Tax

Tax Alert - July 2020

UAE Updates

Indirect Tax

  • VAT Updates

1. Cabinet Decision No. 52 of 2017 Updated

Article 31 of the Executive Regulations of the Federal Tax Law No. 8 has been updated by Cabinet Decision No. 46 of 2020. The updated Article provides that in order to consider a person outside the UAE both the below conditions should be satisfied:

  1. If they only have a short-term presence in the UAE for less than a month; and
  2. The presence is not effectively connected with the supply

As per the old Article, in case either of the two conditions was required to be fulfilled. The updated regulations can be accessed by clicking here.

 

2. Tax Agents can now submit refunds on behalf of UAE Nationals

The Federal Tax Authority (‘FTA’) has now permitted UAE Nationals to appoint authorised Tax Agents to submit VAT refund applications for new residential properties.

For the above purposes, a form has been emailed to all Tax Agents which gives them the right to submit VAT refund applications on behalf of Nationals who have constructed new residential dwellings.

 

 

  • Excise Tax

1. Press Release – FTA ban on supplying, transferring, storing and possessing of Water pipe Tobacco and Electrically Heated Cigarettes without Digital Tax Stamps postponed to January 1, 2021

The FTA has postponed its decision to impose ban on supplying, transferring, storing and possessing of Water pipe Tobacco and Electrically Heated Cigarettes without Digital Tax Stamps. The above-mentioned ban was supposed to come into effect from 1st June 2020 to 1st January 2021.

The extension has been made to grant time to the stakeholders to comply with the new rules amid strict precautionary measures to curb the spread of COVID-19.The businesses will now have an additional time of seven months to sell off their stocks of unmarked goods or make alternative arrangements such as exporting them outside the country.

The press release can be accessed by clicking here.

 

2. Press Release - FTA clarifies measures implemented to postpone final step of Phase 2 of ‘Marking Tobacco and Tobacco Products Scheme’

The FTA asserted that its recent decision to postpone the final step of Phase 2 of ‘Marking Tobacco and Tobacco Products Scheme’ until January 1, 2021, does not affect the first two steps that were already implemented, nor does it impact the Excise Tax rates.

However, the ban on import of waterpipe tobacco and electrically heated cigarettes that do not carry Digital Tax Stamps, which started in March 2020, remains in effect.

The press release can be accessed clicking here.

Customs

1. Customs Notice No. (2/2020) - Submission of Customs Declarations & Required Documents

In accordance with the precautionary measures to curb the spread of COVID-19, the Dubai Customs has decided that the Customs Notice No. 1/2018 on “Submittal of Customs Declarations and Required Documents” and all provisions and effects set forth therein shall be suspended until further notice.

However, all the customers must keep record of the available documents and information and provide the same to the Customs authorities upon request.

The notice shall be in effect until further notice. The notice can be accessed clicking here.

 

2. Customs Notice No. (3/2020) - Acceptance of Bills of Lading & Delivery Orders Submitted Electronically

Dubai Customs has announced that Bills of lading and delivery orders (‘Dos’) electronically sent by the shipping agents/ shippers shall be accepted without the need for stamping all the customs cases, provided that they include all the information contained in the original bills and manifests.

Shipping agents/ shippers shall be responsible for the accuracy and authenticity of the information contained in the furnished bills of lading and delivery orders, with Customs having the right to ask for and refer to these documents any time.

The notice can be accessed by clicking here.

 

3. Customs Notice No. (4/2020) - Temporary suspension of exports of steel scrap and wastepaper

Dubai Customs has also announced that all legal and natural persons are prohibited from exporting steel scrap and wastepaper for a period of four months with effect from 15th May 2020. The notification may be extended owing to the repercussions of the Coronavirus ‘Covid-19’ outbreak and to ensure business continuity and the supply of production inputs required for manufacturing operations.

The notice can be accessed by clicking here.

 

4. Customs Notice No. (5/2020) - Acceptance of Electronic Movement Certificates EUR.1 from Norway

Dubai Customs have declared that Electronic Movement Certificates EUR.1 issued and endorsed by the Customs Authority of Norway shall hereby be accepted. The notice is effective from 2nd April 2020 until further notice.

The notice can be accessed by clicking here.

 

5. Customs Notice No. (6/2020) - Initiatives of supporting innovative industries in Dubai

As part of the Dubai Government efforts to help ease the burden on businesses and to support innovative industries and art in Dubai, the notice has extended temporary entry of borrowed artworks which entered the country through Dubai entry points until the end of 2020.

This applies to all the artworks which entered Dubai and have Customs declarations from 1st October 2019 onwards, and did not leave the UAE until this date.

The notice can be accessed by clicking here.

 

6. Customs Notice No. (7/2020) - Reduction of fines on Customs cases

As part of the Dubai Government efforts to help ease the burden on businesses and people working in different sectors during the coronavirus pandemic, the Dubai Customs has announced 80% reduction in fines imposed on custom cases under the unified GCC customs law. This applies only to finalized cases.

Any party wishing to benefit from this reduction should settle their customs case and pay any charges due by 31st December 2021.

The notice can be accessed by clicking here.

 

Direct Tax

  • Country-by-Country Reporting (CbCR)

 

1. Cabinet Resolution No. 44 of 2020 amending CbCR legislation in the UAE

The UAE recently published Cabinet Decision No. 44 of 2020 amending the CbCR regulations previously introduced in the UAE (Cabinet Resolution No. 32) and detailing the structure of the report to be submitted by multinational group of enterprises (“MNE”).

According to the resolution, the requirement to notify and file the CbC report will be the sole responsibility of the UAE-tax resident Ultimate Parent Entity (“UPE”). Therefore, non-UAE headquartered MNEs are no longer required to comply with the CbCR report. Further, Constituent Entities in the UAE are no longer required to notify the Ministry of Finance whether a CbCR filing obligation applies for their respective MNE group.

The notification must be submitted by the UAE-tax resident UPE to the UAE Ministry of Finance to indicate that it is the entity responsible for submitting the report no later than the last day of the group's reporting year.

The CbCR report that must be filed by the UAE-tax resident entity shall include the following elements:

  1. Aggregate information relating to the amount of revenue, profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents with regard to each jurisdiction in which the multinational Group of Companies operates; and
  2. An identification of each Constituent Entity of the MNE setting out the jurisdiction of tax residence of such Constituent Entity, and where different from such jurisdiction of tax residence, the jurisdiction under the laws of which such Constituent Entity is organised, and the nature of the main business activity or activities of such Constituent Entity.

The CbC Report shall be filed within 12 months following the end of reporting fiscal year of the MNE in line with the standard template set out at in Annex III of Chapter V of the OECD Transfer Pricing Guidelines.

 

GCC Updates

Indirect Tax

 

  • Bahrain

1. NBR releases VAT guide on Oil and Gas sector

The National Bureau for revenue (‘NBR’) has published a detailed guide on the VAT treatment of supply of Oil and Gas.

The guide covers the VAT treatment of Oil and Gas in the following cases:

  1. Import and supply of raw and processed oil, gas and hydrocarbons;
  2. Distribution and storage of oil, gas and hydrocarbons;
  3. Swapping of crude oil and raw materials; and
  4. Construction of oil/ gas fields and petrol and gas stations

The guide can be accessed by clicking here.

 

2. NBR releases VAT guide on Wholesale and Retail

The NBR has published a detailed guide on the VAT treatment for the wholesale and retail industry.

The guide covers the following cases:

  1. Adjustments and discounts
  2. Deemed supply
  3. Concession, return of goods and warranties
  4. Asset Financing
  5. Profit margin scheme
  6. Loyalty programme and vouchers
  7. VAT refund to tourists

The guide can be accessed by clicking here.

 

3. NBR updates FAQ section on its website

The NBR has updated the ‘Frequently Asked Questions’ (FAQs) on its website to include VAT treatment of obsolete stock.

The FAQs clarify that a taxpayer is required to notify the NBR when it intends to dispose obsolete stock. It also mentions the information required to apply for exception in notifying the NBR prior to disposal of obsolete stock.

In order to follow correct treatment applicable to disposal of obsolete stock, the taxpayer must submit an application form and give advance notice to the NBR of its intention to dispose of such stock at least 30 days before the disposal.

The form can be accessed at by clicking here.

The FAQs can be found by clicking here.

 

 

  • KSA

1. GAZT issues guidelines on increased VAT rate

The Ministry of Finance (‘MoF’) had earlier in May announced increase in the VAT rate from 5% to 15% effective from 1st July 2020.

The guidelines issued by GAZT specify treatment of transactions undertaken during the transitional period i.e. 11th of May to the 30th of June 2020.

The VAT rate shall be applicable as follows for contractual transactions:

Supply Contract VAT Rate %
After 1 July 2020 Before 11 May 2020 5% until end of contract (or until 30 June 2021)*
Before 30 June 2020 Contract between 11 May and 30 June 2020 5%
After 1 July 2020 Contract between 11 May and 30 June 2020 15%

 

The VAT rate shall be applicable as follows for single and continuous supply:

Scenario Supply Invoice issued VAT Rate %
Single supply After 1 July 2020 Before 11 May 5%
Single supply After 1 July 2020 Invoiced between 11 May 2020 and 30 June 2020 15%
Continuous supply If contracted before 11 May 2020 for a period after 30 June 2021 Invoiced for the whole amount at once before 11 May 2020

5% until 30 June 2021 and 15% thereafter

(An additional Tax Invoice must be issued with the difference)

Continuous supply  If contracted before 11 May 2020 for a period after 30 June 2021 Invoiced as per installments 5% until 30 June 2020 and 15% from 1 July 2020.
Single supply Before 1 July 2020 Invoiced between 11 May 2020 and 30 June 2020 5%

 

The guide can be accessed in Arabic by clicking here.

 

2. Increase in Saudi Customs rate

The KSA government has announced an increase in the customs rate which will be applicable from June 10, 2020.

The potential increase in rate ranges from 0.5% to 10% across 2,000 HS codes. This also means several items that were exempt from duty now attract Customs duty.

Categories including foodstuff, mineral and chemical products, plastic, rubber, leather goods, textile and footwear, base metals (e.g. steel, iron, nickel, copper, aluminum), cement, ceramic, machinery, equipment and electrical equipment, toys, furniture, vehicles and various other manufactured goods will be affected.

A summary of the revised rates are as follows:

Product Category Current Duty Rates Revised Rates
Food and Beverages 0%, 5%, 12% and 20% Ranges between 6% and 25%, depending on the product.
Chemicals 5% 6.5%
Building Materials 5% and 12% Ranges between 12% and 15%, depending on the product
Vehicles 5% Ranges between 5% and 7%, depending on the product

 

The announcement can be accessed in Arabic by clicking here.

However, vide another notification issued by the Saudi Customs (for which the link has been given below) wherein it was mentioned that increase in Customs rate shall be implemented post 1st July 2020 and not w.e.f. 10th June 2020.

The announcement can be accessed by clicking here.

 

3. VAT Law amended to reflect rate change

The Royal Decree has amended Article 2 of VAT Law to reflect the rate change of 15% that came into effect from 1st July 2020.

The updated guide can be accessed in Arabic by clicking here.

 

4. 15% VAT on import through e-commerce

The Saudi Customs has confirmed that all sales and purchases made through e-commerce including imported goods shall be subject to VAT of 15% if the import or consignment arrives on or after 1st July, 2020.

The notification can be accessed in Arabic by clicking here.

 

 

  • Oman

1. Oman to impose 50% Excise tax on Sweetened drinks

After imposing Excise tax on carbonated and energy drinks and tobacco products, the tax authorities in Oman has announced that w.e.f. October 2020, 50% Excise tax shall be imposed on ready to drink beverages containing added sugar or any form of sweeteners.

Products containing 100% fruit juices, or 75% milk will be excluded from this.

How GT can assist

Connect with our Tax Leaders, should you need any assistance with regards to the above information and updates.

UAE

  • Steve Kitching - Tax Advisory Partner (steve.kitching@ae.gt.com)
  • Steven Ireland - Director of International Tax (steven.ireland@ae.gt.com)

KSA

Bahrain

  • Jatin Karia - Tax Advisory Senior Partner (jatin.karia@bh.gt.com)

Oman