Middle East: Tax landscape continues to evolve across the region with increase in information exchange

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Middle East: Tax landscape continues to evolve across the region with increase in information exchange

mcclafferty.jpg

Fiona McClafferty

In a region famous for its oil and the perception of widespread tax-free living, international tax agreements have generally made little difference to those in the Middle East. However, times are changing. The effects of Foreign Account Tax Compliance Act (FATCA) and soon, the Common Reporting Standard (CRS), championed by the Global Forum on Transparency and Exchange of Information for Tax Purposes, will mean much more cross-border information exchange.

Following satisfactory Phase I peer reviews of their legal and regulatory frameworks for transparency and exchange of information, three Arab countries (United Arab Emirates, Kingdom of Saudi Arabia and Qatar) have indicated their intention to form part of the second wave of 'early adopters' of CRS. The consequence of this is that financial accounts (broadly defined) in existence in these three countries from January 1 2017 will be subject to automatic reporting, in 2018, to the beneficial owner's jurisdiction of residence.

Additionally, Qatar and Bahrain have already been reviewed in the second peer review phase and were rated as "largely compliant". Bahrain is, however, yet to determine its timetable for adopting the automatic exchange system.

Although it is not a member of the Global Forum, Lebanon has also been subjected to a Phase 1 Peer Review by the Global Forum 'because of advertising itself as a developing financial centre'. However, this jurisdiction has not yet been cleared to progress to Phase 2.

In this region, wealth planning, structuring, or the use of trusts and foundations is usually motivated not by tax considerations, but genuine commerciality, confidentiality concerns or succession planning. The bulk of the wealth appears to be concentrated in the hands of a small number of family groups and it is not unusual to see investments being made across borders. Historically, there has been no widespread local requirement to report financial information to a regulatory body and so there will undoubtedly be some initial resistance for the reasons outlined above.

Because of the geopolitical environment in the region now and in the past (as well as the climate), dual nationality or long term visitors' visas are not uncommon. While facilitating travel, such documents can also expose the holder to taxation in the other jurisdiction, something which is commonly overlooked. Awareness of the worldwide basis of US taxation is increasing in the wake of FATCA, and many individuals are regularising their position. The impact of CRS will, however, have a much broader reach.

For those who are tax resident in a jurisdiction with personal taxation, and who also have assets in the Middle East, there remains only a short window of opportunity to regularise one's situation, whereas fully compliant individuals may wish to consider the impact of the loss of confidentiality on the structuring of their affairs.

Fiona McClafferty (fmcclafferty@deloitte.com)

Deloitte

Tel: +971 (0)4 506 4841

Fax: +971 (0) 4 327 3637

Website: www.deloitte.com/middleeast

more across site & shared bottom lb ros

More from across our site

In the age of borderless commerce, money flows faster than regulation. While digital platforms cross oceans in milliseconds, tax authorities often lag. Indonesia has decided it can wait no longer
The tariffs are disrupting global supply chains and creating a lot of uncertainty, tax expert Miguel Medeiros told ITR’s European Transfer Pricing Forum
Corporate counsel should combine deep technical knowledge with strategic dynamism, says Agarwal, winner of ITR’s EMEA In-house Indirect Tax Leader of the Year award
Luxembourg’s reform agenda continues at pace in 2025, with targeted measures for start-ups and alternative investment funds
Veteran Elizabeth Arrendale will lead the new advisory practice, which will support clients with M&A tax structuring, post-deal integration, and more
MAP cases keep increasing, and cases closed aren’t keeping pace with the number started, the OECD’s Sriram Govind also told an ITR summit
Nobody likes paperwork or paying money, but the assertion that legal accreditation doesn’t offer value to firms and clients alike is false
Ryan hopes the buyout will help it expand into Asia and the Middle East; in other news, three German finance ministers have called for a suspension of pillar two
SKAT, which was represented by Pinsent Masons, had accused Sanjay Shah and other defendants of fraudulent dividend tax refund claims
TP managers must be able to explain technical issues in simple terms, ITR’s European Transfer Pricing Forum heard
Gift this article