Perspective

14 Apr 2026

Navigating tax and legal challenges amid Middle East disruption

Key insights for businesses managing supply chain, workforce, and compliance Risks

This article explores the complex tax and legal implications businesses face due to recent disruptions across the Middle East. Learn how operational changes, workforce relocations, and evolving regulations impact your organisation and what steps to take now.

Authors:

Mohamed Serokh

Hadi Allawi

Michael Camburn

Kashif Jahangiri

Pascal Cange

Giuseppe Campolo

Navigating the storm - Resilience Redefined

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Navigating the convergence of disruption in the Middle East

Businesses across the Middle East are facing unprecedented challenges as multiple disruptions converge simultaneously. From curtailed maritime trade routes and airspace restrictions to workforce relocations and contractual uncertainties, the operational landscape is rapidly evolving.

Immediate operational disruption

The restriction of the Strait of Hormuz has forced companies to reroute goods through alternative ports and land corridors, such as Saudi Arabia, Egypt, and Jordan. This shift introduces new customs regimes, tariff structures, and compliance obligations that many businesses are unprepared for.

Customs and trade

Different tariff rates and customs procedures apply, creating potential cost increases and compliance gaps.

Indirect tax

New VAT registration requirements and complex tax treatments arise, especially for businesses importing through unfamiliar jurisdictions.

Transfer pricing

Supply chain disruptions affect cost structures and margins, requiring immediate review and documentation of transfer pricing policies.

Workforce and structural exposure

Employee relocations across the region and beyond have significant tax and legal implications.

Home permanent establishment (PE) risk:

OECD guidance introduces a 50% working-time threshold to assess when a home office may create a PE, with commercial reasons for presence being a key factor.

Permanent establishment risk:

Senior employees working from new jurisdictions may create taxable PE, triggering corporate tax and reporting obligations.

Individual tax residency and social security:

Employees relocating from low-tax GCC countries to higher-tax jurisdictions face new tax and social security liabilities.

Equity compensation:

Tax treatment of share-based awards may become complex due to multi-jurisdictional vesting periods.

Immigration disruptions:

Reduced consular services impact visa renewals and work permits, creating compliance risks.

Medium-term tax and compliance consequences

Beyond immediate challenges, businesses must prepare for longer-term tax and legal effects.

Corporate tax compliance

Issues include revenue recognition under force majeure, treatment of extraordinary costs, and free zone eligibility.

Force majeure and contractual performance

Varying legal standards across jurisdictions affect contract enforcement and tax implications.

Insurance and deductibility

Increased war risk premiums and indemnity payments require careful tax treatment.

Transfer pricing documentation

Policies must be recalibrated and documented contemporaneously to reflect changed circumstances.

Wealth structuring

High-net-worth individuals and family offices are reassessing jurisdictional exposure and estate planning.

Key takeaways

Interconnected issues: Supply chain, workforce, tax, and legal challenges are deeply linked and require coordinated management.
Documentation is critical: Real-time records of decisions and rationale will support compliance and audit defence.
Early guidance is essential: Proactive planning helps avoid irreversible consequences from workforce relocations or supply chain changes.

Businesses operating in the Middle East must act now to navigate this complex environment effectively. Understanding the full spectrum of tax and legal implications will be crucial to maintaining resilience and compliance during this period of disruption.

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Navigating tax and legal challenges amid Middle East disruption