Franchise Agreements

The Sultanate of Oman features an array of international goods and services providers, many of which are operated as franchises. Eateries such as McDonald’s and Starbucks, retailers such as H&M and Zara are just a few examples of Oman’s thriving franchise sector. Such franchises represent not only an important segment of the Sultanate’s existing commercial landscape, but also a significant opportunity for Omani entrepreneurs to start new businesses.

This article provides an overview of what franchises are and discusses key legal and commercial issues relevant to entrepreneurs looking to start a franchise in Oman, particularly with US franchisors.

What is a Franchise?

Although the word “franchise” often conjures images of particular kinds of businesses – such as fast food restaurants or budget hotel chains – franchising is actually used across a broad spectrum of enterprises. What all franchises have in common are (i) a branded line of products and/or services, (ii) an operating system prescribed by the franchisor, and (iii) one or more fees charged to franchisees for the right to participate in the business system by selling the branded products and/or services and by utilizing the franchisor’s operating system. Franchisors and franchisees are independent business entities, and franchisors typically derive their income from initial and ongoing fees paid by their franchisees. Sometimes franchisors also sell items to franchisees or collect fees from franchisees’ suppliers.

For example, in the case of a fast food restaurant such as McDonald’s, the franchisor, McDonald’s Incorporated, has created and maintains (i) a brand together with intellectual property (e.g., the golden arches logo) and products (e.g., the Big Mac hamburger) associated with the brand, and (ii) a system for operating McDonald’s restaurants, which likely includes detailed guidelines for restaurant layout and decoration, food preparation guidelines, customer service guidelines, and many other requirements. McDonald’s franchisees, namely the businessmen and companies that own and operate McDonald’s restaurants throughout the world, pay franchise fees to McDonald’s Incorporated in exchange for the right to use McDonald’s Incorporated’s brand and operating system.

The legal framework for franchising in Oman

In some jurisdictions, there is a separate legal framework that governs franchises. However, in Oman franchises are simply considered another form of commercial agency. Accordingly, franchise agreements, like any agency or distribution agreement, are governed by Oman’s Commercial Agency Law, unless the agreement is expressed to be governed by the laws of a country other than Oman, coupled with an arbitration clause.

To form a legally valid franchise relationship in Oman, it is necessary for the franchisor and franchisee to enter into a franchise agreement and to register in the Commercial Agents Registry at the Ministry of Commerce & Industry.

The franchise agreement is naturally a very important document to the franchisor and the franchisee alike. Although the franchise agreement will usually be based on the franchisor’s standard form, it is important for the franchisee (and, we recommend, the franchisees legal advisors) to review the franchise agreement carefully and negotiate its key points with the franchisor. From the perspective of an Omani franchisee, the key issues are likely to be:

• the fees that the franchisee will be obliged to pay to the franchisor;
• the services that the franchisor will provide to the franchisee (for example, training and marketing support);
• the scope of the franchise rights (for example, geographical reach);
• the reasonableness and attainability of any performance targets or restrictions that the franchisor may impose on the franchisee;
• whether the franchisee is being appointed on an exclusive or non-exclusive basis; and
• the governing law and jurisdiction clause.

Franchise Disclosure Documents (FDDs)

Every prospective franchisee would do well to obtain detailed information about the franchisors that interest him. Fortunately, when it comes to US franchisors, this information is fairly easy to come by.

US franchisors are required to deliver Franchise Disclosure Documents (FDDs) to prospective franchisees for locations within the US, although this requirement does not apply abroad. Franchise laws in twenty other countries also require franchisors to prepare FDDs. FDDs contain invaluable information about the experience of the franchisors and their executives, including the number of units of the franchise opened and closed in recent years, litigation and bankruptcy history, initial investment estimates, audited financial statements of the franchisor, and contact information for the franchisor’s current franchisees, as well as those who have left the brand during the franchisor’s last fiscal year.

Every prospective franchisee should study the information required to be included in the FDD, however US franchisors are often advised by their lawyers not to provide the FDD to foreign franchisee prospects because international franchise agreements usually differ from the US domestic agreements, and the laws of most countries, such as Oman, do not require them to make such detailed disclosures. Franchisors may also fear that if they have no experience in operating businesses in a new market, such as Oman, that a US-oriented FDD could mislead prospective Omani franchisees. Nevertheless, we strongly recommend that an Omani franchisee should demand and examine the franchisor’s FDDs prepared for the US market, as these documents will contain useful information that the prospective franchisee can use in evaluating specific franchise opportunities.

Other recommendations

In order to take advantage of the best available franchising opportunities and to avoid problems with inexperienced or undercapitalized franchisors, prospective Omani franchisees should consider the following:

• Only acquire a franchise if you are comfortable with the franchisor, the people who lead it, and its organizational culture.
• Obtain an FDD of the franchisor, even if it is prepared for the US market. Many FDDs are available online. Many franchisors prepare international or country-specific FDDs and will normally provide them to prospective franchisees without their having to ask.
• Contact unit franchisees in the US and elsewhere. Many franchisees are willing to share information about their experiences with prospective franchisees.
• Although franchisor executives describe franchising as a relationship which is a form of partnership, franchise agreements are complex documents which define the relationship and carefully define the rights, duties and remedies of franchisees. A lawyer with a sophisticated understanding of international franchising can help you to understand, evaluate and negotiate a franchise agreement.
• Be wary of a franchisor that is willing to make substantial modifications to its franchise program for the sake of concluding a deal. Franchisors should have a business plan for your market, and should demand that you present them with a business plan of your own before reaching agreement on a franchise relationship.
• Check out other resources at http://www.franchise.org/ and also check with the US Foreign and Commercial Services at the US Embassy in Muscat for information about evaluating US franchisors offering franchises in Oman.

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Taking Security: Commercial Mortgages

In Part I of this article, which was featured in a previous post, we provided an overview of what commercial mortgages are and the fundamental legal concepts that govern them in Oman. This month we conclude by discussing further the registration requirements for commercial mortgages, along with potential enforcement issues.

 Further details on commercial mortgage registration

For a commercial mortgage to remain valid, its registration must be renewed every five years at the Ministry of Commerce & Industry (MCI). A commercial mortgage can be released and removed from the register of the MCI by the expiry of the mortgage after five years, i.e., without its renewal. It can also be released and removed by virtue of a court order or written agreement of the borrower and the lender.

Details of the commercial mortgage are set out in the commercial registration papers of the borrower. These details include the name of the mortgagee, the date of the charge and the assets mortgaged. In practice, the MCI require the consent of the lender to make any changes to the commercial registration of the borrower once the commercial mortgage has been registered even if only one asset, such as a rig, has been mortgaged.

The registration of a commercial mortgage at the MCI requires the assets to be located in Oman and the borrower to be incorporated in Oman. For moveable property such as ships and aircraft, the vessel must be registered in Oman as the mortgage will be registered against the title to the ship or, as the case may be, the aircraft. Such registrations will be with the relevant authority and not with the MCI.

Potential enforceability issues

If the borrower fails to pay its debt, then a court order is required by the lender to enforce the commercial mortgage against the assets of the borrower (unless the borrower otherwise cooperates with the lender’s enforcement against its assets). This can be a long process and it can take up to two years to obtain the court order. The assets will then be sold by public auction administered by the Omani courts and the lender only will be entitled to the proceeds of sale of the asset sufficient to discharge the secured loan. It is not possible for a lender to simply take physical possession of any secured assets and sell them without the involvement of the Omani courts.

In practice, in relation to limited recourse projects and other transactions, commercial mortgages have been granted and registered by the MCI over a wide range of contracts and government licences. But in our view, there is serious doubt about the ability to mortgage and enforce a mortgage over contracts and government licences. The fact that such commercial mortgages have been registered by the MCI does not mean that they will automatically be enforceable in the Omani courts. In relation to contracts, many of the borrower’s rights under contracts are contingent or come into effect in the future. In addition, many contracts, by their very terms, are not capable of being sold in the manner that mortgaged assets are sold by the Omani courts on enforcement, and consent of the counterparty to any transfer of obligations is likely to be required. In a similar manner, most government licences are not capable of being sold and as a matter of law are generally personal to the borrower.

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Preliminary Attachment

In the Civil & Commercial Procedures Law issued by Royal Decree 29/2002, creditors are granted a legal remedy known as “provisional attachment” which serves to protect the creditor’s rights against his debtor.

As per the prescribed methodology, a creditor may request the Primary Court to issue an order of provisional attachment over the properties of his debtor.

The Civil & Commercial Procedures Law has specified the cases in which a creditor may exercise such a right against his debtor. These cases are (a) if the creditor is a bearer of a bill of exchange or promissory note and the debtor is a merchant and the said instrument obligates him to adhere to it in accordance with the Commercial Law, and (b) in any case in which the creditor fears he may lose his rights, provided that the creditor must prove to the Primary Court that such fear is justified.

The Civil & Commercial Procedures Law specifies certain additional conditions which must be met before a provisional attachment order can be granted. First, the creditor’s right must be definite, meaning the debt upon which the creditor is relying on (x) is in existence and (y) is not based on a probability or subject to a condition. (However, the debt can be subject of a dispute.) Second, the creditor’s right must be matured, meaning that the debt is due and payable at the time of filing of the request for the provisional attachment.

In addition, if the creditor does not possess an “executive deed” (such as a final non-appealable Court judgment), or if the debt sum is not specific (meaning the specific numerical amount of the indebtedness sum is not known), then the Judge issuing the provisional attachment order should provide a temporary estimation of the debt.

Once the provisional attachment order has been signed by the Judge, the Court must notify the debtor within the following ten days; otherwise, the provisional attachment order shall be considered null and void.
Furthermore, the creditor is required, within the above ten days, to file a court case, requesting the “validation” of the provisional attachment order.

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Applications of the Copyright Law to Art in Oman

As anyone who has visited the recently inaugurated Royal Opera House Muscat can attest, the fine arts are coming to play an increasingly prominent role in the Sultanate.  The economic and social advances achieved under Oman’s ‘Renaissance’ of the past decades have laid the foundations for artistic and cultural activities to flourish, with exhibitions and galleries featuring the work of both renowned international artists and a growing corps of Omani artists.

However, it is important not just to create art, but also to protect the artists, their works, and the rightful use of those works.  Legal statutes, particularly Oman’s Law of Copyright and Related Rights (Royal Decree No. 65/2008) (the “Copyright Law”), help to provide this protection.

This article discusses the framework under the Copyright Law with respect to reproduction rights for artwork, which would apply, for example, when an artist licenses the reproduction rights to his works to a museum or gallery.  Essentially, this framework consists of two parts: the inalienable rights of the artist as creator of the work, and the transferable economic rights in the work.

Inalienable rights of the artist as creator

The Copyright Law provides that the following rights of the artist as creator of the artwork are inalienable:

·         the right to decide to publish his work for the first time;

·         the right to have the work attributed to him in the manner he decides; and

·         the right to object to any distortion, deformation or any other modification of his work.

Thus, even when an artist relinquishes economic rights in his work (described below), such as by licensing the work to a gallery, the licensee’s use of the artwork shall be limited so as to respect to the artist’s inalienable rights – for example, the licensee gallery would be prohibited from deforming the artist’s work without the artist’s permission.

Economic rights in works of art

The Copyright Law also provides that certain economic rights in a work of art, such as the following rights, are transferable by a written agreement:

·         reproduction of the artwork;

·         disposal of the original artwork or copies of it to the public, by sale or by any other assignment that transfers the ownership;

·         public display of the artwork; and

·         publication of the artwork by any means.

Just as economic rights holders such as licensees must respect the artist’s rights as creator of the work, the artist is likewise obligated under the Copyright Law to respect the licensee’s rights in the artwork. Without prejudice to the artist’s inalienable rights as creator, the artist is prohibited from obstructing the use of the licensed rights in the artwork by the holder of such rights.

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Mou in Hotel Development Transactions - Part I

By the time a major transaction is finalized, its terms typically will be enshrined in a lengthy legal agreement – or, indeed, in multiple agreements (sometimes enough of them to fill a conference room table). Hotel development transactions, for example, may include a management agreement, a technical assistance agreement, and centralized cost reimbursement agreements, among others.

Yet many large deals, including those that ultimately end up with an array of lengthy documents, will begin with a single short agreement between the parties, such as a memorandum of understanding (MOU).

This article discusses MOUs in the context of hotel development transactions, in which they play a particularly important role. However, it is important to note that many different types of transactions make use of MOUs, so a number of the principles described in this article are likely to apply beyond the hotel project setting to deal-making in general. Part I of this article discusses what MOUs are and why they are so important. Next month, Part II will cover particular deal points that are typically addressed in MOUs for hotel development transactions.

What is an MOU?

In different jurisdictions and different sectors, an MOU (or a “letter of intent” or “heads of terms”) might take on a slightly different meaning, as far as the terms it includes, the parties to it, and its enforceability as a legal document.

For purposes of this article, however, we shall use a simplifying approach and take “MOU” just to mean a short, preliminary agreement entered into by the parties to the agreement at an early stage of the transaction process. Some MOUs are longer versus shorter, and more detailed versus less detailed, but the basic point is that MOUs outline the key terms that the parties will use as the foundation for their final agreements.

In the hotel development context, the MOU will reflect the key terms between the owner and the operator – such as management fees, term of the agreement, and certain key operational issues – that both sides consider necessary to agree up front before they invest the time, energy and costs to negotiate a suite of lengthy, detailed agreements.

Why is the MOU important? The MOU is typically very important to the deal because it will shape the negotiations over the final transaction agreements. Many or most of the key terms in the final agreements will be obliged to follow the way such terms are treated in the MOU.

As mentioned above, the MOU may or may not specify that its terms shall be legally binding between the parties. However, whether or not the MOU is legally binding, it will often carry significant weight as a practical matter; if one party attempts to deviate from the MOU, the other party can accuse of it of not acting in good faith or of backtracking from a position already discussed and agreed.

Thus, it is important for the parties to take the negotiation of an MOU as seriously as the negotiation of the final agreements. Indeed, the MOU might be the most crucial stage of the entire negotiation process. With this in mind, the parties often will be well advised to engage any third-party advisors (including commercial consultants, technical advisors, or lawyers) early in the negotiation process to assist with the MOU, rather than waiting until the MOU already has been signed.

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Legal Requirements for Document Retention

In recent years, the rapid growth of the Omani economy has led to a significant increase in business activities and commercial transactions in the Sultanate. As companies have become bigger and more active, they unsurprisingly have tended to find themselves with an ever-growing amount of corporate documents and records.

Such documents were easily stored back in the days when companies were smaller and transactions were less frequent. Today, however, many companies have such high volumes of documents and data that they may look to store them outside of their own premises. Some companies also may look to discard old documents and records. The question thus arises: what, if any, legal obligations do Omani companies have to retain their business documents?

Many countries throughout the world impose legal obligations on companies to retain their documents for a certain period of time. While Omani law does not prescribe an overall regime of document retention requirements, several key statutes outline particular retention obligations that apply to companies in the Sultanate.


Commercial Companies

All organizations that are regulated under the Law of Commerce (Royal Decree No. 55/90) – which includes all types of commercial companies, regardless of corporate form – must look to the Law of Commerce to help them ascertain the record-keeping requirements that apply to them under Omani law.

For example, merchants should look to Article 28 of the Law of Commerce, which imposes on them a duty to retain the following types of records:

Day books, in which shall be entered day-by-day all transactions pertaining in any way to the merchant’s commercial undertaking, and month-by-month the total of his personal drawing;

Inventory books, which shall be updated at least once each year; and

Copies of all correspondence, as well as telegrams, invoices, and other essential documents sent and received by the merchant for the transactions of his trade.

Article 31 of the Law of Commerce obliges merchants to keep their day books and inventory books for a period of ten years. In addition, merchants must also keep the copies of their correspondence and telegrams for the transactions of their trade for a period of five years.

Financial Institutions

The Anti-Money Laundering Law (Royal Decree No. 34/02) imposes a legal obligation on financial institutions to retain their documents for a period of time. Article 1 of the Anti-Money Laundering Law defines ‘financial institutions’ to mean any establishment licensed to do business in the Sultanate as a bank or money exchange or as an investment, financing, insurance or a financial intermediary company (or any similar activity specified by the committee). Article 5 of the statute requires financial institutions to maintain and hold documents of identification and addresses of their customers and records of their transactions, and prohibits the destruction of the original paper documents during a period of not less than ten years.

Law Firms

There is no specific law concerning document retention obligations of law firms in the Sultanate; however, it could be presumed that law offices are subject to the Law of Commerce’s obligations regarding retention of documents.

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Taking Security: Commercial Mortgages - Part I

When an entity or individual borrows money, in addition to a contractual right of repayment under the lending contract, it is common for lenders to take security over the borrower’s assets as an additional form of protection to ensure repayment of the loan. One way of doing this in Oman is for the lender to take a commercial mortgage over some or all of the assets of the borrower, if the borrower is a company, partnership or sole proprietorship registered with the Ministry of Commerce and Industry (“MCI”).

Part I of this article explains what commercial mortgages are and how they are perfected. Next month, Part II will delve deeper into registration requirements and enforceability issues.


What is a commercial mortgage?

A commercial mortgage grants lenders rights over the assets of the borrower that may be exercised to ensure repayment of the debt. A commercial mortgage requires the consent of the borrower and it may be granted over a variety of the borrower’s assets including its business (including its commercial registration number and business name), machinery, equipment, trademarks, intellectual property (including goodwill), stock, vehicles, ships and aircrafts.

It is important that, on the date the commercial mortgage is signed, the assets secured by the commercial mortgage are (i) owned by the borrower, (ii) in existence and (iii) clearly set out in the commercial mortgage.

Regarding the first of these requirements, it is important to note that contractual rights which are contingent or which come into effect in the future cannot be mortgaged. This can have significant implications for structuring transactions. For example, if an asset is sold via a ‘lease-to-buy’ arrangement, under which title to the asset is only transferred to the buyer after the final payment has been made, the buyer will not be able to grant the seller a mortgage over the asset at the time of purchase; under Omani law, the buyer only can grant a mortgage over the asset once he has title to the asset.

The third requirement is typically achieved by attaching to the commercial mortgage a schedule of the assets with sufficient detail to ensure that the relevant assets are easily identifiable. If the assets covered by the commercial mortgage are not clearly set out, the commercial mortgage only will cover the business trade name, the right to lease, the right to contact clients and goodwill.

It is also important to note that a commercial mortgage is distinct from other similar-sounding kinds of interests. A commercial mortgage is distinct from a legal mortgage which is used to take security over land. In addition, there is no concept of a floating charge under Omani law.

In practice, in order for lenders to capture assets acquired by a borrower after the date of registration of the commercial mortgage, a new addendum is often added every six months, or after the acquisition of a major asset, listing those additional assets. In terms of priority, the mortgage over the additional assets takes effect upon the date of registration of the addendum listing the additional assets rather than the date of registration of the original mortgage.

Perfecting a commercial mortgage

To be enforceable in the Omani Courts a commercial mortgage needs to be perfected, meaning that it has been formally registered at the MCI in accordance with its procedures. For this to occur, the commercial mortgage in Arabic must be signed by both the borrower (the mortgagor) and the lender (the mortgagee) in the presence of the relevant official for the MCI. Where Arabic is not the primary language of one of the contracting parties, it is possible to have a dual language mortgage; however, in the event of any inconsistency, the Arabic language version will prevail. Finally, the commercial mortgage needs to be attested and registered at the MCI within thirty days of it being signed but typically this all done at the same time as the commercial mortgage is signed. Priority is established by the date and time of registration with the MCI. It is possible for more than one commercial mortgage to be granted over the same assets of the borrower.

Please see upcoming posts for a continued discussion of registration requirements, as well as key issues relating to enforceability of commercial mortgages in Oman.

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Time Bar Limitations Under Omani Law

Sometimes, little-known procedural points can be decisive, even trumping legal substance. Time bar limitations are a classic example of this.

What is a time bar limitation?

A time bar limitation is a maximum period of time established by law for the exercise of a claim, judgment, or right, such that the claim, judgment or right will lapse if it is not exercised within this time period. In other words, a person wishing to exercise a right that is subject to a time bar limitation must use this right within the period stated in the law, or else lose the right. Likewise, if a certain judgment that is subject to a time bar limitation is not carried out within the legally specified period, then that judgment lapses and is no longer applicable.

Omani law prescribes a variety of time bar periods in relation to different types of legal matters. This article highlights several of these time bar limitations which are relevant to businesses.

Under the Law of Commerce

The Law of Commerce (Royal Decree No. 55/90) includes numerous time bar limitations, particularly in relation to the carriage and delivery of goods. Some of these include:

A consignee, in case of damage to goods, must submit a contestation to the carrier immediately after he discovers the damage and no later than seven days from the date of delivery.

Where an item is delivered without reservation, the right to seek recourse against the carrier due to damage, partial destruction or delayed arrival shall lapse unless the consignee proves the condition of the goods and lodges an action against the carrier within thirty days from the date of delivery.

The limitation period for filing a court case in respect of a guarantee of the defect is one year as from the date of delivery of the item sold, unless a guarantee for a longer period has been given.

Any lawsuit in relation to a bill of exchange against the person that accepted it shall lapse after three years.

The limitation period for an action arising from a contract for the carriage of goods or persons or a contract of carriage commission agency shall be one year.

The limitation period for the obligation of merchants towards each other in relation to their commercial activates shall be ten years as from when the date for performance of such obligations lapses (unless the law provides for a shorter period).

Under other Omani statutes

Certain key time bar limitations are prescribed by other Omani statutes as well, including the Engineering Consultancy Law (Royal Decree No. 120/94) and the Labor Law (Royal Decree No. 35/2003). These limitations include:

In the Engineering Consultancy Law, if the engineering consultancy office’s duties are restricted to design and do not include supervision or execution, the engineering consultant shall only be responsible for design defects and all security cases shall lapse after three years from the time of discovering the defect without taking action.

In the Engineering Consultancy Law, the project owner of the engineering consultancy office and the supervisor shall be jointly responsible with the contractor for the defects in the projects designed by them or executed under his supervision for ten years from the date of handover of the project; provided that a claim in respect of any defect must be filed within three years of when such defect is discovered (as noted in the preceding bullet).

In the Labor Law, the employee’s rights to bring an action shall lapse after one year of the facts and circumstances that gave rise to such an action.

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Supreme Court Update: Omani Companies with Foreign Shareholdings Welcome Landmark Tax Judgment

We are pleased to share news of a judgment recently handed down by Oman’s Supreme Court in favour of two clients of Curtis, which we believe is of interest to the broader Omani business community.

The Supreme Court decided that Omani companies who have shareholdings in companies outside Oman should not have to pay tax on dividends received between the tax years 2002-2004 inclusive, which were the years under consideration. This decision overturned the earlier decisions of the Omani Primary and Appeal Courts in 2010 that these overseas dividends were taxable, pursuant to a 2004 Supreme Court judgment.

It is expected that the new written Supreme Court judgment will make it clear that the ruling also applies to the tax years 2000, 2001 and 2005-2009 inclusive.

The favourable Supreme Court judgments therefore imply that taxpayers who have received overseas dividends during the applicable years should not be taxed on this income if they have already disputed the charges or if their assessments are yet to be completed. (If they have already paid tax in respect of these years, they are deemed to have accepted their tax liability.)

Following the judgment, dividends paid in the applicable years to any Omani company on shareholdings in foreign companies will no longer be viewed as taxable income.

Needless to say, this is a very positive development for a broad range of Omani companies.

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Sultanate Issues New Executive Regulations to Income Tax Law

As part of the Sultanate’s drive to further modernize its platform for businesses, the government has made significant revisions to the national tax code over the past few years. The new Income Tax Law, promulgated in June 2009 by Royal Decree No. 28/09, replaced the Income Tax Law on Companies (Royal Decree No. 47/81) and the Profit Tax Law for Establishments (Royal Decree No. 77/89) which previously had been in force.

Importantly, the new Income Tax Law also called for the issuance of supporting executive regulations. These regulations finally have been released as Ministerial Decision No. 30/2012 (the “Executive Regulations”), which was published in the Official Gazette last month.

This article provides a high-level overview of several key provisions that we believe might be of interest to companies. Naturally, for further details or specific tax advice please consult specialist professional accountants.


Relief for small businesses

One important provision, likely included as part of the Sultanate’s initiative to grow small and medium enterprises (SMEs), is that small businesses are exempted from many of the registration and filing requirements under the Executive Regulations. Companies that meet the following criteria are eligible for such exemptions:
• A registered capital of RO 20,000 or less;
• Total gross realized income of RO 100,000 or less; and
• An average of eight or fewer employees during the tax year.

Authorities’ right to inspect documents at taxpayer’s premises

The Executive Regulations have given the Omani tax authorities an important new enforcement power in the form of rights to carry out inspections of taxpayer documents and records at the taxpayer’s premises. However, the tax authorities must provide at least 10 days’ prior notice to the taxpayer before conducting any such inspection. Moreover, documents that relate to periods falling more than ten years prior to the date of the inspection are exempt from inspection.

Changes to expense deduction rules

The Executive Regulations set forth rules for the deduction of various categories of expenses. These categories include:
• Contributions to pension and savings funds;
• Donations;
• Rent for real estate;
• Interest expenses; and
• Remuneration to boards of directors and owners.

Expense deductions, in particular, are a sensitive area of tax planning and preparation is crucial for companies to handle these deductions correctly. Again, we recommend consulting specialist accountants on these finer points.

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