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

24.05.2019 BE law
Europees milieurecht: wat na 26 mei?

Articles - Het domein van milieurecht kent een sterke Europeesrechtelijke inslag. Voor basisregels inzake natuurbescherming, luchtkwaliteit of klimaat, ligt het juridisch zwaartepunt al lang niet meer bij de lidstaten. Reden te meer om in de gaten te houden wat er op EU-niveau in de pijplijn zit en op lidstaten afkomt. Ook na de Europese verkiezingen zal de nieuwe Europese Commissie verschillende initiatieven nemen. Zowel impliciet als expliciet lichtten de Commissie en haar vertegenwoordigers de voorbije maanden al een tipje van de sluier op.

Read more

24.05.2019 NL law
European regulatory initiatives for online platforms and search engines

Short Reads - As part of the digital economy, the rise of online platforms and search engines raises all kinds of legal questions. For example, do bicycle couriers qualify as employees who are entitled to ordinary labour law protections? Or should they be considered self-employed (see our Stibbe website on this issue)? The rise of online platforms also triggers more general legal questions on the relationship between online platforms and their users. Importantly, the European Union is becoming increasingly active in this field.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring