Managing Tax Affairs and Legal Disclosures

🤷♂️ Controversy is a fact of tax life. That is not gonna change. Unfortunately. Proactive tax leaders know so. They anticipate questions from the tax authorities coming in, and invest in audit-readiness. Managing tax controversy is incredibly draining. Each tax audit that begins brings immense stress. Deadlines are tight and non-negotiable, disrupting all your plans. M&A has a similar intensity (also a prio), but with a more positive outlook. Controversy tends to be a less pleasant experience… The good thing is that you can prepare for it. It’s called audit-readiness. Here is what the most proactive teams do: 1 - They double down on process excellence, focus on controls, governance, and audit trails, for all tax operations (reality check: more and more the focus of tax inspectors is on the process rather than on individual filings and values) 2 - They invest in operationalising processes by installing workflow engines 3 - They document all their transactions and work, contemporaneously 4 - They have a structured repository for all things tax, unlocking instant data readiness 5 - They connect the dots between their operations across all tax verticals like CTX, IDT, WHT, TP, CBCR, even stat accounts (reality check: yes, the tax authorities are also doing consistency checks across your different filings and reportings) 6 - They track risks knowing that tax is non-binary (always grey) and continuously work on mitigation 7 - They standardise and automate audit management and leverage learnings 8 - They build relationships with the tax authorities 9 - They double down on world-class collaboration between all stakeholders involved, including local finance and external advisors 10 - they invest in AI bots that can e.g. automate the management of incoming questions from the tax authorities The summer period is an excellent occasion to do blue sky thinking around audit-readiness. Go for it. It will pay off. Your CFO will be happy. Your audit committee will be happy. Your statutory auditor will like it. The team will be very grateful. The tax authorities will appreciate it. Why wait?

𝗚𝗲𝘁𝘁𝗶𝗻𝗴 𝗧𝗮𝘅 & 𝗭𝗮𝗸𝗮𝘁 𝗥𝗶𝗴𝗵𝘁 𝗕𝗲𝗳𝗼𝗿𝗲 𝗬𝗼𝘂𝗿 𝗦𝗮𝘂𝗱𝗶 𝗟𝗶𝘀𝘁𝗶𝗻𝗴 As IPO activity in Saudi Arabia accelerates under Vision 2030, companies looking to list on Tadawul or Nomu face more than financial and regulatory hurdles. Tax, zakat, and international tax matters play a critical role in IPO readiness, investor confidence, and ongoing compliance. 🧭 𝗙𝗿𝗼𝗺 𝗭𝗮𝗸𝗮𝘁-𝗢𝗻𝗹𝘆 𝘁𝗼 𝗠𝗶𝘅𝗲𝗱 𝗥𝗲𝗴𝗶𝗺𝗲 Pre-IPO, many companies are owned by GCC nationals or mixed shareholders. Post-IPO, foreign investors enter the picture. Listed shares remain subject to zakat, but foreign founders’ shares are taxable. Accurately classifying and disclosing the zakat vs. tax split in the IPO prospectus is essential to meet CMA scrutiny. 💰 𝗭𝗮𝗸𝗮𝘁 𝗕𝗮𝘀𝗲 𝗮𝗻𝗱 𝗜𝗣𝗢 𝗣𝗿𝗼𝗰𝗲𝗲𝗱𝘀 IPO proceeds can inflate the zakat base if unutilized and treated as zakatable assets. Proper treatment of capital increases, reserves, and retained earnings is key. Errors here can result in unexpected liabilities and erode investor trust. 🏗️ 𝗣𝗿𝗲-𝗜𝗣𝗢 𝗥𝗲𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗶𝗻𝗴 𝗮𝗻𝗱 𝗚𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲 Simplifying group structure, settling intercompany balances, and documenting related-party transactions are critical. A clean structure supports a smoother CMA review and enhances the company’s governance profile. 🌍 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗧𝗮𝘅 & 𝗣𝗘 𝗥𝗶𝘀𝗸 Foreign shareholders or board members can create permanent establishment (PE) risks. Influence from abroad may trigger Saudi tax obligations. Transfer pricing documentation must meet OECD standards. Early assessment and transparent disclosures help mitigate risks. 🧾 𝗩𝗔𝗧 𝗮𝗻𝗱 𝗪𝗶𝘁𝗵𝗵𝗼𝗹𝗱𝗶𝗻𝗴 𝗧𝗮𝘅 IPO-related advisory fees often attract VAT. Companies must assess recoverability and ensure compliant invoicing. Cross-border service payments and dividends to non-residents trigger withholding tax. Listed companies remain responsible for correct deduction and remittance to ZATCA. These require proactive planning and clear disclosures. 🕵️ 𝗭𝗔𝗧𝗖𝗔 & 𝗖𝗠𝗔 𝗘𝘅𝗽𝗲𝗰𝘁𝗮𝘁𝗶𝗼𝗻𝘀 CMA requires disclosure of tax risks, disputes, or assessments that may impact future earnings. Clean tax histories and health checks are standard in IPO workstreams. Early engagement with ZATCA to confirm classification, ownership mix, and compliance status can streamline the IPO process. 🏛️ 𝗦𝘁𝗿𝗼𝗻𝗴𝗲𝗿 𝗧𝗮𝘅 𝗚𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲 𝗣𝗼𝘀𝘁-𝗟𝗶𝘀𝘁𝗶𝗻𝗴 Post-listing, companies must adopt formal tax governance and board oversight. CMA expects robust systems to ensure compliance, safeguard shareholders, and protect market reputation. 🔄 𝗙𝗶𝗻𝗮𝗹 𝗧𝗵𝗼𝘂𝗴𝗵𝘁 An IPO is more than a capital-raising event; it's a long-term commitment to transparency and regulatory excellence. Companies that embed tax and zakat planning into their IPO strategy are more likely to gain investor confidence and succeed post-listing. #SaudiIPO #Zakat #IPOReadiness #CMA #ZATCA #SaudiArabia #Vision2030 #CMA #Tax

You don’t lose tax cases only because of weak facts. Sometimes, you lose because too much information was shared… too casually. Recently reviewed a reassessment matter where the assessee had genuinely disclosed details of a property purchase made in a later year. The intention was clean - full transparency. But that extra disclosure became the department’s bridge. The Assessing Officer used the later-year agreement to support an allegation that on-money must have been paid in an earlier year. Pause and think about that. The transaction itself was not in dispute. The banking trail was fully on record. Yet the narrative shifted - simply because of how information was placed. The matter has now reached the ITAT, and we are contesting the addition on the fundamental principle that admission of purchase cannot substitute proof of alleged cash payment. Here’s the practical lesson: In tax proceedings, every fact you submit gets interpreted in the context of the issue under examination. Smart compliance is not about hiding facts. It is about disciplined, issue-focused disclosure. What professionals should keep in mind: • Respond strictly year-wise and issue-wise • Avoid volunteering background that is not asked • Ensure documents tell a consistent story • Before submitting - ask: how could this be read against my client? Because once a narrative forms in assessment, you spend the next few years dismantling it in appeal. Think ahead. Draft carefully. CA Vikas Abhang

Preparing for FTA Corporate Tax Audits UAE Corporate tax audits would increasingly focus on substance, transfer pricing (especially Managerial Remuneration) and profitability disclosures rather than purely statutory compliance. Companies should expect detailed, evidence-based queries in the following areas: 🔹 Substance & Functional Reality Location of key decision-makers and control over economically significant risks Adequacy of personnel, premises, and operational capacity relative to reported profits Contemporaneous documentation supporting governance and decision-making 🔹 Transfer Pricing Framework & Intercompany Transactions Consistency between transfer pricing policy, intercompany agreements, and operational conduct Appropriateness of tested party selection and transfer pricing methods Reliability of benchmarking studies and comparability adjustments 🔹 Managerial & Executive Remuneration (Related-Party Payments) Arm’s length nature of management fees, director remuneration, and key-man compensation Evidence of benefit received and value creation by management functions Correlation between remuneration, decision-making authority, and risk assumption Employment agreements and functions performed 🔹 Profitability, Losses & Value Attribution Comparative analysis of the profitability vis-a-vis the previous years Commercial rationale for low margins or recurring losses Splitting up of businesses and reorganization from a GAAR Lens Recommended Preparatory Actions: ✔️ Conduct a thorough review of tax returns filed ✔️ Stress-test transfer pricing outcomes against audit scenarios ✔️ Reassess managerial remuneration, documentation and executive compensation models ✔️ Ensure contemporaneous TP documentation and supporting evidence ✔️ Prepare audit-defensible narratives supported by data, not assumptions FTA corporate tax audits will increasingly challenge form over substance. Early, technical preparation is critical to managing exposure and defending positions effectively. #CorporateTax #FTAAudit #TransferPricing #Substance #UAECorporateTax #TaxRiskManagement

🧾 Ind AS 2nd Amendment Rules, 2025: What Legal Professionals Must Know The Ministry of Corporate Affairs has notified the Companies (Indian Accounting Standards) Second Amendment Rules, 2025, introducing nuanced changes across Ind AS 1, 7, 10, 12, 101, 107, 108, 109, 115, 116, 28, and 32. 🔍 Why it matters for legal and compliance teams: ✅ Loan Covenants & Liability Classification Ind AS 1 now mandates granular disclosures on covenant breaches, grace periods, and refinancing rights—impacting how liabilities are classified as current or non-current. Legal teams must reassess loan documentation and board disclosures accordingly. ✅ Supplier Finance Arrangements Ind AS 7 introduces new disclosure norms for reverse factoring and supply chain finance. Contracts involving extended payment terms or early supplier settlements now require detailed reporting. ✅ Pillar Two Tax Legislation Ind AS 12 incorporates OECD’s Pillar Two rules, with carve-outs for deferred tax disclosures. Cross-border tax advisors and legal counsels should prepare for jurisdictional impact assessments. ✅ Transitional Reliefs & IFRS Alignment Updates to Ind AS 101, 107, and 109 reflect deeper harmonization with IFRS, especially around leases and joint arrangements. First-time adopters must navigate transitional provisions with precision. 📅 Effective Date: Most amendments apply from 1 April 2025, with staggered transitions for select provisions. 💡 Legal professionals advising boards, CFOs, and audit committees should proactively align documentation, risk disclosures, and governance protocols with these changes. #IndAS #CorporateLaw #Compliance #Governance #AccountingStandards #MCA #LegalUpdate #IFRS #PillarTwo #ReverseFactoring #LoanCovenants #DisclosureStandards

Non-disclosure of overseas ESOPs by Indian employees of foreign companies / MNCs in the Income-tax Return, particularly in the Foreign Assets Schedule can have serious consequences. Failure to report such foreign assets may attract penalty up to ₹10 lakh and even prosecution under the Black Money (Undisclosed Foreign Income and Assets) Act. Employees holding ESOPs, RSUs or shares in overseas entities are required to disclose the same, irrespective of whether any income has been realised. Further, any income earned outside India, however small, including dividends of a few US dollars must also be reported in the Return. With India being part of the Automatic Exchange of Information (AEOI) under tax treaties, the Indian Income-tax Department regularly receives detailed information about foreign assets and income of Indian residents. Assuming that such disclosures will not come to the notice of the tax authorities is therefore a risky and incorrect assumption. It is also important to note that the Black Money Act does not prescribe any time limitation for initiation of proceedings. Consequently, action may be taken at any stage once the information is acted upon. Employees are strongly advised to disclose foreign assets and income by filing a revised or updated return at the earliest, before any notice or proceedings are initiated. Timely compliance can significantly mitigate penal and prosecution risks.

⚠️ “I think I might owe six figures — can you help?” That’s how the call started. • Six rental properties. • Bought gradually over several years. • High tenant turnover. • Regular repairs. • No returns submitted. He was bracing himself for the worst. But after we applied our 4-phase disclosure method? 📉 He settled for around £30k. ✔️ No penalties. ✔️ No tribunal. ✔️ Just tax and interest — calculated properly and fairly. Here’s how we did it: ✅ Step 1 – Get the real numbers Those early years? Loss-making. Repairs, voids, tenancy churn — no net income. We reconstructed it all and carried forward the losses. ✅ Step 2 – Understand the context He wasn’t hiding anything. He’d been dealing with serious health issues and family loss. It mattered — and we made sure HMRC understood that. ✅ Step 3 – Frame the behaviour We argued reasonable excuse for failure to notify. That shrunk HMRC’s reach from 13 years… to just 4. ✅ Step 4 – Don’t accept the first ‘no’ HMRC pushed back. We explained the narrative. And eventually — they accepted it. 📌 Lesson: If we’d just handed over the numbers and hoped for the best, he’d be looking at 13 years of exposure. Instead, we managed the case — and the outcome. 💬 Ever had a case where it looked bad… until you properly unpacked the story?

Seller’s Tax Warranties: Avoiding Open-Ended Liability With the introduction of taxes in the United Arab Emirates, sellers in M&A transactions must take special care to manage tax exposures. Buyers often push for broad, all-encompassing tax warranties, but that can leave sellers exposed to historic liabilities they neither knew about nor controlled. A smarter structure uses tailored disclosures and indemnity caps. Sellers should disclose known tax positions, pending audits, or disputes and expressly carve them out of warranties. Then, agree on financial caps and survival periods, typically 12–24 months, to limit exposure. In the UAE, VAT-related obligations and economic substance reporting are common flashpoints. Ensure representations address these specifically rather than through vague, blanket clauses. A well-negotiated tax warranty turns an open-ended risk into a contained one. Shoeb Saher Corporate| Contracts | M&A Helping sellers close clean, with no tax surprises waiting post-completion.

As the personal ITR filing season is nearby in India, I want to remind you for an important disclosure which is required in your ITR (Income Tax Return) Form. If you have: -Formed a company overseas, - Immovable property or House purchased overseas, - Bank account in your name or you are acting as a signing authority for your subsidiary's bank account then this is important for you. Such Foreign Assets and the shareholding in the Overseas Company should be disclosed under Schedule-FA while filing ITR and clause of the tax return requiring disclosure of ownership in unlisted equity shares. If you are Individual or Company or LLP or Partnership firm registered in India, the disclosure under Schedule FA is mandatory for all. Disclosure of foreign assets and income in ITR is a critical requirement to ensure transparency in tax compliance and avoid penalties. Non-reporting of foreign assets in Schedule FA of Indian Income-tax Return by Indian Company/Resident Individuals would trigger consequences u/s. 43 and 50 of the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act 2015. Please let me know if you need any further guidance in this regard. #ForeignAssets #ScheduleFA #ITR #Deadline #Disclosure #Compliance

Why Outsourcing Compliance Services to a CA is Beneficial for Businesses Managing tax and regulatory compliance is critical for any business but can often be time-consuming and complex. Outsourcing these services to a Chartered Accountant (CA) offers numerous advantages: 1. Expert Guidance CAs bring in-depth knowledge of tax laws, accounting standards, and regulatory frameworks. They ensure accurate and updated compliance, reducing the risk of errors or penalties. 2. Cost-Effective Solution Hiring a full-time compliance team can be expensive. Outsourcing to a CA provides access to professional expertise at a fraction of the cost. 3. Time-Saving Outsourcing frees up valuable time for business owners and employees, allowing them to focus on core business activities. 4. Minimizing Risks CAs stay updated on changes in tax laws and regulations, ensuring timely filings and compliance to avoid penalties and legal issues. 5. Comprehensive Service CAs handle end-to-end compliance, including GST, income tax, TDS, audits, and statutory filings. This ensures that all regulatory requirements are met efficiently. 6. Better Financial Planning CAs analyze financial data and provide insights to help businesses make informed decisions about tax planning, budgeting, and growth strategies. 7. Peace of Mind With an expert managing compliance, businesses can operate confidently, knowing their regulatory obligations are being taken care of. #ComplianceServices #CharteredAccountant #BusinessGrowth #TaxCompliance