Global tax issues to impact GCC businesses

A group of tax experts were hosted by international law firm Pinsent Masons in Dubai’s financial center DIFC to discuss global tax issues that may be impacting on GCC businesses investing overseas.

In November 2014 the WikiLeaks scandal known as “LuxLeaks”, the large scale exposure of over 340 companies (such as IKEA, Coca-Cola and Disney) who paid a rate of one per cent or less tax on profits moved to Luxembourg by advance pricing arrangements has affected all nationalities and brought the issue to the top of the European Commission’s agenda.

The European Commission has since opened investigations to all 28 EU member states, and there is a growing concern among industry professionals that investors from the GCC could be dragged into these investigations off the back of a series of rulings which were made public in the “LuxLeaks” scandal, in which GCC investors were included.

Pinsent Masons LLP tax partners James Bullock and Jason Collins presented specifically on the risks arising from the recent activity of the European Commission to investigate into national tax rulings that may breach state aid rules.

James Bullock, Partner, Pinsent Masons said: “Businesses could not assume that investment structures that had operated successfully for a number of years would still be appropriate in 2015. Owners must be vigilant in protecting their firms from potential unlawful activity, and use best practice models and consultants to ensure they are protected.”

Jason Collins Partner, Pinsent Masons noted the greater transparency over tax matters with the introduction of country by country reporting of profits and taxes paid and the US FATCA initiative which is now evolving into a common reporting standard across many countries worldwide.

Chairman of the meeting, Ian Anderson, Senior Consultant, Pinsent Masons said, “It is no longer possible for businesses in the region to ignore the impact of the changes taking place in the global tax environment. State aid enquiries is just one of many challenges businesses will face when planning their overseas investments.

“Because of these developments, global initiatives are being developed to target tax planning. It is vital that strategic risk mitigation and alternative tax structures advice is sought, which are compliant with State aid law. ”

Pinsent Masons tax offering is unusual in offering entirely seamless tax and State aid advice, was the winner of the ‘Tax Team in a Law Firm award at the prestigious Taxation Awards 2015.