1. www.bbd-e.com Taxes, Investments and Opportunities in the Middle East 6th Asia/Africa IFA Regional Conference - May 10-11, 2012, Mauritius Thomas Hanzély

2. www.bbd-e.com General Taxes in the Middle East Political Developments and the Economic Situation – impact on tax policy Focus on the GCC (in particular Bahrain, Qatar and the UAE) – attractive for foreign investors GCC as an economic union?

3. www.bbd-e.com Corporate Tax Rate Changes in the Middle East Source: Ernst & Young, Tax Treaties - Recent Applications in the Middle East, 2010

4. www.bbd-e.com General II Corporate Taxation – Different tax rates for the hydrocarbon industry VAT – any harmonization of indirect taxes in the GCC in the near future? Personal Income Tax Growing Treaty Network – availability of treaty benefits, dispute resolution, aggressive approach in various matters (e.g. Permanent Establishments) Withholding Tax Regimes applied by most of the MENA countries

5. www.bbd-e.com General Issues III Lack of service-oriented administration? – However I: Ease of Doing Business report (World Bank, 2012) places Saudi Arabia overall 12th, the UAE 33rd, Qatar 36th, Bahrain 38th – However II: Index of Economic Freedom (Heritage Foundation in cooperation with the WSJ 2012) places Bahrain 12th, Qatar 25th, UAE 35th Communication with authorities – Interpretation of tax rules – Language No bankruptcy laws, no credit rating system Anti-Fronting Laws Still a safe haven for business?

6. www.bbd-e.com Economic Substance in GCC Structures ES is an emerging trend ES can be implemented in the region – place of effective management and control can be in GCC countries There are plenty of non-tax reason to establish a company in the GCC

7. www.bbd-e.com COUNTRY PROFILES

8. www.bbd-e.com BAHRAIN

9. www.bbd-e.com Bahrain – Tax Profile Only GCC country without any (statutory) tax – No corporate income tax (CIT), no capital gains tax (CGT), no withholding tax (WHT), no personal income tax (PIT), no VAT – Except a 46% corporate income tax levied on oil and gas companies Treaty network (25, in force, 8 pending) – a.o. Austria, China, France, Ireland, Netherlands, Singapore – Pending treaties with Belgium and the UK

10. www.bbd-e.com Bahrain – at a Glance I Historical financial and trading hub in the ME Not considered as a tax haven 100% foreign ownership allowed Business friendly environment Good infrastructure Costs Political situation?

11. www.bbd-e.com Bahrain – at a Glance II Free Trade Agreement with the U.S. (2006) Bahrain International Investment Park (BIIP) – 0% Corporate Tax with a 10 year guarantee – Duty free access to the markets of the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) – 100% Foreign Ownership – Availability of serviced industrial land at extremely competitive rates – Renewable 50 year leases – No recruitment restrictions for the first 5 years – Dedicated assistance of a professional management team

12. www.bbd-e.com QATAR

13. www.bbd-e.com Qatar – Tax Profile New tax law effective since 1 January 2011 CIT and CGT 10% (flat rate); petroleum companies are taxed at not less than 35% or as determined in the production sharing agreement (PSA) No personal income tax, no VAT Anti-avoidance measures Transfer pricing

14. www.bbd-e.com Qatar – Overview One of the fastest growing country worldwide – economy is based on the revenues from liquefied natural gas (LNG) Restricted foreign ownership (49/51) – 100% foreign ownership only in exceptional cases Role of the Qatar Financial Centre (QFC) – separate/parallel from Qatari legal system based on common law principles Qatarization laws Costs Treaty Network (37 in force, 7 pending) – Many OECD countries, India, Singapore, China, Mauritius

15. www.bbd-e.com Qatar – Withholding Tax vs Contract Retention WHT at 5% (royalties, technical fees or management fees) or 7% on any other payments (e.g. director´s fees, brokerage fees, commissions, etc.) Contract retention applies if a company is not incorporated in Qatar or only for a period of less than a year and for a specific project. Contract retention it will be the greater of i) 3% of the contract value excluding the supply value and value of work done outside Qatar and ii) the final payment.

16. www.bbd-e.com UNITED ARAB EMIRATES

17. www.bbd-e.com UAE – Tax Profile Statutory CIT exists, but not enforced, currently 0% CIT Petroleum companies are taxed based on individual agreements – tax rates are not disclosed Branches of foreign banks are also taxed No personal income tax, no CGT, no VAT Treaty Network (47 treaties in force, 10 pending) – Many OECD countries, India, China, Singapore, Mauritius, Mozambique

18. www.bbd-e.com UAE - Free Zones Free Zones – 100% foreign ownership only in free zones – new company laws on the agenda – guaranteed tax holiday – no restrictions on hiring foreign professionals – State of the art infrastructure – Professional local authorities / procedures put in place More than 30 Free Zones in the Emirates

19. www.bbd-e.com UAE – Free Zones & Economic Substance Dubai International Financial Center (DIFC) Jebel Ali Free Zone (JAFZA) most well known – Most Free Zones allow for the implementation of economic substance Anti-avoidance provisions in tax treaties – limitation of benefits – subject-to-tax / liable-to-tax (unclear whether UAE residents are liable to tax in the context of the treaty) – Conclusion: bona fide business at least required in order to benefit from tax treaties

20. www.bbd-e.com India – UAE DTT Article 29 - Limitation of Benefits An entity which is a resident of a Contracting State shall not be entitled to the benefits of this Agreement if the main purpose or one of the main purposes of the creation of such entity was to obtain the benefits of this Agreement that would not be otherwise available. The cases of legal entities not having bonafide business activities shall be covered by this Article.

21. www.bbd-e.com UAE – Recent Developments Ras Al-Khaimah (RAK) – new offshore jurisdiction / is the UAE (still) promoting offshore structures? Since 1 January 2011 offshore companies may not acquire real estate in the UAE anymore – A result of the fight against money laundering and a move towards greater transparency – Only entities registered with the Jebel Ali Free Zone are eligible to register real estate

22. www.bbd-e.com GENERAL ISSUES

23. www.bbd-e.com General Greater Arab Free Trade Agreement (GAFTA) Pan-Arab free trade greement (1997) 14 signatory states Full liberalization of goods with full exemption of customs duties and charges key benefits: reduction of usual 15/20% import duty imposed by many MENA countries To benefit from the GAFTA, the imported products must be enhanced in one of the signatory states – the UAE is often used as a gateway to other GAFTA countries, since it has low import duties (5%)

24. www.bbd-e.com Legal Issues Legal Systems / Dispute Resolution – civil law (based on Egyptian law) – common law (e.g. DIFC and other free zones) – Shariah law (GCC countries have a dual system) – Arbitration – DIFC courts can be competent for disputes from other GCC countries (since October 2011)

25. www.bbd-e.com Indian Double Tax Treaties Kuwait (in force, 2007) Oman (1997) Qatar (2000) Saudi Arabia (2006) UAE (1997, amended in 2007)

26. www.bbd-e.com CONCLUSION

27. www.bbd-e.com THANK YOU ADDRESS BBD Enterprises WLL Level 22, West Tower Bahrain Financial Harbour King Faisal Highway Manama, Kingdom of Bahrain PHONE +973 17502909 (Office) Sunday to Thursday, 8:30AM to 5:30PM Standard time zone: UTC/GMT +3 hours FAX +973 17502910 E-MAIL info@bbd-e.com