Legal and Tax Alert - Middle East

Legal and Tax Alert - Middle East

Legal and Tax Alert - Middle East


New Netherlands – Saudi tax treaty provides opportunities for structuring investments into Saudi

The tax treaty between the Netherlands and Saudi Arabia (the "Treaty") has become effective as of 1 January 2011 (click here for more details on the Treaty, Stibbe Tax Alert of 22 October 2008). Since the Treaty contains a unique provision which should generally protect Dutch investors against a 20% Saudi Arabian ("Saudi") capital gains tax levy upon a sale or a transfer of the shares of a SA subsidiary, it can be most beneficial for non-Saudi investors to structure their investments into Saudi Arabia (inbound investments) through a Dutch intermediate company. The attractive and robust tax system and reliable and flexible corporate laws of the Netherlands allow for the efficient structuring of Dutch (holding) companies.

In Saudi Arabia a capital gains tax at the rate of 20% is levied upon the transfer of shares in a Saudi entity by a non-Saudi shareholder. According to the Treaty - which contains a unique provision which is not included in the tax treaties entered into by SA with some 20 other countries - a Dutch entity should be protected against such capital gains tax levy, provided that it beneficially holds at least 10% of the shares of the Saudi entity and the shares are acquired after a date that the Treaty was signed (i.e. after 13 October 2008). Furthermore, under the Treaty in certain reorganisation structures such capital gains tax may be postponed until the date on which the final alienation of investment is made, even in case the interest would be below 10%.

Also the domestic Saudi rate on royalty payments of 15% can generally be reduced to 7% under the Treaty. Income from debt claims and dividend distributions by a Saudi entity to non-Saudi shareholders are subject to a 5% domestic withholding tax in Saudi Arabia, which rate is in principle not further reduced under tax treaties (including the Treaty) entered into by Saudi Arabia.

It can be concluded that the Netherlands with its unique Treaty with Saudi Arabia and its robust and long established position for (joint venture) holding and financing entities, is excellently positioned to be a leading jurisdiction for investments into Saudi Arabia.


Related news

29.06.2018 EU law
Un dossier de soumission imparfait peut-il être rectifié par le paiement d’une amende ?

Articles - Dans l’arrêt du 28 février 2018, la Cour de justice donne son avis sur la possibilité pour un soumissionnaire de rectifier, pendant la phase de sélection et moyennant paiement d’une amende, son dossier de soumission imparfait par un ajout et/ou commentaire. La Cour précise que cette mesure n’est, en principe, valable que si la nature de l’irrégularité constatée permet une rectification ultérieure et que le montant de l’amende est proportionnel à l’importance de l’irrégularité constatée. 

Read more

29.06.2018 EU law
Kan een gebrekkige inschrijving worden rechtgezet tegen betaling van een boete?

Articles - Het Hof van Justitie verduidelijkt in een arrest van 28 februari 2018 dat een regeling waarbij een inschrijver in de selectiefase verzocht wordt om tegen betaling van een boete diens gebrekkige inschrijving via een aanvulling en / of toelichting recht te zetten in beginsel aanvaardbaar is – voor zover (i) de aard van de vastgestelde onregelmatigheid een a posteriori rechtzetting toelaat en (ii) de omvang van de geldboete evenredig is met de zwaarwichtigheid van de vastgestelde onregelmatigheid.

Read more

02.07.2018 EU law
General Court delivers judgments on the scope of dawn raid decisions

Short Reads - On 20 June 2018, the General Court rendered its judgment in two connected appeals submitted by České dráhy, the Czech Railways Operator, challenging two dawn raid decisions by the European Commission. Based on arguments concerning the scope of the investigation, the Court annulled in part the first dawn raid decision and fully upheld the second dawn raid decision.

Read more

01.05.2018 EU law
European Commission imposes record fine on Altice for premature implementation of PT Portugal acquisition

Short Reads - On 24 April 2018, the European Commission announced that it had imposed a fine of EUR 124.5 million on Altice for acquiring control of PT Portugal before clearance by the Commission ('gun-jumping'). The fine is more than six times the amount which was previously imposed by the Commission for similar offences [see our November 2017 Newsletter for a discussion of the Marine Harvest case]. The Commission's recent enforcement actions against gun-jumping violations highlight the importance of strict competition law compliance during M&A transactions.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring