Articles

Legal and Tax Alert - Middle East

Legal and Tax Alert - Middle East

Legal and Tax Alert - Middle East

05.03.2012

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.

Team

Related news

03.06.2021 NL law
First material judgment in Dutch damages proceedings in trucks infringement

Short Reads - In its judgment of 12 May 2021, the Amsterdam District Court ruled that it has not been established that it is definitively excluded that the trucks infringement led to damage to the claimants. However, this does not alter the fact that it must still be assessed for each claimant whether the threshold for referral to the damages assessment procedure has been met. For this to be the case, it must be plausible that a claimant may have suffered damage as a result of the unlawful actions of the truck manufacturers. The Amsterdam District Court has not yet ruled on this issue.

Read more

03.06.2021 NL law
Highest Dutch Court: ACM has not proved dominance of Dutch railway operator NS

Short Reads - A high market share is not always proof of a dominant position. The Trade and Industry Appeals Tribunal (CBb) upheld the annulment of the ACM’s fine of nearly EUR 41 million on Dutch railway operator NS for alleged abuse of dominance. According to the CBb, NS did not abuse its dominant position as the ACM failed to prove beyond reasonable doubt that NS holds a dominant position on the market for the exercise of the right to exploit the main rail network concession.

Read more

20.05.2021 NL law
Het EVRM als anker om een nieuwe toeslagenaffaire te voorkomen

Articles - Had een adequate toetsing aan het EVRM de toeslagenaffaire deels kunnen voorkomen door de spijkerharde alles-of-niets-benadering aan banden te leggen? Dit artikel beantwoordt deze vraag bevestigend door te betogen dat verschillende EVRM-bepalingen een verdragsrechtelijke basis bieden om de proportionaliteit van een dergelijke benadering te toetsen. Een dergelijke toetsing bleef echter uit vanwege de ‘een-voorschot-isgeen-eigendomsrecht’-jurisprudentie van de Afdeling.

Read more

06.05.2021 EU law
Abuse of economic dependence: lessons drawn from the first judgments

Short Reads - On 22 August 2020, the ban on abuse of economic dependence was implemented in Belgium (Article IV.2/1 of the Code of Economic Law). Now that almost a year has passed and the first judgments have been rendered, we assess what first lessons can be drawn from these judgments. The rulings show that the ban is regularly relied upon in court and has lowered the hurdle for plaintiffs to make their case.

Read more