulf Cooperation Council (GCC) countries (comprising of Kuwait, Saudi Arabia, Bahrain, UAE, Oman and Qatar) and fully owned by Kuwaiti / GCC citizens or any corporations which are in turn fully owned by Kuwaiti / GCC citizens are not taxed in practice. A foreign entity with a shareholding in a local Kuwaiti company is required to calculate and pay tax based on its share of profit in the local entity. THE CORPORATE TAX YEAR The taxable period is a year and normally has to be the calendar year. A body corporate may, within three months from the date of signing the contract or the date of commencing the business activity in Kuwait, apply to the Director of the Income Tax Department for permission to submit its first tax return for a period of less than one year (but not less than 7 months) or for an extended period of up to 18 months. It is at the discretion of the Tax Department to grant approval for a tax period which is less than or more than a year.

44 Kuwait Tax Facts CORPORATE INCOME TAX Cont d DEDUCTIBLE EXPENSES All expenses directly incurred in carrying out trade or business in Kuwait, subject to the limits specified in the tax law and regulations, are allowed as a deduction in computing taxable profit, provided that the expense claimed as a deduction is: a) necessary for earning the revenue; b) real and supported by proper documents; and c) related to the taxable period. ACCOUNTING METHODS AND BUSINESS PROFITS A company s taxable income is based on its net profit, computed according to the Kuwait Income Tax Decree of 1955 and related regulations which, inter alia, specify limits on deduction of certain expenses. FILING REQUIREMENTS The tax declaration of each taxable period is required to be submitted within 3½ months of the end of the taxable period. It is possible to seek extension up to 60 days in filing of the tax declaration. Application for extension of time for filing tax declaration should be submitted on or before the 15th day of the second month following the end of the taxable period. It is at the discretion of the Director of Income Tax Department to grant an extension. If the Tax Department does not respond to the request for extension in filing tax declaration within 30 days of the application date, it should be assumed that the application is rejected. Taxes have to be paid in four instalments on the 15th day of the 4th, 6th, 9th and 12th month following the end of the tax year. In case extension is granted, tax has to paid fully at the time of filing the tax declaration. Delays in the submission of the tax declaration is subject to tax penalties at the rate of 1% of the tax payable for each 30 days delay or part thereof. Additionally, penalty is charged for any delay in payment of tax, at the rate of 1% of the tax due for each 30 days delay or part thereof.

45 Kuwait Tax Facts CORPORATE INCOME TAX Cont d The tax declaration has to be filed together with the following: a) Report from an auditor registered with the Ministry of Commerce & Industry and approved by the Ministry of Finance b) Financial statements c) Trial balance d) Statement of fixed assets e) Statement of subcontractors showing name, address, value of work performed during the taxable period, retention held and copy of last payment certificate f) Inventory statement showing stock quantity and amount g) Details of contracts in progress showing the income and expenses relating to each contract h) Copy of last payment certificate issued by project owner i) For insurance companies, statement showing details of reinsured policies and their terms j) Analysis of contracts revenue showing details of revenue subject to tax and revenue exempted from tax in Kuwait under Double Tax Treaties, value of works carried out during the taxable period and value of tax retentions for each contract. k) Analysis of expenses incurred for contracts carried out during the taxable period together with prior year s figures. Approved audit firms registered with the Ministry of Commerce and Industry are required to check compliance with the Kuwait Income Tax Decree of 1955, as amended, and related regulations, administrative circulars and executive rules and issue a tax audit opinion, in the format suggested by the Income Tax Department, that should be filed with the tax declaration. The tax audit opinion must outline the expenses claimed in the tax declaration that are not in compliance with the tax laws and regulations. SELF ASSESSMENT According to Circular 1 of 2014, companies that file tax declarations on actual basis are required to prepare and file a draft self assessment report to the Income Tax Department within three months from the date of filing the tax declaration. The draft self assessment report should include revenue and expenses analysis together with an outline of the expense items that were adjusted by the Income Tax Department in the last tax assessment issued to the company.

46 Kuwait Tax Facts CORPORATE INCOME TAX Cont d For companies which file tax declaration on an actual basis and comply with Circular 1 of 2014, the tax department will give priority to issuing the tax assessment and the release of tax retention within 12 months of submitting the self assessment report, unless it is a case where the tax department believes that it should carry out additional tax audit. For companies which file tax declaration on a deemed profit percentage of 30% or more, as per the last assessment letter, the tax declaration prepared and filed by the company will be accepted as filed and a tax retention release letter will be issued within six months from the date of filing the tax declaration provided that: a) there is no proof of existence of income not reported in the last tax declaration for which a tax assessment was issued; b) the company has settled all tax and fines due for the previous years as per the assessments; c) there is no significant increase or decrease in income; and d) all required documents specified in Circular 1 of 2014 are filed with the tax declaration. TAX INSPECTION AND ASSESSMENT Following the filing of the tax declaration, it is a normal practice for the Income Tax Department to carry out an inspection of body corporate s books and records to verify the income and expenses reported in the tax declaration to the supporting documents. Based on the findings from the tax inspection, adjustments are normally made to the taxable profit e.g. if expenses are not supported, they are disallowed at the time of the tax inspection. Following the tax inspection, an assessment letter is issued. If additional taxes are assessed, the body corporate has the option of paying the additional taxes (within 30 days of the assessment letter, otherwise a penalty of 1% is levied for every 30 days delay or part thereof in paying the additional tax) or raising an objection within 60 days from the date of the tax assessment letter. If an objection is not raised within 60 days, tax as per the assessment letter becomes final and payable. If an objection is raised but is not satisfactorily resolved within 90 days from the date of the objection letter, the body corporate has the right to have its case heard by an Appeals Committee.

47 Kuwait Tax Facts CORPORATE INCOME TAX Cont d Tax appeal has to be filed within 30 days from the date of issue of the Tax Department s letter in response to the tax objection or, in case of no response from the Tax Department; tax appeal has to be filed within 30 days after the end of the 90 days period from the date the objection letter was filed. If the appeal is not filed within the 30 day period, the assessment by the Tax Department becomes final and payable. If the body corporate is not satisfied with the outcome of the Appeals Committee decision, it has the option to refer the case to the concerned courts within 60 days from the date of the tax appeal committee s resolution. Otherwise the decision by the tax appeal committee becomes final and any additional tax assessed has to be settled. CARRY FORWARD LOSSES The losses arising in any tax period can be carried forward to be offset against future taxable profits, for a maximum period of three years. Unutilized tax losses cannot be carried forward if a body corporate ceases activities in Kuwait or does not generate any revenue from trade or business in Kuwait or enters liquidation or changes its legal status or merges with another entity. Tax losses cannot be carried back. DIVIDENDS There is no withholding tax on the payment of dividends. TAX RETENTION Government authorities, ministries, public and private companies, societies, natural persons, contractors and all other bodies/institutions in Kuwait (including foreign entities carrying out trade or business in Kuwait) are required to retain 5% of the total contract value or 5% from each payment made to the contracting party. This retention can be released only on receiving a tax retention release letter from the Tax Department confirming that the retention can be released. Entities that fail to comply with the above will not be allowed to claim deduction for the subcontract cost. Additionally, such entities will be liable for paying the tax due of the body corporate that has failed to settle its taxes.

48 Kuwait Tax Facts CORPORATE INCOME TAX Cont d A tax retention release letter (tax clearance letter) is issued by the Tax Department in the following cases: a) if an entity is not subject to tax or is exempted from tax or has incurred a loss; b) if an entity has settled all due taxes; and c) if an entity has submitted an approved bank guarantee or any other guarantee acceptable to the Tax Department that guarantees settlement of tax. TAX CARDS Effective January 2017, companies subject to corporate income tax law in Kuwait are required to apply for and obtain a tax card from the Kuwait tax department on an annual basis. The tax cards have a validity of one calendar year. Government and public bodies, private companies and institutions are forbidden from dealing with any incorporated body that does not have a valid tax card. DOUBLE TAX TREATIES Kuwait has signed and ratified double taxation treaties with a number of countries. Please contact BDO Kuwait for latest update on countries with whom Kuwait has signed and ratified double tax treaties. TAX BENEFITS Under Law No. 116 of 2013 regarding the Promotion of Direct Investment in Kuwait the following benefits are available to entities granted a license by the Kuwait Direct Investment Promotion Authority ( KDIPA ): a) Tax credits based on certain prescribed criteria including transfer of technology to Kuwait, employment and training of national labor, and utilization of local products and services. b) Customs duty exemption c) Land at concession rates

49 Kuwait Tax Facts CORPORATE INCOME TAX Cont d Investment licenses and incentives applications are evaluated by KDIPA based on the following criteria: 1. Transfer of technology 2. Creating Job opportunities for national labor exceeding the prescribed quota; 3. Conducting training for national labors; 4. Supporting small and medium enterprises; and 5. Contributing to achieve the diversification of economic base. The following scoring system is used for granting the license and tax benefits: 1. If the total score is below 59% Investment license and incentive application is rejected. 2. If the total score is above 60% Only the investment license will be provided. 3. If the total score is above 70% The investment license and one incentive selected by the investor will be provided. 4. If the total score is above 80% The investment license and all incentives available under the law will be provided. Further, under Law No. 116 f 2013, subject to approval by the Kuwait Direct Investment Promotion Authority, it is possible to establish a 100% foreign owned entity, except for the following activities: 1) Extraction of crude petroleum (Class 0610) 2) Extraction of natural gas (Class 0620) 3) Manufacture of coke oven products (Class 1910) 4) Manufacture of fertilizers and nitrogen compounds (Class 2012) 5) Manufacture of lighting gas and distribution of gaseous fuels through main pipes (Class 3520) 6) Real Estate (Level L), excluding projects of developing building for private operation. 7) Security and investigation activities (Division 80) 8) Special Systems relating to public administration, defense and compulsory social security (Level O) 9) Activities of membership organizations (Division 94) 10) Activities of hiring labor including domestic labor.

50 Kuwait Tax Facts OTHER TAXES CUSTOMS DUTIES The six Gulf Co-operation Council (GCC) states comprising Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and UAE announced the formation of the Customs Union with effect from 1 January 2003 eliminating customs duties for trade within GCC states as well as removing regulations and procedures which restrict trade within GCC. The Customs Union results in unified customs duties. The GCC states have approved a unified customs tariff of 5% on CIF invoice price subject to certain exceptions. Collection of customs duty takes place at the first point of entry in the GCC. Subsequent movement of goods within the GCC states does not attract duties. A higher tariff is imposed on imports of tobacco and its derivatives. Each GCC member state can continue to impose protective customs duty as per the list approved for each GCC country. If the goods covered by protection are imported first through another GCC state in which protective duty does not apply, then that country will levy only the normal duty of 5% and the final destination country where the protection duty applies, will recover the balance of the duty. A unified list of goods comprising of over 400 items such as basic foodstuffs, personal effects and used household items has been approved by the GCC states to be exempt from customs duties. CONTRIBUTION TO KUWAIT FOUNDATION FOR THE ADVANCEMENT OF SCIENCES Kuwaiti Shareholding Companies (public and closed) are required to pay 1% of their profits after transfer to the statutory reserve and the offset of losses brought forward, to KFAS which supports scientific progress. NATIONAL MANPOWER SUPPORT TAX Under Law No. 19 of 2000 relating to supporting National Manpower and encouragement of National Manpower to work in Non-Government agencies, all shareholding companies listed on the Kuwait Stock Exchange are required to pay a 2.5% annual tax on the net profits.

51 Kuwait Tax Facts OTHER TAXES Cont d ZAKAT Kuwaiti shareholding companies (public and closed) are required to pay 1% of net profit as Zakat. PERSONAL TAXATION There is currently no tax on personal income of individuals including salary income of employees. PROPERTY TAX There is no property tax in Kuwait. VAT / SALES TAX There is currently no VAT or sales tax in Kuwait. However, it was recently announced that VAT will be implemented across the GCC countries (KSA, Qatar, Kuwait, Oman and Bahrain) on 1 January 2018 or by no later than 1 January The VAT rate is going to be 5%. Based on the limited information available, each GCC state has the right to exempt, or impose tax at zero percent on, certain sectors such as healthcare, education, public transportation and real estate. Each GCC state shall impose tax at zero percent on oil sector, petroleum products and gas, in accordance with conditions and controls specified by such state. More details of the VAT regime will be set out in the common framework of VAT within the GCC once officially issued, and the national legislation which are yet to be made available.

52 LEBANON TAX FACTS 2017 BDO Semaan, Gholam & Co. Gholam Building, Sioufi Street Achrafieh P.O.Box: Beirut, Lebanon Tel: Fax:

53 Lebanon Tax Facts CONTENTS 54 Income Tax on Business Profits 57 Salaries, Wages and Retirement Pensions 58 Tax on Income From Movable Assets 60 Value Added Tax 62 Social Security 63 Built Property and Municipality Tax 64 Stamp Tax 65 Holding Companies 66 Offshore Companies 67 Bi-lateral Tax Treaties

54 Lebanon Tax Facts INCOME TAX ON BUSINESS PROFITS ENTITIES SUBJECT TO TAX Tax is applicable to entities undertaking business activities in Lebanon (whether they are resident or not in Lebanon), including incorporated companies, sole proprietorships and professions. TAX BASE The methods for the determination of the tax base are: - the real profit method - the lump-sum profit method - the estimated profit method The application of one or the other of these methods depends on the legal status of the entity and/or its size. REAL PROFIT METHOD This method is mandatory for certain entities, including corporations, partnerships, manufacturing and commercial entities, as well as private businesses with more than four employees. The computation of taxable income is based on accounting and tax rules. It generally involves two steps: - Accounting profit is adjusted in order to obtain an income measure based on tax rules - Losses of prior 3 years are deducted from that measure in order to obtain the amount of taxable income. LUMP-SUM PROFIT AND ESTIMATED PROFIT METHODS Entities not subject to the real profit method are taxable under the lump sum profit method or the estimated profit method in which taxable income is a percentage of turnover, determined annually by the Ministry of Finance and based on sales figures reported by the taxpayer. Lump-sum profit method is mandatory for insurance companies, transportation companies and oil refineries. The net profit rate under the lump-sum method depends on the business activity undertaken by the taxpayer. The rates vary from 5% to 50%.

55 Lebanon Tax Facts INCOME TAX ON BUSINESS PROFITS Cont d Under the estimated profit method, taxable income is determined directly by the Ministry of Finance based on a field audit of the taxpayer. TAX RATES ON BUSINESS INCOME ARE DEFINED AS PER TABLE BELOW: Amount Corporations and limited liability companies Sole proprietorships and professions Statutory tax rates Taxable income brackets millions of LBP Below or Above equal to 15% N/A N/A 4% 0 9 7% % % % 104 Sole proprietorship and professions taxable income are subject to a tax deduction according to the family status of the related taxpayer as shown in table below: Millions of LBP Single individual 7.5 Married couple (spouse does not work) 10 Married couple (spouse works) Children 7.5 each 0.5 per child TAX ON NON-RESIDENT All kind of goods provided and services rendered by companies or individuals not registered at the Ministry of Finance are subject to a withholding tax rate respectively of 2.25% or 7.5%.

56 Lebanon Tax Facts INCOME TAX ON BUSINESS PROFITS Cont d TAX ON DISPOSAL OF FIXED AND FINANCIAL ASSETS Profit from disposal of fixed and financial assets is subject to a tax rate of 10%, unless it is part of the business. FILING DATE Corporations May 31 Individuals Real Profit method Lump-Sum profit method Estimated profit method March 31 March 31 No filing obligations; the Revenue Department produces an assessment

57 Lebanon Tax Facts TAX ON SALARIES, WAGES AND RETIREMENT PENSIONS ENTITIES SUBJECT TO TAX The employer must withhold the tax on behalf of the employee. Individuals who earn business income (subject to Title I tax), or who have worked for more than one employer during the year, must file their own Title II tax return form. TAX BASE Net income for purposes of Title II tax is determined as gross income less eligible expenses. Taxable income is the net income less tax deductions. These deductions are the same as per in above TABLE 2. TAX RATES The tax rates on salaries, wages and retirement pension s structure are as shown in the table below. It is a deduction structure where the rate increases with taxable income. Statutory tax rates TAXATION ON TEMPORARY LABOR Taxable income brackets millions of LBP Above Below or equal to 2% 0 6 4% % % % % 120 Lump sum wages are subject to 3% tax, regardless of its amount and without any deductions. Lump sum wages of temporary labor is defined as being the amount paid to perform temporary quantitative work based on pieces or quantity. FILING DATES The employer shall be filed the following reports: Quarterly filing Yearly filing within 15 days from the end of each quarter 1st of March of the following year

58 Lebanon Tax Facts TAX ON INCOME FROM MOVABLE ASSETS ENTITIES SUBJECT TO TAX Unlike Title I and II, Title III of the Income Tax Act does not include any article specifying the entities subject to the tax on investment income. However, administratively, the tax is withheld at the level of the payer entity, which must file a tax form in that regard. TAX BASE Various incomes resulting from shares, shares in interest and founders share issued by joint stock companies or financial, industrial, commercial, civil and other public or private bodies; - directors fees; - fees paid to shareholders for attending general assemblies; - amounts transferred out of the reserves or profits for redeeming or depreciating shares, - shares in interest and founders shares before the suspension of activities; - distribution of reserve funds and profits effected in the form of free shares or in any other form; - interest proceeds and revenues of debentures and loans granted by the state, the municipalities and other public or private bodies and institutions and by companies; - premiums paid to creditors and debenture holders; - interest on security debts, their proceeds and revenues; - interest on preferential and ordinary debts, their revenues and income, unless resulting from commercial operations; - Interest on bank deposits and money in trust, whatever be the trust and whoever may be the owner thereof; and bank current accounts, the proceeds and revenues thereof.

59 Lebanon Tax Facts TAX ON INCOME FROM MOVABLE ASSETS Cont d EXEMPTIONS FROM TAX - amount paid in reimbursement of creditors or shareholders provided they are not taken from the profit and loss account or from reserve funds. - amounts reimbursed to shareholders and creditors in concessionary companies even though they are taken from reserve funds or profit and loss account when this is warranted by the obligation to surrender the installations to the State, free of charge, at the expiry of the concession. - interest on savings accounts. - interests and revenues of current accounts opened at the banks in the name of the government, municipalities and public institutions, and also foreign diplomatic and consular corps in Lebanon subject to reciprocal treatment - income from bonds issued by the Treasury of the Lebanese government (this income is only subject to the tax on profits when it is due to profession practicing) TAX RATE The tax rate is set at 10% Article 51 Law No. 497/2003 Some types of income from movable assets stated under article 51 Law n 497/2003 are subject to a 5% tax, such as revenue or interest earned from Lebanese treasury bills, debenture bonds issued by corporations and banks, bank credit accounts (including saving accounts), bank certificates of deposit, margin on letter of credit and letter of guarantee. FILING DATES Under the Lebanese income tax system, Income from Movable Assets must be filed separately on several dates.

60 Lebanon Tax Facts VALUE ADDED TAX (VAT) TRANSACTIONS SUBJECT TO VAT The supply of goods and services carried out by a taxable entity, within the Lebanese territory and import transactions undertaken by any entity, whether that entity is taxable or not are subject to VAT at a rate of 10%. TAXABLE ENTITY A taxable entity is every individual or juridical entity which, in the course of an independent economic activity, performs taxable supplies of goods and services or exempt supplies with the right of deduction (zero-rated) in accordance with the provisions of the VAT law, providing that it achieves a total turnover covering four successive quarters that exceeds LBP 150 million. The entities, whose turnover is less than 150 million LBP may optionally apply for VAT. EXEMPT ACTIVITIES Major activities exempt from VAT are the following: - medical activities - education - insurance and reinsurance - banking and financial services; - non-profit organizations - public transportation; - supply of gold to the Central Bank; EXEMPT GOODS Major goods exempt from VAT are the following: - livestock, poultries, live fish and agricultural alimentary products sold in their raw state; - cereals - books and similar publications, - postal, fiscal stamps and paper money; - agricultural machinery; - medicines, drugs and pharmaceutical products - medical tools, installations and equipment; - precious and semi-precious stones, gold, silver and other precious metals.

61 Lebanon Tax Facts VALUE ADDED TAX (VAT) - Cont d RECOGNITION DATE OF TAX The tax is recognized at the date when: - goods and services are supplied, - the price has been partly or wholly paid, - invoice is issued. As for the imported merchandises, the tax is recognized when the customs duties are due, according to the legislations in force. TAX PERIOD The tax is calculated at the end of each quarter of the calendar year and settled within 20 days following the end of quarter. THE RIGHT TO DEDUCT The right is given to a taxable entity to deduct from the tax due on a certain transaction the value of the tax paid in respect of goods and services purchased by a taxable entity from another taxable entity, and goods and services imported by a taxable entity, including capital assets. THE EXCESS OF DEDUCTIBLE TAX If, at the end of a tax period, the amount of the deductible tax exceeds the amount of the tax due, then the excess shall be carried forward to the following period. The taxable entity has the right to claim, semiannually or annually, a refund for the excess of the input deductible tax covering this period / year. The exporters have the right to claim, at the end of any tax period, a refund of the excess deductible tax covering this period THE RIGHT TO DEDUCT PARTIALLY Where a taxable entity engages, in the furtherance of its activity, in both transactions in respect of which tax is deductible, and others in respect of which tax is not deductible, that entity is entitled to deduct such part of the tax attributable to the former transactions.

62 Lebanon Tax Facts SOCIAL SECURITIES NATIONAL SOCIAL SECURITY FUND The National Social Security Fund (NSSF) provides employees with insurance coverage for sickness and maternity care. It also covers family allowances, end-of-service pension, and work related accidents and diseases. Any employee or labor in any sector is eligible to enroll in the program. Employers are required to register with the NSSF all employees working for local and international firms. Foreign employees with a valid work permit and residence permit are entitled to join the NSSF, provided their home country offers equivalent or better programs to Lebanese residents employed there. Foreign Nationals are not entitled for end-of-service benefits. CONTRIBUTIONS Contributions are set as follows: - Family allocations (6% of the monthly salary up to a ceiling of LBP 1,500,000) charged on the employer - Medical Insurance (7% of the monthly salary up to a ceiling of LBP 1,500,000) charged on the employer Medical Insurance (2% of the monthly salary up to a ceiling of LBP 1,500,000) charged on the employee - End of service indemnity subscription (8.5% of monthly salary) charged on employer; termination indemnity due by is based on the last salary times the number of years of service. Companies are liable to pay the difference between 8.5% of cumulated subscriptions and the termination indemnity. FAMILY ALLOWANCES Employees are entitled to family allowances, attached to the husband s rather than wife's salary, except if the female employee is a widow or sole provider. A married employee enrolled in the NSSF benefits from a spouse allowance of LBP 60,000 and an additional LBP 33,000 for every child under parental custody (maximum 5 children) COMPLIANCE The law requires all companies to contribute to NSSF Fund. Firm with less than 10 employees have to file and pay contributions quarterly. Larger enterprises that employ more than 10 employees must file and pay their contribution on a monthly basis.

63 Lebanon Tax Facts BUILT PROPERTY AND MUNICIPALITY TAX Rental income is taxed at deduction rates. Income-generating expenses are all deductible when computing for the taxable income. Deductible expenses include depreciation costs (depreciation of the building is deductible up to 5% of the rent), expenses incurred by the landlord such as management costs and charges (up to 5% of the rent) and maintenance costs. The sliding tax rate applies as follows: Up to 20 million 4% 20 million 40 million 6% 40 million 60 million 8% 60 million 100 million 11% Over 100 million 14% The following entities are exempt from built property tax: - public buildings - charities - places of worship - cemeteries - embassies or consular offices - association or syndicate headquarters. The following may be exempt from built property tax upon government approval request: - orphanages - non-profit hospitals, clinics or schools or buildings donated for these purposes - buildings that house sports facilities, welfare organizations, social clubs, cultural centers, public health organizations, political parties, or labor unions. Property owners must register all rental agreements with the local municipality. Tax on the rent received is due on the first day of the contract period. It stops when the landlord declares to the local authority that the property is vacant. The rates for municipal taxes are set at two levels. On business property the levy is fixed at 8.5 percent, while the rate for residences, rented as well as owner-occupied, is set at 6.5 percent.

64 Lebanon Tax Facts STAMP DUTY Stamp duty is payable on documents at a rate of 0.3% unless otherwise provided by law. The general rate applies to issue share capital, leases and other agreements, etc. The rate is reduced to 0.15% in respect of commercial bills.

65 Lebanon Tax Facts HOLDING COMPANIES Holding companies are exempt from tax on business profits and tax on profit distribution. They are subject to the following taxes: - 10% on the interest on loans granted to companies operating in Lebanon, if the loan maturity is less than three years - 10% on capital gain received from the sale of their participation in Lebanese companies owned for less than two years - 10% on revenues from renting patents and on the reserved rights owned on a Lebanese company - Progressive tax on capital and reserves up to a maximum of LBP 5,000,000.

66 Lebanon Tax Facts OFFSHORE COMPANIES Offshore companies are exempt from tax on business profits and tax on profit distribution. They are subject to the following taxes: - fixed annual tax amounting to LBP 1,000,000-10% on profit from disposal of fixed assets

67 Lebanon Tax Facts BI-LATERAL TAX TREATIES Lebanon has signed treaties for the avoidance of double taxation with the following countries. Algeria, Armenia, Bahrain, Belarus, Bulgaria, Cuba, Cyprus, Czech Republic, Egypt, France, Gabon, Iran, Italy, Jordon, Kuwait, Malaysia, Malta, Morocco, Pakistan, Poland, Qatar, Romania, Russia, Senegal, Sudan, Sultanate of Oman, Syria, Tunisia, Turkey, U.A.E, Ukraine, Yemen.

68 OMAN TAX FACTS 2017 Bipin Kapur Managing Partner BDO Oman Suites 601 & 602 Penthouse, Beach One Bldg. Way No. 2601, Shatti Al Qurum PO Box 1176, Postal Code 112, Sultanate of Oman Tel: Fax:

69 Oman Tax Facts CONTENTS 70 Corporate Income Tax 74 Withholding Tax 75 Personal Income Tax 76 Social Insurance & Other Contributions 77 Other Duties and fees 78 Bi-lateral Tax Treaties

70 Oman Tax Facts CORPORATE INCOME TAX Income tax in the Sultanate of Oman has been in force since 1971 and is governed by the Law of Income Tax on Companies of In June, 2009, a new tax law was promulgated by Royal Decree 28/2009 which became effective from 1 January, This law has been further amended by Royal Decree no. 9/2017 that was issued on 19 February 2017 and which has been published in the Official Gazette on 26 February TAXABLE ENTITIES Taxable entities that are subjected to corporate tax are: Omani proprietorships, Omani companies and permanent establishments (PE). The term PE refers to foreign entities (including persons) carrying out activities in Oman, either directly or through a dependant agent. The tax law provides for a 90 days threshold limit of stay in Oman during a period of twelve months for creating a PE for foreign persons engaged in activities of either services or holding any building site, place of construction or assembly project. Under the dependent agent PE concept, the activities of a dependant agent could create a PE for the foreign principal in certain cases. Provisions have also been introduced by Royal Decree no. 9/2017 to ensure that Islamic financial transactions are taxed in accordance with their fundamental substance in the same way as conventional financial transactions. TAX RATE AND PAYMENT The Royal Decree no. 9/2017 has increased the tax rate from 12% to 15% and all entities are now subject to the new tax rate for the tax year beginning on or after 1/1/2017 on their net taxable income. However, certain entities which meet the definition of a SME will be charged tax at the rate of 3% on their taxable income. Additionally the exemption of RO 30,000 previously allowed has now been removed and all income is now taxable. Oil exploration and production companies are taxed under special rules covered by concessional agreements. Foreign taxes paid abroad can be set-off against taxes due on the same income taxable in Oman based on the compliance of certain conditions mentioned in the law. There are no advance payment procedures, and tax due should be paid with the provisional return on estimated taxable income within 3 months of the end of the financial year of an entity, with the balance, if any, being payable with the final tax return, which should be filed within 6 months of the financial year-end.

71 Oman Tax Facts CORPORATE INCOME TAX Cont d TAX RATE AND PAYMENT Cont d The liability of the payment of tax falls on the owner of the Omani proprietorship or the owner of the PE or an Omani company. Partners of joint ventures shall be jointly liable for the payment due. Any tax due and not paid by the due date will attract interest of 1% per month. TAX RETURNS It is mandatorily required for all tax payers to register with the tax department within three months from the date of incorporation or assuming a PE status. Further, based on the new tax law issued vide Royal Decree No. 9/2017, all tax payers are now required to obtain a tax card from the Secretariat General of Taxation and are committed to show the tax card number issued in all bills and correspondences. The tax year is generally the calendar year. Taxable entities are permitted to have a different tax accounting year than the calendar year. Provisional tax returns must be filed within three months from the end of the tax accounting year and final returns within six months. In respect of a foreign person who carries on business in Oman through multiple permanent establishments, a consolidated tax return should be submitted to the tax department. The financial statements are required to be prepared in accordance with International Financial Reporting Standards. Entities that fall under the definition of SMEs are required to prepare the income statement and final tax return on the cash basis and submit the final tax return within 3 months from the financial year-end. Failure to submit the tax return within the due date shall attract penalty ranging between Omani Rial 100 and Omani Rial 2,000 which is based at the discretion of the tax authorities. TAX EXEMPTIONS Companies and establishments established with the fundamental purpose of industry, mining, exporting, operation of hotels, fishing, farming, agriculture, higher education institutions, schools and colleges and hospitals were previously exempt from income tax for a period of five years from the date of commencing production. The period of exemption may be extended provided that such extension does not exceed a further five years. However, the Royal Decree no. 9/2017 has waived all the above exemptions except for companies in the manufacturing sector which will be granted for a non-renewable period of five years beginning from the date of commencement of production, and subject to compliance with certain conditions.

72 Oman Tax Facts CORPORATE INCOME TAX Cont d Shipping companies registered in Oman are exempt from tax and foreign person carrying shipping and air transport activities in Oman is exempted from tax from the date of commencement of business on the condition that reciprocal treatment is granted. Income realized by foreign airline companies carrying out their activities in Oman through an established entity is exempt from tax. Dividends received against investment in equities, shares, portions or stocks in the capital of any other company established in the Sultanate of Oman are also exempt. Profit made on sale of securities listed on Muscat Securities Market is fully exempt from tax. Income earned by joint investment accounts/mutual funds registered in Oman under the Capital Market Laws, or established overseas for dealing in shares and securities listed on Muscat Securities Market is exempt from tax. DEDUCTIBLE EXPENSES Expenses are deductible if they are incurred wholly and exclusively for the purpose of generation of gross income. Any expenses if determined by the tax department as excessive to the related income will be disallowed to the extent of amount deemed to be excessive. Special rules apply to allowances, such as depreciation, bad debts, donations, partners /proprietors/director s remuneration, contribution to pension funds, rent, interest, head-office overhead allocated to branches and agent/sponsorship fees. Provisions of any nature, whether specific or general, are not allowed as deductions for tax purposes. The tax department takes the view that a deduction will only be allowed when the expense is authentic, fully-supported and actually incurred. The Income Tax Law effective from January 2010 has changed the method of calculating depreciation of capital assets with effect therefrom. Apart from buildings, aircraft and ships, which continue to be depreciated on the straight-line method, all other capital assets are to be depreciated by the written-down method, and for these assets the pooling of assets concept has been introduced. It is the normal practice that transactions entered directly or indirectly with related parties are closely scrutinized by the Secretariat General to ensure that they are at arms length and adjustments are made in the computation of taxable income, wherever necessary.

73 Oman Tax Facts CORPORATE INCOME TAX Cont d ASSESSMENT All the tax returns submitted are subject to assessment within 3 years from the end of the tax year during which the final return is submitted and in case the company did not submit the final tax return, the period will be 5 years. The new income tax law issued vide Royal Decree no. 9/2017, has introduced a mechanism of self-assessment as the basis for tax declaration. This change is intended to increase the accuracy and correctness of the tax filing. OBJECTION AND APPEALS The tax payer can file an objection against an assessment with the Secretariat General for Taxation, within 45 days from the date of issuing the assessment order. The tax payer can also file an appeal with the Tax Appeals Committee against the decision of the Secretariat General for Taxation within 45 days of notification of the decision issued by the Secretariat General of Taxation. The tax payer may also file a case before any court concerned to appeal against the decision issued by the Tax Appeals Committee. CARRY FORWARD AND SET-OFF OF LOSSES The new tax law requires that when a foreign entity carries on business through more than one PE, the loss of any of those PE s for any tax year is allowed to be carried forward only after being reduced by the taxable income for that tax year of the other PE owned by that foreign entity. Losses are allowed to be carry forward for a maximum period of five years and are offset against future profit, except the losses relating to the first 5 years of the exemption period which are allowed to be carried forward indefinitely until fully utilized. However, no loss may be deducted or carried forward if such loss was incurred from carrying on any business exempted from tax, either under this Law or any other law.

74 Oman Tax Facts WITHHOLDING TAX Withholding tax is a tax charged on certain specified payments accruing or arising in Oman to foreign companies which do not have a PE or such income that does not constitute a part of the gross income of that PE. The specified payments are; (a) Royalties (Include rental of equipment); (b) Consideration for research and development; (c) Consideration for the use of or right to use computer software; (d) Management fees; (e) Services; (f) Dividends and g) Interest. Royalties referred above are defined as (1) consideration for the use or right to use of (a) intellectual or proprietary right either for artistic, literary or scientific work, including computer software, cinematograph films, or films or tapes or discs or any other media used for radio or television broadcasting, (b) patent, trademarks, drawings, model and secret process or formula, (c) industrial, commercial or scientific equipment, (2) consideration for information concerning industrial, commercial or scientific experience, (3) consideration for granting rights to work mineral or other sources of natural wealth. The taxpayer who has paid or credited any of the specified payments mentioned above is responsible to deduct 10% tax from the gross amount paid or credited, whichever is earlier, and remit the amount to the Secretariat General not later than 14 days from the end of the month following the month in which that amount is paid or credited. The law states that in case payments are made to countries with which Oman has a Double Tax Avoidance Agreement (DTAA), the rate mentioned in the DTAA would apply. Delay in remittance in withholding tax to the tax department shall attract 1% additional tax per month of the tax due. It is to be noted that the Royal Decree 9/2017 has widened the scope of withholding tax to include dividend and interest. The Secretary General for Taxation issued an assessment in the name of the tax payer responsible for deducting and remitting the withholding tax which is due but has not been paid within the due date.

75 Oman Tax Facts PERSONAL INCOME TAX There is no personal taxation on income, capital gains, gifts or inheritances in Oman and, furthermore, there are no requirements to file any form of tax return.

76 Oman Tax Facts SOCIAL INSURANCE AND OTHER CONTRIBUTIONS SOCIAL INSURANCE Omani employees are protected by Social Security Law. Employers are required to register all Omani employees with the Public Authority for Social Insurance (PASI). According to the PASI Law 61/2013 and Ministerial Decree numbers 8 and 9/2014, starting from 1 July 2014, the monthly contributions should be 11.5% of the total salary (ie basic salary plus all allowances) along with 7% contribution by the employees (which is deducted from the Omani employee s salary). END-OF-SERVICE BENEFIT Expatriate employees at the completion of their employment contract are entitled to an end-of-service benefit which is calculated on the following basis: Fifteen days basic salary for every year of service for the first three years of continuous service; One month basic salary for every year of service thereafter.

77 Oman Tax Facts OTHER DUTIES AND FEES CUSTOM DUTY Import of goods which originates from non-gcc countries are subject to a custom duty of 5% of the import value. Equipment imported by companies for short duration or for the duration of the project is subject to import duty on the equipment by paying the customs duty as a deposit and are entitled to obtain refund after re-exporting the relevant equipment. OTHER TAXES/DUTIES Municipal tax is 5% on hotel income, 5% on property rents, 10% on leisure and cinema income and 2% on electricity bills exceeding RO 50 per month. Tourism levy of 4% and service charge of 8% are also charged on hotel income. A sewerage tax of 10% on water consumption is levied on houses using the drainage system. VALUE-ADDED TAX Currently Oman has no value-added tax. However the Convention for VAT of the Gulf Cooperation Council (GCC) has been drafted to be applied in the territory of all the GCC Member States. It is expected that taxes will be imposed for any transaction for goods and services supplied to any taxable person by a resident or non- resident in a GCC Member State, including the importation of goods by anyone and the tax rate is expected to be 5%. However, there will be some expected exemptions for basic foodstuffs, education sector, the medical sector, the real estate sector and local transport sector. Additionally, each GCC Member State will be required to issue its local law system for VAT and relevant legislation in the coming period. It is expected that VAT system may be effective in Oman from January 2018.

78 Oman Tax Facts BI-LATERAL TAX TREATIES Oman has signed treaties for the avoidance of double taxation with the following countries. Algeria, Belarus, Belgium, Brunei Darussalam, Canada, China, Croatia, France, Germany, India, Iran, Italy, Japan, Lebanon, Mauritius, Moldova, Morocco, Netherlands, Pakistan, Seychelles, Singapore, South Africa, South Korea, Spain, Sudan, Syria, Switzerland, Thailand, Tunisia, Turkey, United Kingdom, Uzbekistan, Vietnam and Yemen Note: Some of the above treaties have either not yet been ratified or are not yet in force. Oman has also entered into treaties with several countries with respect to the avoidance of double taxation on income generated from international air transport.

79 QATAR TAX FACTS 2017 Gavin Brown Partner BDO Qatar 38 th Floor, Palm Tower (B) PO Box 24139, West Bay Doha State of Qatar Tel: Fax:

80 Qatar Tax Facts CONTENTS 81 Registration with Tax Authorities 82 Corporate Income Tax 83 Withholding Tax on International Transactions 84 VAT

81 Qatar Tax Facts REGISTRATION WITH TAX AUTHORITIES REGISTRATION In order to comply with the provisions of the tax law, all resident companies (Business with Permanent Establishments) are required to register with Qatar Public Revenues and Taxes Department (PRTD) within thirty days from the commencement of the activity; and to obtain a tax card (which will essentially be an ID card for tax purposes). A financial penalty amounting to QR 5,000 shall be imposed in the case of failure to register with the tax department on time. In registering companies for tax and subsequently issuing them with a tax card, the PRTD will require certain information from the taxpayer. PROCEDURES Every tax payer carrying on an activity in the State of Qatar shall submit an application from the date of effectively of the tax law for tax payers carrying on activity at that date in accordance with the limits, conditions and procedures provided for in the executive regulations of the tax law. REQUIREMENTS The process will require: gathering all relevant information required from the tax department; drafting and submission of the application to the department; liaising with the department and ensuring that all enquiries are answered promptly; and followingup with the department until the issue of the tax card.

82 Qatar Tax Facts CORPORATE INCOME TAX RATES OF CORPORATE TAX In general, the standard rate of corporate tax is 10% flat rate applied to the company s net taxable profits starting from the beginning of January THE CORPORATE TAX YEAR The rate of corporate tax is fixed in respect of the corporate tax year or the financial year. The company has the right to choose the date of year-end to issue its annual financial statements, regardless of the calendar year. Each year has to be accounted for separately. The first accounting period shall begin on the date of commencing the activity, and the company may end it at the end of the taxable year in which it started the activity or the following year, provided that the accounting period shall not be less than 6 months nor more than 18 months. DEDUCTIBLE EXPENSES The general rule is that only expenses that are wholly and exclusively incurred in earning the income of the business are deductible. The cost and expenses have to be supported by proper documents. ACCOUNTING METHODS AND BUSINESS PROFITS A company s taxable income is based on its accounting profits, computed according to the International Financial Reporting Standards. FILING REQUIREMENTS The corporate tax return must be filed along with all supporting documents (e.g. Audited financial statements), within four months from the accounting year end, e.g. 30 April, for 31 December year-end. CARRY FORWARD LOSSES Losses are carried forward for deduction from subsequent profits for up to three years. DIVIDENDS There is no withholding tax on the payment of dividends, whether the recipient is resident or non-resident.

83 Qatar Tax Facts WITHHOLDING TAX ON INTERNATIONAL TRANSACTIONS BASIS OF TAXATION The new tax law has been applied from the beginning of year 2010 and it introduced a requirement to operate withholding tax on certain payments to foreign companies which are not resident or do not have a Permanent Establishment in Qatar. The obligation to deduct withholding tax applies to all businesses operating in Qatar regardless of whether they are 100% Qatari owned or partly foreign owned. (There is no exemption) RATES OF WITHHOLDING TAX Under the new law, businesses in Qatar must deduct withholding tax at the rate of 5% on payments of royalties and technical fees, and at the rate of 7% on payments of managerial, consultancy fees, directors fees, attendance fees and any other payments to non-residents for services carried out wholly or partly in Qatar. Payments for a pure supply of goods are not subject to withholding tax however if there is a service element involved, this portion would be subject to withholding tax. A service is considered to be carried out wholly or partly in the State where any of the actions required to its performance is carried out in the State. This includes particularly the collection of data, sightseeing and performance of the service. The delivery of the service shall not be considered as an action required to its performance. The following activities shall not be regarded as services the consideration for which is subject to withholding tax under item 2 of Article 11 of the Law: - Reinsurance; - Freight and sale of travel tickets; - Sea transport of petroleum and its derivatives as well as manufactured products. FILING REQUIREMENTS Businesses which deduct withholding tax from payments made to non-residents are required to remit this to the Tax Department by the 14th day of the month following the month in which the payment was made. Detailed letter will need to be provided to the tax department along with the payment and the payer will also need to issue a receipt to each of the parties from whom it deducted the withholding tax. Failure to deduct the withholding tax and remit it to the tax department by the specified date will result in a penalty for the entity equal to the amount of the withholding tax. This is in addition to payment of the withholding tax itself.

84 Qatar Tax Facts VALUE ADDED TAX In common with the other member states of the GCC Qatar is expected to introduce value added tax with effect from (or sometime after) 1 January The details of the VAT regime, which will be set out in a GCC framework agreement and enacted by national legislation, have not yet been made available. However, the law is expected to follow the European model, with exemptions and zero-rate relief for a limited range of goods and services including healthcare, education and some basic foodstuffs. The rate is expected to be 5%. Imports will be subject to VAT on entry.

85 SAUDI ARABIA TAX FACTS 2017 BDO Dr. Mohamed Al-Amri & Co. P.O.Box.: 8736, Riyadh Tel: Fax:

86 Saudi Arabia Tax Facts CONTENTS 87 Zakat 88 Income Tax 91 Withholding tax 92 Other Taxes 93 Social Insurance

87 Saudi Arabia Tax Facts ZAKAT WHO IS SUBJECT TO ZAKAT? Zakat is a religious tax, levied on Saudi nationals, wholly Saudi-owned companies and the Saudi shareholders share of profits of companies with foreign participation, in accordance with Islamic law "SHARIA". For this purpose, GCC nationals and companies are treated as Saudis. Zakat is payable annually on the higher of Adjusted Net Income or Zakat base (which is calculated in general on the net worth). RATE OF ZAKAT Zakat is calculated at a rate of 2.5% of the Zakat base. ZAKAT YEAR The rate of Zakat is fixed in respect of the corporate financial year. DEDUCTIBLE EXPENSES The general rule is that all necessary and actual expenses to run the business are deductible for Zakat calculation purposes. The cost and expenses have to be supported by proper documents. ACCOUNTING METHODS AND BUSINESS PROFITS Zakat is payable annually on the Zakat payer's total capital resources and income, excluding amounts invested in fixed assets. The rate of Zakat is 2.5%. FILING REQUIREMENTS Corporate Zakat payer s must submit their Zakat return within 120 days from the accounting year end, e.g. 30 April, for 31 December year end. The GAZT has allowed holding companies previously to file a consolidated return for entities owned 100%. A new circular was issued requiring each company in the consolidated return to submit a stand-a-lone informative return. E-FILING The General Authority of Zakat and tax (GAZT) introduced a portal for online submission of zakat return. The Zakat payers are required to obtain an online registration for the company with GAZT and obtain the log in name and the password for the submission of the annual zakat returns, no hard copy of the Zakat return Form Q2 will be accepted by the tax authorities. CARRY FORWARD LOSSES Where Zakat is calculated on the Zakat Base (net worth), losses are carried forward as part of the equity. Where Zakat is calculated on net Zakat adjusted income no offsetting of losses are allowed.

88 Saudi Arabia Tax Facts INCOME TAX REGISTRATION In the Kingdom of Saudi Arabia every person subject to tax shall register with the General Authority of Zakat and Tax before the end of its first fiscal year. In March 2016, the Department of Zakat and Income Tax introduced a new system known as EARD. The new system will require a new detailed online registration applicable for all Zakat and Tax payers. The new system should automate the whole filing and certificate collection process. RATES OF INCOME TAX A 20% income tax rate is applicable to the taxable income of non-saudi individuals in business, companies registered in Saudi Arabia, and non-resident individuals and companies carrying business activities through a permanent establishment in the Kingdom. Income includes all income, profits, gains of any type and of any form of payment resulted from carrying out activity, including capital gains and any incidental income. A Natural Gas Investment Tax (NGIT) is applicable on any person, natural or corporate, Saudi or non-saudi, taxable income derived from exploration, production, collection, treatment, transportation, processing and fractionation of natural gas, natural gas liquids and gas condensates. The NGIT rate for any taxable year is determined based on the internal rate of return on the cumulative annual cash flows of the taxpayer from the natural gas investment activities. Based on the NGIT rates table, the NGIT rate can range from a minimum of 30% for an internal rate of return of 8% to a maximum of 85% for internal rates of return of 20% and above. A tax rate of 85% is applicable to the taxable income from oil or other hydrocarbon production activity in the Kingdom. EXEMPT INCOME The following income types are exempt from income tax: a) Capital gains realized from disposal of securities traded in the Stock Market in the Kingdom in accordance with controls specified in the By-law. b) Gains on the disposal of property other than assets used in the activity.

89 Saudi Arabia Tax Facts INCOME TAX Cont d THE CORPORATE TAX YEAR The rate of corporate tax is fixed in respect of the corporate tax year or the financial year. A company has the right to choose the date of its year-end which is always stated in its Articles of Association regardless of the calendar year. Branches of foreign subsidiaries usually follow the year-end of their Head Office. Each year has to be accounted for separately. The first and last year should be a short period unless otherwise is agreed with the tax authority. In case of a long tax year, a return must be submitted for the 12 month period as well as for the long year. DEDUCTIBLE EXPENSES The general rule is that only necessary and actual expenses that are wholly and exclusively incurred in earning the income of the business are deductible. The cost and expenses have to be supported by proper documents. CAPITAL GAIN Capital gain derived from disposal of fixed and traded assets, or from disposal of shares in a resident company is subject to tax at 20%. The following incomes are exempt from income tax: a) Capital gains realized from disposal of securities traded in the Stock Market in the Kingdom in accordance with controls specified in the By-law. b) Gains on the disposal of property other than assets used in the activity. ACCOUNTING METHODS AND BUSINESS PROFITS A company s taxable income is based on its accounting profits, computed according to the Saudi Accounting Standards, which is, to a great extent, compliant with the International Financial Reporting Standards (IFRS). Certain adjustments are required to be made to the accounting profit to arrive at taxable income.

90 Saudi Arabia Tax Facts INCOME TAX Cont d E-FILING REQUIREMENTS The General Authority of Zakat and tax (GAZT) introduced a new portal for online submission of all Zakat and Tax returns. FILING REQUIREMENTS The corporate tax return must be filed along with all supporting schedules and documents (e.g. audited financial statements), within 120 days from the accounting year end, e.g. 30 April, for 31 December year end. Partners in a partnership and professionals must submit their tax return within 60 days from the accounting year end. Under the tax law no extensions are granted. CARRY FORWARD AND OFFSET OF LOSSES Losses are allowed to be offset equal to 25% of tax adjusted net income for the year. Losses can be carried forward indefinitely until they are recovered in full. In case of a change of fifty percent (50%) or more in the ownership or control of a company, the share of a non-saudi may not be deducted in losses incurred prior to the change in taxable years following the change. RULES FOR ADVANCE PAYMENT OF TAXATION Tax has to be paid in advance where previous year tax obligation is SR 2 million or more. In such case advance tax will be 25% of previous year tax obligation and has to be paid prior to the last date of sixth, ninth and twelfth month. GAZT has the power to reduce the amount of advance tax where the revenue for the year drops by 30%.

91 Saudi Arabia Tax Facts WITHHOLDING TAX Payments made to non-residents by a resident or permanent establishment of a non resident that are from a source in the Kingdom are subject to withholding tax. Depending upon the nature of payment, the payer is required to withhold the tax at the following rates: Type of Payment Tax Rate % Management fees 20 Royalties or proceeds; payments against technical and consulting or international telecommunication services paid to head-office or affiliated company Technical and consulting services or international telecommunication services except the ones paid to headoffice or affiliated company rent, air tickets, air freight and maritime freight; profit distributions; loan charges; insurance or reinsurance premiums 15 5 Other payments Not to exceed 15 Technical and consulting services are deemed to be from a Saudi source even if they were performed outside the country. The person withholding the tax, irrespective of whether or not he is a taxpayer under the tax law, is required to register with the GAZT, and pay the tax so withheld within 10 days after the end of the month in which such payments are made. The payer is also required to issue a certificate to the payee stating the amount of payment and the tax withheld. At the end of each tax year, the payer is required to submit the names, addresses and other details of the payees to the GAZT no later than 120 days of the end of the fiscal year, and not later than 60 days of the end of the fiscal year for partnerships. Withholding tax is payable upon payment or deemed payment (clearance or settlement of accounts). The date of settlement is considered to be the date of payment unless the settlement is between related parties in which case it is the date of book entry. A delay penalty of 1% of the amount of unpaid withholding tax is applicable for each 30 days of delay from the due date of the tax till such time the tax is paid. Recently the GAZT has launched the online WHT filing. Accordingly, all companies are required to complete the monthly and annual WHT using the online portal.

92 Saudi Arabia Tax Facts OTHER TAXES At present the following taxes are not imposed in the Kingdom: Personal tax on employee's remuneration Value-added tax Withholding tax of local transactions Estate and gift taxes VALUE ADDED TAX In common with the other member states of the GCC Saudi Arabia is expected to introduce value added tax with effect from 1 January The details of the VAT regime, which will be set out in a GCC framework agreement and enacted by national legislation, have not yet been made available. However, the law is expected to follow the European model, with exemptions and zero-rate relief for a limited range of goods and services including healthcare, education and some basic foodstuffs. The rate is expected to be 5%. Imports will be subject to VAT on entry.

93 Saudi Arabia Tax Facts SOCIAL INSURANCE Social insurance in the Kingdom is administered by the General Organization for Social Insurance (GOSI). Employers are required to make contribution for Saudi employees who are required to contribute the same percentage of their salary in respect of social insurance. In addition, employers are required to contribute 2% of the basic salary of both Saudi and non-saudi employees to cover the job hazards risk. Certain categories of employees such as certain government employees, armed forces and diplomatic personnel, domestic servants etc are exempt from social insurance contributions SOCIAL INSURANCE RATE The rate of Social Insurance is as follows, showing the employer and employees portions: Category of Employees Annuity branch (Pension annuity) Unemployment Contribution Occupational Hazards Total Employer Employee Employer Employee Employer Total SAUDI EMPLOYEE 9% 9% 1% 1% 2% 22% NON-SAUDI EMPLOYEE 0% 0% 0% 0% 2% 2% On 6 January 2014, the Council of Ministers approved a new annuity for insurance against un-employment. The program is called SANID which means support. The annuity will be 2% and will be split equally between the employer and the employee. SANID will apply within 6 months from the date it was approved.

94 U.A.E. TAX FACTS 2017 BDO Chartered Accountants & Advisors Suite 305, Al Futtaim Tower Al Maktoum Street, Deira P.O. Box- 1961, Dubai Tel: Fax:

95 U.A.E. Tax Facts CONTENTS 96 Corporate Income Tax 97 Salary Tax 98 Social Insurance and other contributions 99 VAT & Indirect Taxes 100 Stamp Tax 101 Withholding Tax on Local Transactions 102 Capital Gain Tax 103 Tax Treaties

96 U.A.E. Tax Facts CORPORATE INCOME TAX RATES OF CORPORATE TAX There are decrees issued by each Emirate covering corporate tax and levying up to 55% based on the income slabs, but their enforcement has been limited to foreign banks and foreign oil companies only and there is no corporate tax for other entities registered in the UAE. Further, entities registered in the Free Zones are exempted from tax for years a concession that is renewable. Foreign banks have been paying a 20% tax on net profits of each of their branches in the UAE and for foreign oil companies the amount of tax paid by an oil company is based on a rate agreed in an individual concession between the oil company and the respective Emirate. THE CORPORATE TAX YEAR There is no corporate tax for other entities registered in UAE. Hence, there is no separate corporate tax year for the companies registered in the UAE. DEDUCTIBLE EXPENSES The general rule is that only expenses that are wholly and exclusively incurred in earning the income of the business are deductible. The cost and expenses have to be supported by proper documents. However as there is no corporate tax in the UAE, the significance of deductible expanses is limited. ACCOUNTING METHODS AND BUSINESS PROFITS There are no Local Accounting Standards in place and to a great extent the International Accounting Standards (IAS & International Financial Reporting Standards (IFRS) are being followed in the UAE. FILING REQUIREMENTS There are no tax related filing obligations for the companies registered in the UAE other then foreign banks & oil companies. DIVIDENDS There is no withholding tax on the payment of dividends. PAYMENT TO NON-RESIDENTS Since there are no withholding taxes in the UAE and there are no restrictions in transferring funds into or outside the UAE or payment to non-residents.

97 U.A.E. Tax Facts SALARY TAX TAXATION Individuals are not taxed in the UAE; hence there are no taxes on salary income or personal income.

98 U.A.E. Tax Facts SOCIAL INSURANCE AND OTHER CONTRIBUTIONS The UAE Nationals are automatically provided with extensive state help, including medical care, sickness and maternity cover, child care, pensions, unemployment benefit and in some instances housing and disability benefits. Medical insurance is mandatory to be provided by the employer in Abu Dhabi. Dubai Government is also implementing new regulations making basic healthcare cover mandatory to be provided by the employer. PENSION There are no state pension schemes in the UAE for foreign expatriates. There are pension schemes for the UAE nationals, which are covered under Law No 2 of 2000 applicable in Abu Dhabi. The total contribution is 26% comprised as follows: From the employee - 5% From the employer - 15% From Government - 6% Under the UAE Federal Law No. 7 of 1999 applicable for all other Emirates, pension for the UAE Nationals in private sector is contributed as under: From the employee - 5% From the employer 12.5% From Government 2.5% The employer is responsible for collecting employee s contributions and remitting them to the pension fund along with employer s contribution. The Government pays its contribution directly to the pension fund. It is also mandatory for the employer hiring GCC Nationals to deduct and contribute towards pension as per the pension scheme of the respective country of the nationality of the employee. END OF SERVICE BENEFIT At the completion of the employment contract, the employees are entitled to an end of service benefit which is calculated on the basis of number of days basic salary for each completed year of service.

99 U.A.E. Tax Facts VALUE ADDED TAX & INDIRECT TAXES VALUE ADDED TAX In common with the other member states of the GCC the UAE is expected to introduce value added tax with effect from 1 January The exact details of the VAT regime which will need to be set out in the common framework of VAT within the GCC and the national legislation have not yet been made available. However, the law is expected to follow the European model, with exemptions and zero-rate relief for a limited range of goods and services including healthcare, education and some basic foodstuffs. The rate is expected to be 5%. Imports will be subject to VAT on entry. OTHER INDIRECT TAXES Individual Emirates may charge levies on certain services such as those provided in the hospitality industry and on property rentals. Municipal fees are charged in some of the Emirates. In Dubai a 10% municipal fee is charged on hotel revenues and entertainment. Municipal fee on rental of residential and commercial premises is charged by different Emirates at the rate of 2-10%. This amount is payable by the tenants. INVOICES DETAILS There is no specification with regards to Invoice formats; however the standard documentation will apply for invoices for import & export purposes. EXPORTED & IMPORTED GOODS Customs duty is levied at 5% on imports of majority of products except tobacco & alcoholic beverages which are subject to import duty at higher rates. Certain essential commodities are exempt from import duties. There are no export duties.

100 U.A.E. Tax Facts STAMP TAX There is no stamp duty. However, there are various fixed transaction charges for processing of visa, work permit, notarization, vehicle registration and other services from Government departments. For transfer of property, transfer fees are charged by the land department based on the value of property.

101 U.A.E. Tax Facts WITHHOLDING TAX ON LOCAL TRANSACTIONS TAXATION There are no withholding taxes in the UAE.

102 U.A.E. Tax Facts CAPITAL GAIN TAX TAXATION There are no capital gain taxes in the UAE.

103 U.A.E. Tax Facts TAX TREATIES The UAE is a leading country with regards to agreements to avoid double taxation. These agreements bring about a positive impact on investment promotion, economic cooperation and trade between the UAE and other countries. The UAE has an extensive and growing list of double tax treaties with more than 50 countries.

104 The BDO network in Middle East countries: BAHRAIN EGYPT JORDAN- KUWAIT LEBANON OMAN QATAR - SAUDI ARABIA U.A.E. This publication has been prepared by the BDO Khaled & Co, the BDO Member Firm in Egypt, and includes contributions from the independent BDO Member Firms of the Middle East Region. This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained herein without obtaining specific professional advice. Please contact the appropriate BDO Member Firm to discuss these matters in the context of your particular circumstances. Neither the BDO network, nor the BDO Member Firms or their partners, employees or agents accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO is an international network of public accounting, tax and advisory firms, the BDO Member Firms, which perform professional services under the name of BDO. Each BDO Member Firm is a member of BDO International Limited, a UK company limited by guarantee that is the governing entity of the international BDO network. Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Zaventem. Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal entity and has no liability for another such entity s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network. BDO is the brand name for the BDO network and for each of the BDO Member Firms.