De Beer is an audit and accounting firm that was established in 1952. De Beer has nine partners and 106 staff in total. It operates from two offices in the south of the Netherlands and offers audit, international and domestic tax and accounting services to a range of SME and private clients. Industry specialisms include trading, real estate and logistics.
The addition of De Beer to Kreston Global’s network further extends its European region, which consists of 62 member firms across 33 countries providing a range of financial, audit and accounting, taxation and other advisory services to large and mid-sized businesses requiring inbound and outbound growth support and set up.
Liza Robbins, Chief Executive of Kreston Global, said:
“The addition of De Beer to our large number of both Dutch and European firms is a great move. Our nine Netherlands member firms together represent over e100m in revenue and collaborate closely on clients and operational matters to share knowledge and expertise widely. It will be wonderful to see Wil and the team at our next European conference and to hear more about their plans.”
“We are really excited to have become a member of the Kreston Global network. The network has an extensive international footprint which will benefit our clients as well as our people. We have also found the Kreston Netherlands member firms extremely welcoming and we are very much looking forward to working with them closely for example on the Dutch Zero Co2-projectto support clients with ESG issues, and to meeting the rest of the network in due course.”
News
Luxembourg firm joins Kreston Global network
April 18, 2024
Sector:Finance, Leisure & Hospitality, Real Estate & Construction, Technology, Media & Telecom
Kreston Global has today welcomed Luxembourg firm Global Osiris Audit & Expertise to the Kreston Global network.
The firm offers Audit and Assurance, Corporate Recovery and Insolvency services to national and international privately-owned entrepreneurial businesses across Luxembourg and across Europe. The firm deals with a variety of industries including technology, financial services, real estate, food manufacturing, hotels and consultancy organisations.
The addition of Global Osiris Audit & Expertise to Kreston Global’s network ensures a strengthening of accounting provision across its substantial European region, which consists of 61 member firms across 33 countries providing a range of financial, audit and accounting, taxation, and other advisory services to large and mid-sized businesses requiring inbound and outbound growth support and set up.
The firm will be rebranding to become Kreston Osiris Luxembourg over the next few months.
Liza Robbins, Chief Executive of Kreston Global, said:
“We are really pleased to welcome Global Osiris Audit & Expertise to our European region and our network as it brings a range of complimentary solutions for our Luxembourg service offering as well as considerable experience of operating within international networks. The firm will be a strong addition to our member firm lineup especially as it is located in such a key financial centre.”
Olivier Janssen, Managing Partner at Global Osiris said:
“We chose Kreston Global because of its member firm ethos and its great reputation for servicing entrepreneurial international businesses around the world. We can see enormous potential in our collaboration with Kreston and the network’s excellent member firms worldwide.”
News
Kreston Global announces new Singapore firm
April 15, 2024
Kreston Global has today welcomed Singapore firm, Helmi Talib LLP, to the Kreston Global network.
Established in 1992, Helmi Talib offers eight key service areas: Audit and Assurance, Tax Compliance and Advisory, Business Process Outsourcing, Liquidation and Receivership, Internal Audit, Payroll, Transaction, and Corporate Secretarial Services. For more than three decades, Helmi Talib has provided services to a wide range of clientele, the majority of which are subsidiaries of multinational organizations, and privately owned entrepreneurial businesses, under diverse sectors ranging from investment holdings, financial institutions, charities, and information technology to name a few.
The Firm was named by Singapore Business Review as one of Singapore’s top 30 accounting firms. Continuing to grow, the Firm today is led by five audit partners and five non-assurance directors supported by close to 80 staff.
Over the next few months, Helmi Talib Group will rebrand as Kreston Helmi Talib.
The addition of Kreston Helmi Talib to Kreston Global’s network further strengthens its Asia Pacific region, which consists of 45 member firms across 22 countries providing a range of financial, audit and accounting, taxation, and other advisory services to large and mid-sized businesses requiring inbound and outbound growth support and set up.
Liza Robbins, Chief Executive of Kreston Global, said:
“I’m delighted to welcome Kreston Helmi Talib to our network. Singapore serves as a major hub for our member firms in and beyond Asia, offering a dynamic business landscape which attracts our core market of companies with entrepreneurial organisations with a growth mindset. Kreston Helmi Talib’s extensive experience and client range make them both a natural fit for and a great asset to our network
Helmi Talib, Managing Partner at Kreston Helmi Talib said:
“The Kreston network has a great reputation for servicing entrepreneurial international businesses around the world, so joining the network is an exciting milestone in our professional journey. Given our extensive international client portfolio, Singapore being one of the world’s major hubs for inbound investment, we can see enormous potential in our collaboration with Kreston and the network’s excellent member firms across the globe.”
News
Kreston Global network welcomes new Argentinian firm
Kreston BA Argentina has been established to serve local private, public, and listed enterprises as well as international companies looking to invest in Argentina, at every stage of their business lifecycle.
Kreston BA Argentina is run by Ricardo Gameroff and Esteban Babino, who have nearly six decades of local and international experience from big four accounting firms between them as well as holding CPA, CFE and MBA certifications in Argentina and the United States. They are fluent in English and possess a deep understanding of both local and global business cultures. The new firm has a total of 10 employees based in Buenos Aires and provides a wide array of customised services covering all aspects of accounting and professional needs, from tax and legal planning to business process outsourcing solutions, financial audits, corporate fraud, internal audit and risk and legal advisory. The firm’s client base includes blue-chip clientele spanning energy, mining, manufacturing, oil & gas, utilities and agribusiness.
The addition of Kreston BA Argentina to Kreston Global’s network further strengthens its Latin America region, which consists of 25 member firms across 17 countries providing a range of financial, audit and accounting, taxation and other advisory services to large and mid-sized businesses requiring inbound and outbound growth support and set up.
Liza Robbins, Chief Executive of Kreston Global, said:
“I’m delighted to welcome Kreston BA Argentina to our network. Our Latin America region is full of energetic and collaborative firms who regularly work together on client and employee initiatives. Argentina is a really important location in the region as the country embarks on a new economic strategy. With Ricardo and Esteban’s backgrounds and their vision, I have no doubt that Kreston BA Argentina will be a great addition to our network”
“We are extremely energised to be joining the Kreston network and benefitting from its highly connected infrastructure full of firms who enjoy working together. It has a great name for servicing entrepreneurial international businesses around the world and we see the synergies it will bring for our clients and our new venture. ”
News
Pretino Albury
Partner at Kreston Bahamas
Pretino Albury, Partner at Kreston Bahamas, brings over a decade of expertise, serving clients in The Bahamas, Caribbean, and the USA. As a CPA, he specialises in management consulting, risk advisory, public accounting, and auditing across diverse industries.
Understanding BEPS implications with crypto-clients
Dealing with decentralised cryptocurrencies in the absence of global tax standards is challenging. With the worldwide rollout of the OECD’s BEPS framework, advisers and clients must collaborate to formulate an effective strategy. Robust policies aligning with international standards are essential to ensure compliance and minimise risks in cryptocurrency transactions. Below are critical considerations for crafting such policies.
Implementing robust policies
Understand BEPS implications for cryptocurrency transactions by familiarising yourself with OECD guidelines, particularly Actions 10, 13, 5, and 15. Consult with clients to gather information on their cryptocurrency business activities, transactions, and risk appetite. Conduct thorough risk assessments, addressing transfer pricing and cross-border transactions. Implement a transparent transfer pricing model and design policies to handle hybrid mismatches in cross-border cryptocurrency transactions. Establish a BEPS-compliant KYC process for crypto transactions, including identity verification, beneficial owner identification, risk assessments, and ongoing customer activity monitoring. Mandate proper disclosure, robust record-keeping, and precise procedures for identifying, reporting, and paying taxes on cryptocurrency-related income.
Risk mitigation strategies
Integrate risk mitigation into policies by developing strategies to identify and counter suspicious activity, protecting against fraud, theft, and regulatory sanctions. Include clear procedures for reporting suspicious activity, robust anti-money laundering programs, and legal expertise to prevent asset seizure. Implement cybersecurity measures to safeguard against cyberattacks and unauthorised access.
Educate client personnel comprehensively on the newly implemented cryptocurrency policies to ensure an understanding of requirements and risks. Provide training on the rationale behind each approach and their role in implementation and adherence.
Continuous compliance monitoring
Continuously check and review compliance by establishing a system to monitor adherence to the BEPS-compliant cryptocurrency policy. Stay updated on evolving regulations and tax laws, regularly reviewing and updating client policies to ensure ongoing compliance with changing rules and standards.
Tech-tools for efficient monitoring
Utilise tech tools for efficiently monitoring cryptocurrency transactions, employing advanced technologies and analytics to trace transaction history and identify potential risks like money laundering and tax evasion. These tools can detect anomalies, assign risk scores, and enable real-time monitoring for immediate identification and recording of suspicious activity. Additionally, technology aids in staying updated on evolving rules and regulations across jurisdictions, ensuring accurate and timely tax calculations, payments, and reporting through AI, blockchain, and cloud systems.
Collaboration with tax authorities
Maintain open communication and collaboration with tax authorities to align cryptocurrency policies with expectations, preventing unforeseen issues and demonstrating commitment to compliance.
Building BEPS-compliant cryptocurrency policies is an ongoing process, requiring continuous collaboration and adaptation to the evolving cryptocurrency landscape. Advisers must partner effectively with clients for the long term, implementing and maintaining robust policies. By following these steps, advisers can navigate the complexities of cryptocurrency taxation, minimize BEPS risk, and strengthen client relationships in a landscape with an estimated 420 million crypto users worldwide.
Shareholder, Mayer Hoffman McCann P.C, Deputy Technical Director, Global Audit Group, Kreston Global
Herbert M. Chain is a highly experienced auditor and is a financial expert with over 45 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance. Herb is a member of MHM’s Attest Methodology Group and serves as Deputy Technical Direct of Kreston Global’s Global Audit Group.
Auditing standards: Unpacking SAS 143 and SAS 145 updates
March 12, 2024
In his comprehensive overview, Herbert M. Chain from MHM explores the recent updates to SAS 143 and SAS 145, which signify significant milestones in auditing standards. Read the full article here, or the summary below.
Overview of SAS 143 and SAS 145
The issuance of SAS No. 143, focusing on Auditing Accounting Estimates and Related Disclosures, and SAS No. 145, centered on Understanding the Entity and Its Environment and Assessing Risks of Material Misstatement, represents a significant advancement in auditing standards. These standards offer auditors extensive guidance for testing accounting estimates, particularly those involving fair value, and outline essential requirements for grasping the entity’s internal control system. This is crucial in navigating the complexities of the contemporary economic, technological, and regulatory accounting environment.
SAS 143: Auditing accounting estimates
Effective for audits of periods ending on or after Dec. 15, 2023, SAS 143 mandates a deeper examination of uncertainties in accounting estimates, focusing on potential management bias. This involves a thorough evaluation of assumptions, especially for significant judgments like fair value measurements. The standard necessitates a detailed risk assessment tailored for complexities in auditing accounting estimates, providing guidance on responsive audit procedures, including assessing the suitability of valuation models and data integrity for fair value estimates. SAS 143 aims to enhance transparency and accountability in fair value estimation, ultimately improving the quality and reliability of these estimates for increased stakeholder trust.
Key changes from SAS 143
Key changes to auditing standards in SAS 143 include a heightened emphasis on auditors addressing estimation uncertainty and exercising professional skepticism in evaluating fair value estimates. The standard mandates a more detailed risk assessment process tailored for complexities in auditing accounting estimates, particularly fair value estimates. Additionally, auditors must assess the reasonableness of accounting estimates within the financial reporting framework, ensuring compliance with permitted methods, assumptions, and data.
SAS 143impacts
SAS 143 brings substantial changes to the audit process in assessing fair value estimates. The focus now shifts to understanding factors and assumptions behind estimates, demanding greater transparency and accountability from management. Auditors, in response, perform the following procedures:
Method Assessment: Evaluate if the method aligns with the financial reporting framework and remains consistent. Changes prompt scrutiny for potential bias.
Significant Assumptions: Ensure suitability of assumptions within the financial reporting framework, considering both positive and negative outcomes. Evaluate consistency with prior periods and other business activities, considering potential bias.
Data Evaluation: Assess data reliability, understanding sources and consistency with prior periods. Verify relevance in the context of the chosen method and assumptions, addressing potential bias.
Management’s Point Estimate: Scrutinise alternative outcomes and assumptions when management opts for a precise value (point estimate), evaluating potential bias.
Enhancing controls with SAS 145
SAS 145, also effective for audits for periods ending on or after Dec. 15, 2023, revises aspects of the risk assessment process, focusing on an entity’s internal control system. Notably, it enhances auditor responsibilities related to evaluating the design and implementation of controls, including IT general controls (ITGC). The standard recognises the increasing significance of an entity’s IT environment, requiring auditors to identify and assess ITGCs, categorised into four domains:
Security and Access: Controls ensuring appropriate user access, segregation of duties, and ongoing authorisation for IT applications and cloud providers.
Systems Change: Controls over designing, testing, and migrating changes into a production environment, with segregation of access to prevent unauthorised changes.
System Development: Controls over initial IT application acquisition, development, or implementation, including data conversion and creation of new reports.
Computer Operations: Controls monitoring financial reporting program execution, ensuring backups, and enabling timely data recovery in case of outages or cyberattacks.
While not all domains may be applicable annually, SAS 145 mandates evaluating design and implementation for relevant ITGCs within the applicable domain for each identified significant IT application. The standard also introduced the concept of a continuum of inherent risk as well as other changes.
If you are interested in doing business with Kreston Global, contact us here.
News
Ganesh Ramaswamy
Partner at Kreston Rangamani and Associates LLP, Global Tax Group Regional Director, Asia Pacific
Ganesh has extensive experience of more than 30 years in providing specialist tax services, particularly to large privately owned groups, with particular strengths in the property, retail, healthcare and hospitality industries. He has supported various entities with specialist advice on tax-effective structures and restructures, cross-border transactions on account of outbound and inbound India investments, mergers, acquisitions and divestments. Ganesh has also worked with stakeholders across businesses to deliver solutions such as tax due diligence, tax consolidation and restructuring of large family businesses in the Middle East, Asia, and Singapore.
Biodiversity standard of GRI gets an update
March 11, 2024
Sector:ESG
The Global Reporting Initiative (GRI) has published a biodiversity standard update which will help Corporates to provide information and analysis on the biodiversity impacts.
Overview of GRI’s biodiversity standard update
The standard GRI 101 – “Biodiversity 2024” has been updated to support Corporates around the world to disclose their significant impacts on biodiversity which comes out of their business operations and supply chain management.
GRI has agreed to support the use of the above standard over the next two years, with Corporates expected to mandatorily follow it from 2026. This revised standard builds on key global developments in the biodiversity field such as UNFCCC Kunming Montreal Global Biodiversity Framework, The Science Based Target Network (SBTN) and The Taskforce on Nature Related Financial Disclosures.
Key features and requirements of GRI 101
The updated GRI standard sets new rules for reporting through transparency on biodiversity impacts. The standard suggests location specific reporting, both within the organisations’ operations and its supply chain functions. This is aimed at enabling the stakeholders to correctly assess the organisation’s impact on biodiversity.
In detail, the biodiversity standard focuses on achieving the following objectives:
Covering the areas where significant impacts on biodiversity gets poorly reported especially in supply chain management.
Location specific reporting on impacts including all places where impacts are felt with detailed information of the place and site where the impact has been felt.
Disclosure norms on biodiversity loss covering the areas of land misuse, climate change, pollution and over exploitation.
Reporting the impacts on society including those on communities and indigenous people.
Corporate responsibilities in addressing biodiversity loss
The Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services has come out with an assessment report which sends a warning that 50% of the global economy is under threat due to biodiversity loss. The GRI update on Biodiversity standards has come up against this background.
Corporates need to take immediate steps to reverse the biodiversity loss, restore nature to its glory, respect the rights, roles and contributions to sustain biodiversity along the supply chain. When these actions of the Corporates are validated and communicated in the form of a report brought out by GRI, all the stakeholders in the system will definitely end up benefitting from this transparency.
For more information on Kreston Global’s sustainability hub, click here.
News
Frank Sánchez Ruiz, CPA, CMA, CIA, CGFM, CGMA,
Managing Partner at Kreston PR
Investing in Puerto Rico: Low tax jurisdiction for investors
March 7, 2024
Investing in Puerto Rico has proven lucrative, experiencing an 11% growth in its economy since 2019, despite the challenges felt globally from COVID-19, a global recession and increasing supply chain challenges. So far in 2024, the International Monetary Fund records the island as having the highest GDP per capita in the Caribbean.
Puerto Rico (PR) can claim several advantages that can be attributed to this growth. It is a strategic Caribbean geographic location, offering political stability, modern infrastructure, and a highly skilled bilingual workforce (Official languages are Spanish and English). It is the main air and sea access hub in the Caribbean, with multiple flight options to and from the major cities of the United States, Latin America, and Europe.
Unincorporated United States territory
Secondly, Puerto Rico enjoys the United States constitutional, legal, financial, and regulatory protection, including among others, intellectual property, Homeland Security matters, and banking system. The U.S. dollar is also the official currency, and no passport is required for U.S. citizens.
Recent tax incentives
Thirdly, Puerto Rico enjoys fiscal autonomy and has a number of tax incentives to attract investment. Puerto Rico recently published legislation designed to boost remote PR workers. The governor, Pedro Pierluisi, signed the new act into law on January 17, 2024. This legislation builds on Act 52-2022, targeting the enhancement of the foreign private sector’s remote work force in PR.
Tax incentives for local and foreign companies and individuals
During 2019 PR enacted legislation to compile all previous PR tax exemption laws into Act 60, that has attracted foreign and local businesses, and non-resident high net worth individuals who relocate to PR, contributing to the overall economic health of the island. The benefits cover a number of industries attractive to investors, most notably:
Export of Goods and/ or Services–Act 60- 2019 (Formerly Act 20)–Available to businesses established in Puerto Rico that offer services or sell goods to customers or clients outside Puerto Rico.
Manufacturing, Research and Development – Act 60-2019 (Formerly Act 73) – Available for manufacturing, R&D and high-tech industries that invest in the island. Manufacturing, Research and Development – Act 60-2019 (Formerly Act 73) – Available for manufacturing, R&D and high-tech industries that invest in the island.
Creative Industries – Act 60-2019 (Formerly Act 27) – Available for entities engaged in film production, postproduction, and similar creative projects.
Green Energy – Act 60-2019 (Formerly Act 83-325) – Incentive is available for entities engaged in the production/sale of green energy, sale of equipment, assembly, or installation of green energy equipment.
Visiting Economy (Tourism – Formerly Act 74) – Available for businesses engaged in tourism activities.
Income Tax rate
Among its benefits, Act 60 grants a reduced income tax rate from 37.5% to 4% on eligible activities as well as 100% exemption on distributions from earnings and profits on those activities, designed to stimulate growth in key industries and attract investors to the country. The tax decree also provides exemptions on indirect taxes (municipal license, property taxes, excise tax, among others) that ranges from 50% to 100% of exemption, making investment even more appealing to local and foreign businesses.
Individual resident investor and other tax incentives
Non-resident high net worth individuals who relocate to Puerto Rico also benefit from additional tax grant benefits under Act 60. Also, there are other tax incentives for those engaged in providing highly skilled medical professional services (physicians), professional researchers or scientists, small and medium enterprises (PYMES), young entrepreneurs, public porters of air transportation, maritime transport services, infrastructure investment and agriculture.
Low tax jurisdiction
This legislative update is a key component of Puerto Rico’s strategy to stimulate economic growth, attract global talent, and encourage the development of a diverse and resilient economy, emphasising the significance of investing in Puerto Rico.
If you would like to speak to someone about doing business in Puerto Rico, please get in touch.
News
Pretino Albury
Partner at Kreston Bahamas
Pretino Albury, Partner at Kreston Bahamas, brings over a decade of expertise, serving clients in The Bahamas, Caribbean, and the USA. As a CPA, he specialises in management consulting, risk advisory, public accounting, and auditing across diverse industries.
Understanding BEPS implications with crypto-clients
Dealing with decentralised cryptocurrencies in the absence of global tax standards is challenging. With the worldwide rollout of the OECD’s BEPS framework, advisers and clients must collaborate to formulate an effective strategy. Robust policies aligning with international standards are essential to ensure compliance and minimise risks in cryptocurrency transactions. Below are critical considerations for crafting such policies.
Implementing robust policies
Understand BEPS implications for cryptocurrency transactions by familiarising yourself with OECD guidelines, particularly Actions 10, 13, 5, and 15. Consult with clients to gather information on their cryptocurrency business activities, transactions, and risk appetite. Conduct thorough risk assessments, addressing transfer pricing and cross-border transactions. Implement a transparent transfer pricing model and design policies to handle hybrid mismatches in cross-border cryptocurrency transactions. Establish a BEPS-compliant KYC process for crypto transactions, including identity verification, beneficial owner identification, risk assessments, and ongoing customer activity monitoring. Mandate proper disclosure, robust record-keeping, and precise procedures for identifying, reporting, and paying taxes on cryptocurrency-related income.
Risk mitigation strategies
Integrate risk mitigation into policies by developing strategies to identify and counter suspicious activity, protecting against fraud, theft, and regulatory sanctions. Include clear procedures for reporting suspicious activity, robust anti-money laundering programs, and legal expertise to prevent asset seizure. Implement cybersecurity measures to safeguard against cyberattacks and unauthorised access.
Educate client personnel comprehensively on the newly implemented cryptocurrency policies to ensure an understanding of requirements and risks. Provide training on the rationale behind each approach and their role in implementation and adherence.
Continuous compliance monitoring
Continuously check and review compliance by establishing a system to monitor adherence to the BEPS-compliant cryptocurrency policy. Stay updated on evolving regulations and tax laws, regularly reviewing and updating client policies to ensure ongoing compliance with changing rules and standards.
Tech-tools for efficient monitoring
Utilise tech tools for efficiently monitoring cryptocurrency transactions, employing advanced technologies and analytics to trace transaction history and identify potential risks like money laundering and tax evasion. These tools can detect anomalies, assign risk scores, and enable real-time monitoring for immediate identification and recording of suspicious activity. Additionally, technology aids in staying updated on evolving rules and regulations across jurisdictions, ensuring accurate and timely tax calculations, payments, and reporting through AI, blockchain, and cloud systems.
Collaboration with tax authorities
Maintain open communication and collaboration with tax authorities to align cryptocurrency policies with expectations, preventing unforeseen issues and demonstrating commitment to compliance.
Building BEPS-compliant cryptocurrency policies is an ongoing process, requiring continuous collaboration and adaptation to the evolving cryptocurrency landscape. Advisers must partner effectively with clients for the long term, implementing and maintaining robust policies. By following these steps, advisers can navigate the complexities of cryptocurrency taxation, minimize BEPS risk, and strengthen client relationships in a landscape with an estimated 420 million crypto users worldwide.
The practitioner’s guide to the OECD Multilateral Convention
January 18, 2024
Multinational firms leverage intangible assets in the rapidly changing digital landscape, posing challenges to outdated tax regulations. The OECD addresses this with a two-pillar solution, highlighting the crucial role of the Multilateral Convention in swiftly implementing the subject tax rule (STTR) to reshape global taxation for fairness and efficiency.
Challenges in international taxation amidst digital transformation
In the digital transformation era, multinational enterprises (MNEs) exploit intangible assets like intellectual property and data to reap substantial profits across borders without a physical presence. Outdated international tax rules struggle to cope with this virtual reality, enabling MNEs to circumvent taxes through “nexus” and “profit allocation” tactics.
The OECD’s Two Pillar solution
The Organisation for Economic Cooperation and Development’s (OECD) Inclusive Framework on Base Erosion and Profit Shifting (BEPS) has devised a Two Pillar Solution to address this. This initiative aims to establish global consistency and transparency, ensuring MNEs pay a minimum level of tax on their global profits, regardless of where they are generated.
The first pillar involves the establishment of a global minimum tax, requiring legislative changes in jurisdictions with tax rates below the minimum. The second pillar, Subject to Tax Rule (STTR), closes loopholes in intragroup payments, preventing profit shifting to low-tax jurisdictions.
Catalyst for fair taxation and global consistency
In October 2023, the OECD introduced the Multilateral Convention, a crucial STTR implementation tool. This convention allows source jurisdictions to “tax back” certain intra-group payments, promoting fair taxation and protecting the tax base of developing countries.
The STTR’s swift implementation is facilitated by the Multilateral Convention, offering a streamlined process through simultaneous tax law modifications across multiple nations. This unified approach becomes effective from 1 January, 2025, benefiting companies with a fiscal year aligning with the calendar year.
While the speedy implementation of the STTR is a positive step, it has progressed ahead of other Pillar Two rules. The benefits of the Multilateral Convention include:
ensuring quick STTR implementation
levelling the playing field for developing countries
providing a fair framework for reclaiming taxing rights
In summary, the Multilateral Convention plays a crucial role in accelerating the implementation of STTR regulations, ensuring a fair and efficient global tax landscape for multinational enterprises.
Rob McGillen is the Chief Innovation Officer at CBIZ Financial Services with 25+ years’ working with innovative companies. Focus includes Professional Services, Financial Services, Manufacturing, Health and Life Sciences, Technology / SaaS, Insurance, and Energy.
Artificial intelligence in the accounting industry
The accounting sector is swiftly embracing Artificial Intelligence (AI), with the Big 4 (Deloitte, PwC, Ernst & Young, and KPMG) leading the charge. The Institute of Analytics (IoA) recognises accountants as strategically positioned to address the AI skills gap.
While the Big 4 invest in and experiment with AI tools, the broader UK business landscape needs to be adopted faster. According to a 2022 report on AI activity in UK businesses, only 15% currently use AI to some extent, with 2% piloting AI technologies and an additional 10% planning future adoption.
Despite this, the potential benefits of AI in accounting, including predictive analysis, AI-enabled document reviews, natural language processing, AI-assisted forecasting, and audit automation, are significant. Dr. Clare Walsh, Director of Education at IoA, emphasises the value of AI technologies in providing more significant insights amid the shift towards automation and the demand for accurate, real-time data.
In exploring how smaller practices leverage AI, we delve into the AI technologies accountants are testing and the tangible benefits emerging for professional practices.
Document and template generation
Rob McGillen noted that the shift from exploratory to demonstrable prompts involves upskilling professionals through prompt engineering training and demonstrations, fostering adoption within accountancy practices. Rob addresses AI challenges with practical, prompt building, custom instructions, and private data sets. Emphasising the need for the right tool for specific tasks, he acknowledges the evolving nature of the field, requiring continuous focus and updates.
Generative AI enhances efficiency by minimising time spent on lower-impact tasks, enabling professionals to focus on insightful analysis and application of expertise. Overall, the verdict is positive, highlighting AI’s role in improving document and template generation for increased work process efficiency.
If you are interested in implementing artificial intelligence in your business, please contact us.
News
Ryoji Kuroiwa
Partner at Ark LLC
Ryoji Kuroiwa is a partner at Ark LLC, working in Sapporo, Japan. In addition to auditing listed companies in Japan, one of his main focuses is on expanding business by developing clients and human resources.
‘I work for Ark LLC in Japan and am mainly engaged in auditing services to listed companies. In addition to auditing work, I am also involved in acquiring new clients and expanding the size of the firm. I used to work at the Tokyo head office for more than 10 years, but I was transferred to Sapporo two and a half years ago following the opening of the Sapporo branch. Tokyo is one of the largest cities in the world with a population of over 10 million, whereas Sapporo has a smaller population of around 2 million. Sapporo is very cold from December to March, and the entire region is covered with snow. During heavy snowfalls, transport is sometimes halted and commuting to work is not possible.’
‘Compared with other countries, Japan is not an open business environment due to the difficulty of communicating in English and high business barriers. Despite this, Tokyo has a great diversity of business, including global projects, due to its large economy. Although we have many competitors, we also have many clients, so I think we are fortunate to be in an environment where there are few inconveniences for any kind of business. When I transferred from Tokyo to Sapporo, I felt a difference in the business environment. People have strong connections in their work. I initially did not know anyone and had to start almost from scratch.’
‘When the Sapporo office opened, there were only two people, including myself, and only two clients, so we worked to acquire new clients. The number of employees has gradually increased and the number of clients has grown by five over the past two and a half years to a total of seven. Some of these clients were approached by us, but it was the human network that made a major contribution here. When I was posted to Sapporo, a few acquaintances introduced me to many people in Sapporo, where I had no personal network, and as a result, my personal network expanded and we were introduced to clients. Fortunately, the acquaintances included us in their network because they had a positive image of the auditing firm I belonged to. We regularly exchange information on a regular basis, and as a result, we are extremely grateful to them for helping us in a time of need.’
‘The Kreston Global training made me realise that we are a globally connected community and that the relationships that come from diversity are very important. During the Connected Leader programme, I learnt that business is accelerated by connecting with people. This is obvious, but not easy to put into practice. Naturally, the other party will think about the kind of people they want to do business with, and in order to connect with each other globally, it is important to have English and business skills, as well as mutual respect for each other due to different environments. I believe that building such a relationship is not something that can be done by using techniques, but by taking into account a variety of factors such as past experience, way of thinking, knowledge, and what one values in one’s work. While the benefits of human networks can be very significant, they are also difficult to build and maintain, but I believe they are a great asset.’
Each state and many local jurisdictions have authority to impose a sales and use tax, subject to U.S. constitutional restrictions.
What type of tax is it?
Consumption based tax on the final consumers of taxable goods and services. Entities generally collect the tax from the customer and remit the amounts to the state.
What is it due on?
Retail transactions of tangible personal property, enumerated services, and certain digital goods.
What are the sales and use tax rates?
There is no national sales tax therefore there is no standard rate.
Rates vary state to state. Most states allow local jurisdictions, such as cities, counties, and districts, to impose sales tax in addition to the state tax.
Are there exemptions for sales tax?
Many states offer reduced rates or exemptions for certain types of goods and services, such as clothing, food, or personal hygiene items. However, each state varies.
Retailers and manufacturers are allowed to provide resale certificates to their wholesale dealers or suppliers to purchase goods without having to pay sales tax on the transaction.
What does a sales tax number look like?
Varies by state.
When does an entity need to register for a sales tax permit?
If the entity is engaged in the business of selling tangible personal property at retail or taxable services, the entity should register once they have established nexus in the state. Each state has its own standards of what constitutes nexus.
What is nexus and how is it established?
Nexus is a level of connection between an entity and a taxing jurisdiction. Until an entity has nexus, the taxing authority cannot impose sales tax on that entity.
Nexus can be established by the entity having a physical presence or an economic presence in the state. Each state has put into place economic thresholds, such as sales volume or number of transactions. Once those thresholds are exceeded, or physical presence,exists, the entity will have substantial nexus in the state and will be required to collect and remit sales tax.
Are there any special rules?
States also have marketplace facilitator laws where online marketplaces are required to collect and remit sales tax on behalf of third-party sellers. However, each state has its own definition of what constitutes a marketplace facilitator, therefore, online sellers should verify that tax is being collected on their behalf.
Does a foreign entity need a fiscal representative?
Some states require foreign registrants to have a registered agent in the state to receive official notices or correspondence.
How often do sales and use returns need to be submitted?
Depending on the state, returns must be filed either annually, semi-annually, quarterly, monthly, or semi-monthly. Sales volume or the amount of tax due typically determines an entity’s filing frequency.
Are penalties imposed for late filing and payment?
States will assess penalties for the late filing of the return and the late payment of tax. Generally, most states assess a penalty up to 25% of the tax due. However, some states will assess taxes up to 39%. The state will also assess interest on the underpayment of tax.
Is there a way to get penalty relief if an entity failed to timely file a return?
Yes – States offer voluntary disclosure agreements for entities to come forward to pay its tax obligation in exchange for penalty waivers and limiting the lookback periods. Additionally, penalties can be waived if there is reasonable cause for the late filing.
Sales Tax is similar to VAT/GST in that it is also charged on supplies of goods and services, but it is a consumption-based tax, charged on the sale to the end consumer rather than throughout the supply chain.
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Jenny Reed
Director of Quality and Professional Standards at Kreston Global
Jenny oversees the onboarding process of prospective member firms as well as the ongoing development of training and resources. She will be working with member firms to identify priority areas for professional development and training, as well as working with Kreston’s ESG Advisory Committee.
Herbert M. Chain
MBA, CPA (USA), Director, CBIZ Marks Paneth, and Shareholder, Mayer Hoffman McCann P.C.
Herbert Chain is a highly experienced author is a financial expert with 40 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance, and experience with SPACs.
Quality without borders: Quality management in a global network of firms
November 24, 2023
Quality management is crucial to maintain and enhance a global network’s reputation, protect the public interest, ensure client satisfaction, attract and retain top talent, and build a network’s competitive edge. It is also required by regulators and professional bodies.[1] Additionally, the International Standards on Quality Management (ISQM) provide a globally recognised framework for quality management in the accounting and auditing profession. Adhering to the ISQM requirements is essential for global networks to demonstrate the commitment of their member firms to delivering high-quality services.
For global networks, dispersed across countries and regions, and composed of independent firms, maintaining consistency and excellence presents unique challenges. A commitment to quality by global and firm leadership is essential to set the standard, demonstrate a tone at the top, and encourage (and require) appropriate behavior.
Critical elements of quality management
Culture, culture, culture
Leadership must emphasise the importance of quality at all levels of the network, develop a culture of quality, and communicate expectations for behavior. It must also encourage a culture of continuous improvement. This means creating an environment where staff feel comfortable identifying and reporting problems and where there is a process for addressing those problems.
It also requires those in authority within the firm to “walk the talk” (i.e., “tone from the top”) and not to ignore those who either believe themselves to be exempt from the standards that apply to others, or whose moral compass does not point to true north. Such inaction is very visible to staff and will undermine the effectiveness of a firm’s stated and/or documented policies and procedures, however good they may be.
2. Overcoming resistance to change
For most organisations, global or domestic, resistance to change can hinder the successful implementation of any initiative, including a quality management system. To overcome this, the organisation and its leadership must foster a change management culture by involving stakeholders at all levels and at all stages in the process, providing clear communication about the benefits of the new system(s), and demonstrating its positive impact on quality, firm success ad reputation, and client satisfaction.
3. Standardisation and harmonisation
One of the key factors in promoting effective quality management across a global network of independent firms is the establishment of standardisation and harmonisation protocols. Developing a set of standardised processes, methodologies, and best practices ensures uniformity in service delivery, documentation, and work performance. This can be achieved through the implementation of a global quality management system, which outlines the framework for quality objectives, procedures, and responsibilities. It should also encompass continuous improvement initiatives, regular performance reviews, and quality audits. While non-standardised methodologies and policies can still result in quality performance of services, standardisation permits effective resource sharing, scalability of operations, and consistent documentation frameworks.
In a diverse network of independent firms, there will always be aspects of quality management that need to be firm-specific for maximum effectiveness, but alignment of policies and procedures will often be beneficial and cost effective. The introduction of ISQM1 has helped accelerate this process for global firm networks.
4. Training and development
Investing in comprehensive training and development programs is vital to enhancing the capabilities and competencies of professionals within the network. Providing regular training sessions, workshops, and certifications not only strengthens technical skills but also cultivates a culture of continuous learning. Additionally, sharing knowledge and best practices among member firms through online platforms and collaborative forums fosters innovation and improvement across the network.
A focus on efficiency through these types of training and collaboration initiatives can also indirectly contribute towards audit quality. Streamlining processes and cutting out unnecessary work and/or documentation frees up staff to focus their time and effort on more important (i.e., riskier) matters.
5. Key Performance Indicators (KPI)
KPIs, sometimes known as Audit Quality Indicators (AQIs), play a vital role in measuring and monitoring quality across the network. It is important to define meaningful KPIs that align with the organisation’s overall objectives and values. These indicators should include both qualitative and quantitative metrics, such as client satisfaction ratings, adherence to industry standards, results of inspections or quality reviews, and employee training and development.
6. Client engagement and feedback
Quality management should extend beyond internal processes to include effective client engagement and feedback mechanisms. Regular communication channels should be established to capture client expectations, needs, and satisfaction levels. Implementing client feedback surveys, conducting post-engagement reviews, and actively seeking client input helps identify areas for improvement and enhances client relationships. This feedback loop is crucial for maintaining high-quality services and driving continuous improvement efforts.
7. Technology and automation
Leveraging technology and automation tools plays a vital role in streamlining processes, minimising errors, and maximising efficiency. Implementing next-generation accounting and auditing software systems (including artificial intelligence applications), data analytics tools, and workflow automation platforms can significantly improve the ability to analyze data, reduce work times, and enhance the quality of work performed. For example, dashboarding tools such as Caseware Sherlock can automatically measure and report on KPIs such as time to lock down the file, number of review points raised etc.
Regularly assessing and adopting emerging technologies ensures that the network remains at the forefront of industry advancements and accesses effective and efficient methodologies for performing engagements.
8. Monitoring and review
The network must have a system for monitoring and reviewing the quality of its work. This system should identify areas where improvement is needed and permit the network to take steps to address those areas.
Collaboration and peer review processes foster a culture of accountability and continuous improvement. These encourage cross-firm and cross-border collaboration, and allow firms to learn from one another, share best practices, and review each other’s work. Implementing robust peer review mechanisms helps identify areas for improvement, rectify errors, and ensure adherence to quality standards. The feedback received from these reviews should be used to refine processes, address gaps, and strengthen the overall quality management system.
Whilst the main objective of a global quality review program will always be to ensure that member firms can refer their clients to other member firms with confidence, the program should also aim to provide objective, constructive and friendly advice and recommendations to firms based on the reviewer’s own experience and best practices seen elsewhere within the network.
Constraints and overcoming the challenges
While pursuing quality management objectives, several constraints may arise. Identifying and overcoming these challenges is essential. Here are some common constraints and suggested approaches to overcome them:
Geographical and cultural diversity
The global nature of networks may introduce variations in language, cultural practices, and legal frameworks. Overcoming this constraint requires promoting cross-cultural understanding, establishing clear communication channels, and conducting regular cultural training sessions. Adaptation to local regulatory requirements while maintaining global quality standards is also crucial.
While a baseline framework is essential, it must be flexible enough to accommodate variations arising from local regulations, industry practices, and cultural norms. Encouraging local participation in the development of quality standards ensures that the quality management system is adaptable and relevant to different contexts.
Whilst challenging, diversity within the network can also have a positive benefit, providing firms with new perspectives and insights from those firms who take a different approach. Collaborating internationally can generate ideas and ways of thinking that can unlock innovative solutions to problems and challenges.
Resource allocation
Unequal distribution of resources and varying levels of expertise among member firms can hinder quality management efforts. Addressing this constraint involves developing resource-sharing mechanisms, fostering collaboration, and conducting knowledge transfers among firms, recognising that when accomplished, the network as a whole is stronger and all benefit. Centralised resource pools, mentorship programs, and secondment (i.e., outsourcing) opportunities can help balance expertise and optimise resource allocation.
Compliance and regulatory challenges
Different countries may have different compliance requirements and regulatory frameworks, making it challenging to maintain consistent quality practices. Overcoming this constraint necessitates establishing an understanding for such differences and incorporating them into the design of any quality management system. Standardising core compliance processes while allowing for necessary local adaptations ensures compliance while preserving quality standards.
With a global network also comes the requirements to monitor services provided to clients across the network to minimise the risks of breaches of the independence rules on financial interests, mutuality of interest, and scope of services. This has been a significant emphasis on the part of the largest global firms and their networks, especially as related to their public clients, but it also is important for mid-sise networks and even associations. These risks can be overcome by effective communications among network member firms, awareness of services being provided by member firms, and, as often practiced by the larger global networks, the designation of a lead client relationship partner for the client whose responsibilities include monitoring and improving services to be provided by the network before engagement. Firms have also made significant investments in technology to track global services being provided by member firms.
Technology maturity of firms
Unequal technological infrastructure and varying levels of technological maturity can impede effective quality management. Overcoming this constraint involves providing adequate technical support, training, and access to essential technologies, providing standardised tools and systems while allowing flexibility to accommodate local IT infrastructure and preferences. Encouraging knowledge-sharing among member firms regarding technology implementation and providing incentives for adopting new tools can drive technological advancement throughout the network.
Conclusion
Developing, implementing, and enforcing a quality management system for independent firms within a global network is a daunting, yet achievable, task. With the support of senior leadership and the board, and the support and will of the leadership of member firms, however, it is doable – and will maintain and enhance the network’s reputation, protect the public interest, ensure client satisfaction, attract and retain top talent, and build a competitive edge.
[1] Note the recent enforcement actions by the U.S. Public Company Accounting Oversight Board and Securities Exchange Commission, the UK’s Financial Reporting Council, and other regulatory bodies against public accounting firms relating to lapses in their engagement performance and firm-level quality management systems.
Kayode Oni is an accomplished finance analyst with a proven track record of accounting and consulting. Experienced in finance, accounting, financial analysis, investment appraisal, tax laws and regulations, consulting, project management, and data analytics, Kayode is a valuable asset in the financial sector at Kreston Pedabo.
With over 12 years of experience spanning diverse sectors such as financial services, real estate & hospitality, consumer markets, and oil & gas, Tyna Adediran is a resourceful and self-motivated Business Analyst and Management Consultant. Specialising in areas like Strategy Design & Execution, Project Management, and SME Transformation, she is known for her strong skills in data collection, diagnostics, and critical thinking. Beyond her professional expertise, Tyna is a passionate advocate for continuous learning, sustainable business practices, and youth empowerment, reflecting her commitment to making a positive impact on both the business world and society at large.
Kreston Pedabo on Africa Industrialisation Day
November 20, 2023
Sector:Energy
Agenda 2063 is Africa‘s development blueprint for inclusive and sustainable socioeconomic growth and development. African Heads of State and Governments adopted the continental agenda during the golden jubilee celebrations of the Organisation of African Unity (OAU)/African Union (AU) in May 2013. Agenda 2063 seeks to deliver on seven development aspirations, each with its own goals to move Africa closer to achieving “The Africa We Want.”
The blueprint contains key activities to be carried out in five Ten-Year implementation plans, ensuring that Agenda 2063 delivers quantitative and qualitative transformational outcomes for Africa’s people over a 50-year timeframe.
Agenda 2063
The implementation of Agenda 2063 at continental, regional, and national levels has progressed steadily during the reporting period. This is attributed to remarkable progress and achievements made towards the realisation of several goals and targets of the First Ten-Year Implementation Plan of Agenda 2063.
The data in the second continental progress report on the implementation of Agenda 2063 indicates that Nigeria has achieved a 40% score concerning the goals set for the seven development aspirations. This marks a significant increase of 208%, up from the 13% recorded in the first continental progress report on implementing Agenda 2063.
Key areas where Nigeria has contributed significantly to the implementation of Agenda 2063 include:
Increased access to internet and electricity
Reduced under-five mortality rate
Increased access to anti-retroviral treatment
Increased women’s access to sexual and reproductive health services
Reduced prevalence of underweight among under-five children
Reduced the proportion of Official Development Assistance (ODA) in the national budget
Reduced unemployment rates
Increased real GDP per capita and annual GDP growth rates
Increased enrolment in pre-primary, primary and secondary schools
Increase in the proportion of the population with access to safe drinking water and safely managed sanitation services.
Increase in the share of manufacturing in GDP.
Key beneficial legislation for international businesses
No specific, unified legislation applies to all international businesses looking to expand into Africa. The legal landscape in Africa is diverse, and each country has its own set of laws, regulations, and policies governing international business activities.
However, some regional economic communities in Africa/Trade blocs, such as the Economic Community of West African States (ECOWAS) and the African Continental Free Trade Area (AfCFTA), have taken steps to harmonise certain aspects of business laws among member states to facilitate trade and investment.
International businesses aiming to expand into Africa typically need to navigate a range of legal considerations, including investment laws, taxation, employment laws, industry-specific regulations, trade agreements, intellectual property laws, and local content laws, among others.
Businesses must conduct thorough due diligence and seek legal advice tailored to the country or countries in which they plan to operate. Additionally, regulations and business environments can change, so it is advisable to consult legal experts with the most recent and relevant information.
A focus on Nigeria
In Nigeria, however, efforts have been made to attract foreign direct investment (FDI) through its investment promotion agency, the Nigerian Investment Promotion Commission (NIPC). The NIPC Act provides the legal framework for investments in Nigeria and incentivises investors in various sectors.
The Federal Government of Nigeria has adopted rigorous efforts to ensure that areas of concern for foreign investors, such as bureaucratic red tapes, incorporation processes, taxation, capital repatriation, and visa policies, are relaxed to the fullest extent possible to open up Nigeria’s economy to fair competition and prosperity.
Consequently, in line with the NIPC Act 22, the Nigerian Investment Promotion Commission regularly consults with crucial Government agencies to negotiate specific incentive packages in identified strategic areas of investment interest. These consultations have led to an increasingly attractive business environment with tax holidays for pioneer companies producing exportable goods, newly established industries in manufacturing, or expansion of production in sectors vital to the economy. The Government also grants non-tax incentives to non-pioneer firms in addition to industry-specific incentives.
NIPC Act
Section 24 of the NIPC Act provides that a foreign investor in an enterprise to which the Act applies shall be guaranteed unconditional transferability of funds through an authorised dealer in a freely convertible currency of:
dividends or profits (net of taxes) attributable to the investment;
Payments in respect of loan servicing where a foreign loan has been obtained; and
The remittances of proceeds (net of all taxes) and other obligations in the case of the sale or liquidation of the enterprise or any interest attributable to the investment.
Foreign Trade Zones
Foreign investors can set up businesses directly in Free Trade Zones (FTZs) without incorporating a company in the customs territory. Registered companies may also apply as a separate entity to operate in an FTZ that would append the company’s name with the FZE (Free Zone Enterprise) suffix to gain the FTZ benefits.
FTZ incentives include:
Exemption from all Federal, State, and Local Government Taxes, Rates, and Levies.
Duty-free importation of capital goods, machinery/components, spare parts, raw materials, and consumable items in the zones.
100% foreign ownership of investments.
100% repatriation of capital, profits, and dividends.
Waiver of all import and export licenses.
One-stop approvals for permits, operating licenses, and incorporation papers.
Permission to sell 100% of goods into the domestic market (in which case applicable customs duty on imported raw materials shall apply).
For prohibited items in the customs territory, free zone goods are allowed for sale provided such goods meet the requirement of up to 35% domestic value addition.
Rent-free land during the first 6 months of construction (for Government-owned zones).
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Kreston NBB Saudi Group announces Kreston NBB Cluster Advisory
Saudi Arabian Kreston member firm, Kreston NBB Saudi Group, today announced the establishment of a new advisory organisation, Kreston NBB Cluster Advisory, to meet the growing need for advisory services to clients in the region.
Kreston NBB Cluster Advisory offers a wide range of management consulting services designed for a range of client types. These include corporate governance, risk and compliance services, corporate restructuring, financial advisory services, accounting services, internal audit, and forensic accounting services.
Founded by Kreston NBB Saudi Group Managing Partner Nefal Barrak, the new firm is branded as Kreston NBB Cluster Advisory to take advantage of the extensive global reach of the Kreston Global network. The advisory firm has an ambitious growth strategy and is focused on building a solid quality-led national, regional, and international offering, strengthened by extensive training expertise, to ensure clients can achieve maximum potential. Two of the firm’s partners, Nefal Barrak and Samer J. Yamin, are ex “Big 4“ corporate finance and deal advisory specialists, and are looking forward to working in an entrepreneurial environment with ambitious growing clients.
Nefal Barrak, Managing Partner at Kreston NBB Cluster Advisory, said:
“The establishment of our advisory practice is to meet increasing client demand for specialist consulting services which we are seeing in both Saudi Arabia and the Middle East as a whole. We know the international market is a key growth area here in Saudi Arabia, and Kreston’s Middle East region is highly active and well-connected. As a firm looking to build a strong sustainable future, being able to take advantage of the Kreston Global network is key thanks to its dynamic, ever-growing community of firms serving their clients with dedication and commitment. We are excited to be able to offer a truly multi-disciplinary service to local and international clients.“
“It is always exciting to see firms expand their portfolio and grow and I’m looking forward to watching Kreston NBB Cluster Advisory and their colleagues across the Middle East collaborate on national and international clients in the region.”
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Nefal Barrak
Managing Partner, Kreston NBB Saudi, Saudi Arabia
Nafal Barrak brings extensive experience in consulting, accounting, and management from his time at Deloitte and BDO Saudi Arabia, including Dr. Mohamed Al-Amri & Co. Currently, he holds the position of Managing Partner at Kreston NBB Saudi, where he has facilitated the establishment of a culture of innovation and collaboration, contributing to significant company growth.
Investing in Saudi Arabia: Vision 2030 a catalyst for change
October 20, 2023
Against the backdrop of fluctuating foreign direct investment (FDI), Saudi Arabia, with a formidable GDP of approximately $833 billion, is pioneering economic revitalisation through its ambitious Vision 2030 initiative. Smart businesses are moving quickly positioning themselves to ride the wave of regulatory changes as the Kingdom moves forward to rejuvenate FDI with Vision 2030.
We spoke to Nefal Barrak Beneyyah, Managing Partner at Kreston NBB Saudi about how the vision is affecting doing business and investing in Saudi Arabia.
Understanding the impact of vision 2030 on investing in Saudi Arabia
The Kingdom experienced a significant FDI drop in 2022, making the Vision 2030 initiative, launched by Crown Prince Mohammed Bin Salman in 2016, even more critical. With aspirations to attract over $100 billion annually in FDI by 2030, Saudi Arabia is diversifying investments across sectors, including chemicals, real estate, fossil fuels, automobiles, tourism, plastics, and machinery, drawing interest from countries like France, Japan, Kuwait, Malaysia, Singapore, the UAE, and the USA.
Nefal believes the use structural reforms have supported the rapid change, “Since the launch of Vision 2030, Saudi Arabia has succeeded in implementing many initiatives, for example, privatisation, to enable economic transformation in the Saudi market. Under Vision 2030, Saudi Arabia has taken impressive steps to improve the business environment, attract foreign investment and create private-sector employment and maximised its investment capabilities by participating in large international companies and emerging technologies from around the world. Interestingly, the number of small and medium enterprises (SMEs) registered in Saudi Arabia has also grown since the launch of Vision 2030.”
The Line: A futuristic investment opportunity in Saudi Arabia
As a pillar of Saudi Arabia’s Vision 2030, The Line is part of an ambitious strategy by Crown Prince Mohammad Bin Salman, reflecting the country’s aspiration to diversify away from oil dependency and reshape its economy. A selfdescribed “cognitive city” 170 kilometres long and only 200 metres wide, stretches from the mountains of NEOM to the Red Sea.
With an estimated investment of $500bn, The Line is part of the NEOM mega-development, which focuses on developing sectors such as energy, water, and advanced manufacturing, positioning itself as a global hub for trade and innovation. However, the project faces challenges in securing concrete investments and navigating the sociopolitical landscape, marked by controversies and the need for healthy relations with neighboring countries. The megacity’s progress, buoyed by the Crown Prince’s commitment, hinges on the realisation of FDI dreams, with the first phase of construction potentially completed by 2025.
Funding this ambitious venture is the Saudi Arabian Public Investment Fund (PIF) and a range of local and international investors. The PIF, bolstered by collaborations with Blackstone Group and SoftBank, is pivotal in supporting various sectors within NEOM, such as renewable energy, advanced manufacturing, and biotechnology. The city’s listing, set to follow Aramco’s IPO, aims to draw investments from diverse fields.
Boosting FDI with strategic investment initiatives in Saudi Arabia
To bolster FDI, Saudi Arabia launched the Special Economic Zone (SEZ) programme and established the Investment Law Business Regulations Zone (ILBZ) in Riyadh. These initiatives, coupled with far-reaching legal reforms, including the new Foreign Investment Law. Under the draft law in Saudi Arabia, foreign investors will experience neutral treatment, enjoying freedoms to manage and operate their projects, including property ownership, contract conclusion, company acquisitions, and funds transfer. Both local and foreign investors will adhere to identical sectoral requirements for licenses, registrations, and certain economic activities, supported by facilitated procedures from Saudi authorities. Violations of the law may result in SR500,000 fines, cancellation of registration or licenses, and revocation of investment facilities, while confiscation or expropriation of investments is restricted and subjected to fair compensation.
These changes are pivotal in fostering a conducive investment environment. The ILBZ, offering attractive incentives such as a 50-year tax exemption and 100% business ownership rights, and the SEZ’s focus on nonconventional sectors, are instrumental in attracting quality FDI.
Streamlining foreign investing in Saudi Arabia’s securities market
In a recent move, Saudi Arabia’s Capital Market Authority (CMA) announced new regulations for foreign investment in its securities market on 2 May 2023. This legislation governs qualified foreign investors’ (QFIs) operations in the Saudi capital market and consolidates measures into a comprehensive document, including provisions for QFIs, disclosure requirements, and continuous obligations. The amended legislation reduces differences between QFIs and other investors and simplifies QFI requirements, including allowing investments in main market securities through discretionary portfolio management.
Kreston NBB Saudi: Navigating the opportunities of investing in Saudi Arabia
Aligned with Saudi Arabia’s evolving economic landscape, Kreston NBB Saudi offers a diverse service portfolio, ensuring adaptability and readiness to navigate the complexities of Vision 2030 and the newly introduced market legislations. Nefal is clear the firm’s commitment to quality, governance standards, and high-quality training underscores its strategic alignment with the Kingdom’s ambitious economic goals,
“Initially, our priority will be to fully support major multinational and national companies, which have already gained a leading market share, by providing them with our quality services regionally and globally starting from Phase I “Selecting the proper legal status” to Phase III, especially in the fields of assurance, tax consultancy/ planning, advisory service, and value-added tax compliance services. We also seek to support local and multinational companies with promising growth opportunities so they could develop into new regional and global leaders.”
Saudi Arabia’s ascent in the World Bank’s Doing Business report and impressive GDP growth of 8.7% in 2022 highlight its promising economic trajectory. The Kingdom’s transparent regulatory framework, strategic initiatives like the SEZ programme and ILBZ, and continuous regulatory reforms, including the recent securities market legislation, are driving forces making Saudi Arabia a dominant and attractive investment destination in the MENA region.
As Saudi Arabia endeavors to realise Vision 2030 through leveraging strategic initiatives, regulatory reforms, and newly introduced securities market regulations. Nefal observes, “Saudi Arabia is a future forward economy, offering untapped potential and unique business opportunities to national and international businesses.”
Mohamed Mamdouh is Director at Ahmed Mamdouh & Co. Kreston Egypt. He is also a committee member of Kreston Global Middle East.
Investing in Egypt: IMF backing, BRICS and reform attract investors
In 2022, Egypt doubled its 2021 Foreign Direct Investment (FDI) figure, bolstered by an International Monetary Fund (IMF) loan and a slew of regulatory reforms. The loan, awarded on December 17 2022 by the IMF, is a 46-month arrangement under the Extended Fund Facility worth $3 billion for the nation, conditional on the Government of Egypt (GoE) implementing a range of structural reforms. We spoke to Mohamed Mamdouh in the region to find out more about doing business in Egypt.
Egypt’s resilience as a top destination for Foreign Direct Investment (FDI)
Egypt attracted over $11 billion of inward investment in 2022, according to a 2023 report by UNCTAD (United Nations Conference on Trade and Development) in addition to the IMF funding agreement. The IMF’s backing aims to encourage Egypt in adopting a flexible exchange rate, implementing the State Ownership Policy to encourage privatisation, and lifting import restrictions imposed in the spring of 2022.
In line with this, Egypt has enacted several regulatory reforms like the Investment Law (Law 72 of 2017), a “New Company” law and a Bankruptcy law in 2018, and a new Customs Law in 2020, to optimise its business climate. In August 2023, Egypt also announced it was due to join trade coalition, BRICS, to help shore up the IMF investment and attract more FDI.
Sustainable development and climate readiness in Egypt: A growing priority
Additionally, Egypt’s engagement in global climate negotiations has been underscored by its hosting of the United Nations Climate Change Conference (COP 27) in November 2022, signalling a growing awareness of sustainable development.
Egypt’s economy is undergoing substantial transformations, thanks in part to a raft of governmental reforms targeted at foreign investments and broader economic development. This has led to increased demand for specialised auditing and accounting services, a need that Kreston Egypt is wellplaced to meet.
“Egypt has taken several initiatives over the last year, particularly focused on adapting to changes in the external environment,” remarks Mohamed Mamdouh, an expert in the Egyptian accounting and auditing sector. Among these initiatives are efforts to encourage foreign direct investment and bringing previously closed firms onto the stock exchange. “This has allowed auditing firms like Kreston Egypt to play a pivotal role in enhancing financial transparency and performance,” Mohamed observes.
Adapting to the changing tax landscape in Egypt: Implications for investors
In addition to these economic shifts, accounting regulations for domestic businesses have been revised, affecting areas such as currency exchange treatment and insurance firm standards. According to Mohamed, “Our local expertise, bolstered by the Kreston Global network, positions us to offer a full suite of auditing, accounting, and advisory services.” The firm specialises in a range of areas, including financial statement auditing, tax planning, transfer pricing and M&A due diligence, giving the team a broad understanding of the impact the reforms are having on clients.
Diversified investment opportunities in Egypt’s growing sectors
Changes to Egypt’s taxation laws aim to align with international norms, including The Organization for Economic Cooperation and Development (OECD) Base Erosion and Profit Sharing (BEPS) guidelines. “New regulations have emerged, covering a broader definition of Permanent Establishment, the use of e-invoicing, and a unified tax rate for gains,” Mohamed advises.
Beyond traditional financial matters, the regulatory environment in Egypt is also adapting to include ESG factors. “We are seeing a greater focus on ESG within the regulatory framework, states Mamdouh. Artificial Intelligence and blockchain are other key areas witnessing regulatory development. “The country is developing a stance on Artificial Intelligence, anticipating its role in enhancing business efficiency,” says Mamdouh. Regarding cryptocurrency and blockchain, he notes, “While the rules are still in development, there’s a clear interest in these technologies, indicating future regulatory action.”
Investment landscape
Opportunities for investing in Egypt are aligning with its new policy directions, offering potential in sectors like financial services, renewable energy, and technology. Kreston Egypt is ready to assist companies in navigating this evolving environment. “As the economy and regulatory landscape change, we are committed to guiding our clients through these complexities, contributing to their long-term success,” Mamdouh concludes.
Egypt is laying significant foundations to attract FDI, for businesses contemplating entry into the Egyptian market in 2024, the dynamic regulatory transformations underscore the importance of securing knowledgeable local expertise for effective navigation and compliance.
Sudhir Kumar, with over 30 years of business acumen in the domains of Management and Consulting in the UAE market is the primary resource behind the successful positioning of Kreston Menon as one of the leading Superbrand in the region. He works closely with all the market segments including Government, Corporate Sector, Free Zones as well as Financial Institutions. He spearheads the CSR initiatives of the organization along with his branding and corporate communication responsibilities.
Investing in the Middle East: Economic outlook for 2023/4
October 19, 2023
The Middle East economy is still attracting inward investment in 2023, despite a slowing global economy. The IMF and World bank are predicting GDP growth in the Middle East and North Africa (MENA) in 2023 to land somewhere between 2.4% and 3.1%.
Oil dependency and market dynamics
While oil and gas remain crucial for the Middle East’s economic landscape, especially for the Gulf Cooperation Council (GCC) states, there is a clear and evidenced interest in reducing this dependency by diversifying into other sectors to build more resilient, stable, and sustainable economies. Many regions have developed an ambitious tourism strategy, particularly Oman and United Arab Emirates (UAE), with Saudi Arabia’s flagship tourism investment opportunity NEOM picking up pace and The Line, Saudi’s planned 170km, $500 billion new city, due to be complete in 2039.
Diversification for economic stability
Oil and gas remain pivotal when investing in the Middle East. The EIU (Economist Intelligence Unit) notes that GCC states will particularly benefit from strong global demand and high prices for energy exports. The organisation expected oil prices to remain above $90 per barrel until at least mid-2023, echoing the International Monetary Fund’s (IMF) warning about rising oil prices due to global turbulence. (OPEC+) countries are unlikely to increase production despite pressure from the U.S. and Europe, focusing instead on price levels.
Inflation is another key concern, particularly for troubled states like Lebanon, Syria, Yemen, Iran, as well as Egypt and Turkey. According to the EIU, these countries are bracing for another year of double-digit annual consumer price inflation, with hyperinflation in Lebanon and Syria. This dovetails with the IMF’s report, highlighting inflation rates in some Middle Eastern countries.
Both the EIU and the IMF highlight the increasing focus of major Middle Eastern countries like Saudi Arabia, the UAE, and Iran on Asia for trade and investment. The EIU expects this “look East” policy to continue in 2023.
Promising tourism developments
Tourism is showing signs of recovery across the region, with the EIU anticipating international arrivals returning to pre-COVID levels by the end of 2023. This is due in part to major events like the FIFA World Cup in Qatar and efforts to promote tourism across Middle Eastern countries.
Business conditions in the GCC states are expected to be the most favourable in the region, per the EIU. These countries will see high oil and gas revenues spilling over into nonenergy sectors, helped by state-backed investments in diversification.
Challenges and opportunities investing in the Middle East
Both the World Bank and the EIU emphasise downside risks, including global shocks that could affect economic growth, stability, and social cohesion. Upside risks are limited and mostly hinge on external factors like a quick resolution of the war in Europe or stronger demand from China.
Ersel Barlak has 25 years of working experience in diversified roles such as corporate finance, business strategy, banking, audit and corporate business development covering a broad number of industries with significant project and deal execution leadership responsibility.
Ersel has a proven track record of leading projects such as valuations, project finance assignments, strategic assessments, market and financial feasibility studies, greenfield investments, portfolio reviews, competitive analysis, strategic planning, evaluation of investment targets, M&A engagements, formation of strategic partnerships, privatizations, divestitures, IPOs and SPOs.
Investing in Turkey: Can the economy find stability in 2024?
Investing in Turkey is a tale of two halves. As the 19th largest economy in the world, boasting a GDP of roughly $906 billion, Turkey is working against the odds to keep a seat at the economic table of the G20 powerhouses, navigating a complex list of setbacks, from natural disaster to hyperinflation.
The nation has experienced a notable journey of growth, reforms, and resilience over recent years. Ersel Barlak, partner at Kreston ATA, Turkey, examines Turkey’s foreign investment growth, second only to the United Arab Emirates in 2022. In the face of 58% inflation, Ersel discusses the firm’s trajectory amidst economic challenges and opportunities.
Overview of investing in Turkey
Turkey has witnessed ambitious reforms and high growth rates between 2006 and 2017, leading to a substantial reduction in poverty. The share of individuals below the $6.85 per day poverty line nearly halved to 9.8% between 2006 and 2020 according to World Bank data.
Ersel Barlak, with six years in the network under his belt, has a clear perspective on why that is.
“When compared to the EU countries, Turkey is the country with the highest youth population, half of Turkey’s population is under 32, which forms a youthful workforce with a strong potential,” shares Ersel, attributing part of the success to the nation’s intellectual capital.
“As of 2020, approximately 1 million undergraduates graduate from more than 200 universities yearly. The workforce in Turkey experiences the biggest growth among the EU countries as it becomes more and more productive every day .”
Despite the challenges of high private sector debt, persistent current account deficits, high inflation, and an unemployment rate double that of European G20 members, Turkey managed to achieve a robust economic growth of 5.6% in 2022 following the COVID pandemic recovery.
Foreign investment: Istanbul’s significance
The country took a blow in February 2023 in the form of devastating earthquakes, which inflicted physical damage in 11 provinces, accounting for 16.4% of Turkey’s population and 9.4% of its economy. The direct losses are estimated at $34.2 billion according to a World Bank report, but reconstruction of that figure could potentially double.
Ersel reflects on Istanbul’s resilience and emergence as a regional hub for foreign investors amidst these adversities. “Particularly Istanbul has become a strong attraction centre for foreign investors investing in Turkey,” notes Ersel, underscoring the city’s strategic significance and adaptability.
OECD economic outlook for investing in Turkey
The OECD Economic Outlook, June 2023, further details this situation, projecting a moderate economic growth of 3.6% in 2023, attributed to weaker exports, while domestic demand continues to fuel growth. This was still the best outlook in the G20.
The extensive damage caused by the earthquakes has indeed disrupted economic activity, yet the rapid initiation of reconstruction work is expected to largely offset this negative impact. The unemployment rate is anticipated to hover around 10%, and inflation, currently at 58%, is projected to “return to normal” rates of 15% by the end of 2025, with nominal wages experiencing a rapid ascent.
Investment incentives and strategic advantages
So what is bringing foreign investment to Turkish shores, despite uncertainty? Turkey offers a myriad of investment opportunities, bolstered by extensive incentive programs, a liberal investment environment, and strategic geographical leverage. “Hundreds of leading global companies in automotive, energy, and retail industries take advantage of competitive R&D incentives,” states Ersel. He further highlights Turkey’s role as a gateway for international companies aiming to expand into diverse markets and the youthful demographic profile that augments the nation’s appeal.
Focus, too, on uninterrupted reforms, makes the process of starting a business in Turkey appealing, Ersel believes, “Thanks to the reforms introduced in the fields of innovativeness of production, the sustainability of growth, qualified workforce, and collaboration in the international market, the average time period required to start a business shortened to 6.5 days from 38. In addition to its expanding domestic market, Turkey also offers access to approximately 1 billion consumers in the regional market with the support of free trade agreements .”
Investing in a greener future
Looking to the future, Kreston ATA is focusing on expanding its Corporate Finance & Advisory business. While acknowledging that the demand in specific service areas has remained constant, Ersel highlights the firm’s commitment to leveraging emerging opportunities and adapting to the evolving economic landscape. The integration of ESG policies is also gradually gaining traction in Turkey. “ESG is a new concept to our clients. Frankly speaking, it is not a priority on their agendas,” reveals Ersel.
However, he does predict a shift in this outlook, as clients exporting to the EU will need to comply with regulatory standards, hinting at potential future investment in this area to align with international business norms.
Conclusion
Turkey, with its blend of historical significance, economic resilience, and strategic advantages, remains a destination for foreign investment. As the nation navigates economic challenges and opportunities, insights from Ersel Barlak provide a glimpse into the evolving narrative of doing business in Turkey – a tale of adaptability, strategic foresight, and continuous growth.
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