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

The US’s GILTI regime will not be forced upon American multinationals in foreign jurisdictions, Bloomberg has reported; in other news, Ropes & Gray hired two tax partners from Linklaters
APAs should provide a pragmatic means to agree to an arm's-length outcome for an Australian entity and for the ATO, the tax authority said
Overall revenues and average profit per partner also increased in the UK, the ‘big four’ firm revealed
Increasingly complex reporting requirements contributed towards the firm’s growth in tax, it said
Sector-specific business taxes, private equity tax treatment reform and changes to the taxation of non-residents are all on the cards for the UK, authors from Herbert Smith Freehills Kramer predict
The UK’s Labour government has an unpopular prime minister, an unpopular chancellor and not a lot of good options as it prepares to deliver its autumn Budget
Awards
The firms picked up five major awards between them at a gala ceremony held at New York’s prestigious Metropolitan Club
The streaming company’s operating income was $400m below expectations following the dispute; in other news, the OECD has released updates for 25 TP country profiles
Software company Oracle has won the right to have its A$250m dispute with the ATO stayed, paving the way for a mutual agreement procedure
If the US doesn't participate in pillar two then global consensus on the project can’t be a reality, tax academic René Matteotti also suggests
Gift this article