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8 September 2016

Complying with BEPS rules "an opportunity for UAE"

Content team

Companies based in the United Arab Emirates (UAE) and other states in the Middle East have been encouraged to view the base erosion and profit shifting (BEPS) project as an opportunity to achieve new efficiencies and reduce risk, according to KPMG.

Led by the Organisation for Economic Cooperation and Development (OECD), the BEPS initiative aims to crack down on multinational corporations (MNCs) reducing their tax exposure by artificially shifting profits to low-tax environments.

One of the OECD's key objectives is ensuring that companies are in compliance with legislation on transfer pricing - the process of setting prices at which two parties belonging to the same group transact with one another.

Transfer pricing is legal, but there is a risk of MNCs abusing the system to pay taxes lower than they should.

Writing in state-owned UAE newspaper The National, Shabana Begum, head of transfer pricing at KPMG Middle East and South Asia, pointed out that the new BEPS rules apply to any group with international transactions or operations.

That means all businesses headquartered in countries belonging to the Gulf Cooperation Council (GCC) will be affected, regardless of whether they pay corporation tax in their home jurisdiction.

Ms Begum pointed out that several international tax authorities have already implemented the BEPS proposals, but some Gulf states might require more time to adjust to the changes.

"This will be a transitional period for the Middle East because the new proposals mean that a number of GCC groups will be subject to BEPS and an unprecedented level of disclosure and scrutiny," she wrote.

"Complying with these new rules should be seen as an opportunity for global companies headquartered in the UAE and the region to streamline their supply chains and to mitigate their tax risks."

Identifying potential BEPS risks and opportunities is one of the areas where KPMG expects companies to require help as they adjust to the new system.

Content team, Bureau van Dijk

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