The recent Ernst & Young MENA Tax Conference 2012 outlined the evolving tax landscape in the Middle East and North Africa (MENA) region. Sherif El-Kilany, MENA Tax Leader, Ernst & Young, said "from a fiscal and tax perspective, the changes we are seeing are largely positive, with business and investment friendly tax laws and increased transparency of regulation and enforcement. The changes rightly factor in the impact of the eurozone crisis which continues to cast a gloomy shadow. We see MENA countries proceeding with their resources investment, infrastructure development and economic growth plans with more realism than we have experienced in the past." He noted a trend that could have considerable tax cost impact in the coming years is the increasingly rigorous tax assessment process and less attractive outcomes related to deemed profit tax declarations. "Throughout the region we see tax authorities either tightening on deemed profit assessments or discontinuing this tax filing option." Tax laws in Egypt, Oman and Qatar, now provide the tax authority the right to review the pricing of the related parties' transaction and compare it with fair market price. Many countries, including Egypt and Qatar, have issued executive regulations that include accepted pricing methods and require taxpayers to declare specific information for related parties' transactions. Regional tax authorities often take a much broader, and at times more local, interpretation of tax concepts that may be different from other jurisdictions. For example, the interpretation and application of new tax laws relating to foreign oil and gas contractors also requires local expert understanding and experience in dealing with the authorities. More complexity in tax laws relating to dependent agency, thin capitalization and transfer pricing is being introduced in countries like Egypt, Qatar, Kuwait and Oman. In Egypt, for example, if the debt equity ratio of any company exceeds 4:1, excess interest is not tax deductible. In Kuwait, interest paid to financial institutions outside Kuwait could be challenged. It is important to keep abreast of tax practice in various countries in the region.
