THE SOVEREIGN REPORT

Welcome to the new edition of the Sovereign Report. 2022 was a year of extraordinary growth in the Middle East as economies rebounded from the global pandemic and Russia’s invasion of Ukraine pushed oil prices to record highs. The Gulf Cooperation Council (GCC) states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE – far outpaced the rest of the region and world average with growth of 7.3% in 2022, although this is expected to decelerate to 3.2% in 2023 as oil prices fall back.

Sovereign is well positioned to facilitate this growth following last year’s acquisition of PRO Partner Group (PPG), one of the foremost company formation and corporate services providers in the Middle East. With a presence in the UAE, Qatar, Oman and Saudi Arabia, PPG provides security, efficiency and local knowledge to international corporations and investors looking to set up within the GCC.

This year will also see a seismic change in the UAE, when it introduces a federal corporate tax (CT) regime for the first time as from 1 June. While the absence of CT has traditionally been one of the UAE’s key selling points for foreign investors, it is important to look at the bigger picture to appreciate the many benefits that this decision will bring.

The UAE’s 9% CT rate on taxable profits above AED375,000 is not only one of the world’s most competitive rates, it will also ensure that the UAE remains aligned to international standards and requirements under the OECD’s Base Erosion and Profit Shifting (BEPS) initiative and its forthcoming ‘Two-Pillar’ tax solution to the challenges arising from the digitalisation of the economy.

The federal corporate tax will enable businesses in the UAE to continue to benefit from the country’s extensive network of over 100 double tax treaties with trade partners around the world, which provide transparency between member countries on taxation related to cross-border trade and investment.

Finally, the introduction of corporate tax in the UAE will be a major step towards the country’s diversification goals. Establishing this new revenue stream will allow it to further reduce its reliance on oil revenues and demonstrates a commitment to long-term economic stability and growth.

We are also excited about the Sovereign Business Hub in Bahrain, a new incubator that is designed to increase the successful development of new businesses, job creation and employment in specific sectors that are aligned with the Bahrain’s areas of opportunity. We are seeking entrepreneurs and start-ups that want to embrace the ‘incubator’ model.

The Hub’s aim is to create a platform for entrepreneurship and a centre of excellence for business collaboration. It not only provides start-ups with physical space in Bahrain, on flexible terms and with advanced ICT capacity, but also offers access to business guidance, mentoring and networking through Sovereign’s global network.

Nicholas Cully

Group Sales Director