JEDDAH: Certain tax inefficiencies facing foreign investors were discussed at a workshop held in Jeddah on Sunday. “These include a lack of tax exemption rules to cater for corporate restructures and potential double taxation of certain investment holding structures,” Muhammad Saloojee, head of tax and Zakah at KPMG, which organized the workshop, told the workshop at the Park Hyatt. While great strides have been made recently in attracting foreign investors to the kingdom, certain provisions of the Saudi tax law such as double taxation of holding structures and taxation of capital gains on initial public offerings (IPO) are areas that concern foreign investors, he added.
The daylong workshop, which is also being repeated in Riyadh on Monday, also dealt with certain areas of overlap between Saudi tax and Zakah, and some International Financial Reporting Standards (IFRS) accounting principles. “There are several areas where the application of IFRS standards in the Kingdom leads to tax or Zakah uncertainties,” Saloojee said. An area, which is currently contentious, relates to non-deductibility for Zakah purposes of items that are treated for accounting purposes as long-term receivables. “Power and water projects are particularly at risk since the application of IFRS rules result in de-recognition of fixed assets in certain project companies thereby potentially increasing Zakah liabilities for such projects,” Saloojee added.
“The global accounting landscape is currently in a period of significant change,” Simon Albrighton, KPMG’s senior manager in the UK, said. Barely a month goes by without new IFRS rules, standards and interpretations being published. Given the difficulties that businesses currently face, many finance professionals are finding that they cannot stay abreast of all the changes. “This is less than ideal in a period where financial statements are under intense scrutiny, he added.
Another industry facing a similar challenge is the finance leasing industry. “There is a need for standard setters to provide certainty on these issues for both preparers and users of financial information in these industries,” Ebrahim Baeshan, partner at KPMG, said.
