TAX

Tax Alert - March 2020

UAE Updates

Indirect Tax

 

VAT Updates

 

  • VAT Administrative Exception Guide – Updated

Last year, the Federal Tax Authority (‘FTA’) had published a guide for filing VAT Administrative Exception form with the FTA, to seek their approval for not reflecting all the particulars in the VAT documents as mentioned in the UAE VAT Law. Earlier this month, the guide was updated to include exception for accepting alternative evidence for export of goods where official and commercial evidence cannot be obtained due to valid reasons.

This is mainly applicable to companies which export by road or courier through a third-party agent.

The updated guide can be accessed by clicking here.

 

  • Designated Zones – Change of Name

The FTA has changed the name of the following designated zones:

  1. Free zone area in Al Qusais to DAFZA Industrial Park Free zone – Al Qusais
  2. Ras Al Khaimah Free Trade Zone to Ras Al Khaimah Port Free Zone.

No further additions or reductions have been made to the list.

The update list can be found here.

 

 

Excise Tax

 

  • Extension of Tax Period for Excise Registrants

The FTA has decided to ease tax burdens of excise registrants by extending the tax period which commenced on 1st March 2020 to end on 30th April 2020.

Two separate returns (March and April 2020) will have to be filed on or before 17th May 2020.

 

 

Customs

 

  • Customs Notice 1/2020 On Implementation of Government’s Economic Stimulus Package

In respect of the new Economic Stimulus Package announced, the Dubai Customs will refund 1% of the Customs duty imposed on imported goods, sold locally in the UAE markets, and which are subject to Customs duty rate of 5%.

The notice also exempts traditional wooden commercial vessels registered in the Country from berthing service fee for arrival and departure as well as direct and indirect loading fee at the Dubai Creek and Hamriyah Port.

Moreover, the bank or cash guarantee of AED 50,000 required to undertake customs broker activity will be revoked. All guarantees deposited by existing brokers will be refunded.

The notice is into force from 15th of March 2020 to 30th June 2020.

For the complete notice please click here.

 

  • Customs Policy No. DCP 48/2020 on Conditions and Procedures of Implementation of the Free Trade Agreement between the GCC countries and the Republic of Singapore.

This Customs Policy is an amendment to paragraph 3 of Article 2 of the Customs Policy no. 40/2015. The amendment states that goods of Singapore origin listed in the agreement shall be free of Customs duty when imported directly from Singapore to GCC countries.

The policy is in force from the 1st of April 2020.

For the complete notice please click here.

 

  • Government and Central Bank introduces measures to support economy

The Dubai and Abu Dhabi governments along with the Central Bank of UAE have introduced the following measures to support the individuals as well as the economy in this unprecedented time .

The measures are as follows:

Dubai:

  • 50% reduction in municipal fees paid by hotels (now 3.5%)
  • 10% reduction in water and power bills for three-month period.
  • 50% reduction in deposit to DEWA

Abu Dhabi

  • Allocation of AED 5bn for water and electricity for individual and industry
  • Subsidized electricity connections for startups until end of year
  • Removal of the 25% down payment for requesting the installment of gov fees for licensing and renewing licenses.
  • Exemption from Tawtheeq fees, vehicle registration fee, toll tariff and real estate registration fee until the end of 2020.
  • Providing 20% rebate on rental values for restaurants tourism and entertainment sectors.
  • Suspension of tourism and municipality fee until the end of 2020
  • Reduction of industrial land leasing fees by 25% on new contracts.
  • Waiving of Current commercial and industrial penalties

Central Bank

  • AED 50bn in zero interest loans to SMEs.
  • Reduced banks voluntary capital buffers to free up to AED 50bn in capital.
  • Limits on bank fees including interest and credit cards fees.

 

Direct Tax

  • RAK ICC – Guidelines on Economic Substance Regulations (“ESR”)

RAK International Corporate Centre (“RAK ICC”) has released further guidelines on ESR applicable to all RAK ICC entities. All RAK ICC registered entities are required to file a notification on whether they fall under the Relevant Activities by 30th June 2020 through the RAK ICC’s “Agent Portal”.

The ESR in UAE apply to financial years commencing from 1 January 2019, further requires RAK ICC entities that undertake “Relevant Activities” to demonstrate “Economic Presence” in the UAE in relation to the activities they undertake. As per the guidelines introduced by the RAK ICC, in order to determine whether a Relevant Activity is taking place, a substance over form approach should be followed. This means looking beyond what is stated on the commercial license to what activity is being undertaken by the entity.

Tax Alert can be accessed by clicking here.

GCC Updates

KSA Updates 

  • Deferring Taxes

In light of COVID-19 pandemic, KSA has published a clarification deferring the filing of Zakat, Corporate Income, Excise and Value Added Taxes for three months. As per the clarification, the new deadlines will be as follows:

Withholding Tax

  • March 2020
    • Original due date - 10/04/2020
    • Revised due date - 10/07/2020
  • April 2020
    • Original due date - 10/05/2020
    • Revised due date - 10/08/2020
  • May 2020
    • Original due date - 10/06/2020
    • Revised due date - 10/09/2020
  • June 2020 (No delays are to be made after June)
    • Original due date - 10/07/2020
    • Revised due date - N/A

 

VAT

Monthly

  • February 2020
    • Original due date - 31/03/2020
    • Revised due date - 30/06/2020
  • March 2020
    • Original due date - 30/04/2020
    • Revised due date - 31/07/2020
  • April 2020
    • Original due date - 31/05/2020
    • Revised due date - 31/08/2020
  • May 2020
    • Original due date - 30/06/2020
    • Revised due date - 30/09/2020

Any period after May 2020 are to be submitted within their original dates

  • June 2020
    • Original due date - 31/07/2020
    • Revised due date - N/A
  • July 2020
    • Original due date - 31/08/2020
    • Revised due date - N/A
  • August 2020
    • Original due date - 30/09/2020
    • Revised due date - N/A
  • September 2020
    • Original due date - 31/10/2020
    • Revised due date - N/A

 

Quarterly

  • 1st Quarter of 2020
    • Original due date - 30/04/2020
    • Revised due date - 31/07/2020

The 2nd quarter has not been delayed and still holds its original date

  • 2nd Quarter of 2020
    • Original due date - 30/04/2020
    • Revised due date - 31/07/2020

 

Excise Tax

  • March/April 2020
    • Original due date - 15/05/2020
    • Revised due date - 15/08/2020

Periods which are not to change

  • January/February 2020
    • Original due date - 15/03/2020
    • Revised due date - N/A
  • May/June 2020
    • Original due date - 15/07/2020
    • Revised due date - N/A
  • July/August 2020
    • Original due date - 15/09/2020
    • Revised due date - N/A

 

  • Tax Amnesty

The GAZT has further introduced additional reliefs in light of COVID-19. The Amnesty will last until 30th June 2020 and includes the following:

  • Tax Payments can be made by Installments subject to making a request to GAZT
  • A 30- day deferral for the collection of customs duties on imports for the next three months, provided a bank guarantee is submitted
  • No Late registration penalty for delayed registration between 18 March to 30 June 2020.
  • Pending refund will be expedited by GAZT
  • Corporation and Zakat certificates will be issued without a restriction for the fiscal year 2019

 

  • Economic Measures

A stimulus package for SMEs has also been introduced including:

  • SAR 30bn for banks and other finance companies to delay payments from SMEs for 6 months.
  • SAR 13.2bn of concessional finance for banks and finance companies to support SMEs to maintain employment levels.
  • SAR 6bn for banks and insurance companies to relieve SMEs from finance costs
  • SAR 800m to support the fees of POS and e-commerce platforms for 3 months

 

Bahrain

  • Extension of deadline for Economic Substance Notification

Deadline for Economic Substance notification or submission is extended to 30 June 2020 from 31 March 2020.

 

  • Economic Measures

The government has introduced the following economic measure were announced to support the economy:

  • Payment of salaries for next 3 months for all private sector employees & utility bills for individuals and businesses.
  • Exemption of municipal fees for individuals and businesses
  • No industrial rent for 3 months
  • No tourism levies for 3 months
  • Increasing liquidity Support fund up to 200 BHD.
  • Increasing Central Bank loan facilities to BHD 3.7bn.

Moreover, the Central Bank has agreed to provide the following support;

  • Bahraini nationals granted 3-month loan holiday.
  • Reduced interest rate from 2.45% to 1.7%
  • Cash reserve ratio for retail banks reduced from 5% to 3%

 

  • VAT Public Clarification (VAT/PC/20/1) on Warranty Repair Services

On the 10th of March, NBR issued a clarification on the treatment of goods repaired under warranty.

The clarification discusses the tax treatment in the following situations:

  1. Repair services provided by the dealer to the customer during the warranty period
  2. Reimbursement of repairs costs paid to the dealer from the manufacturer during the warranty period
  3. Third party warranty repair services
  4. Extended warranty periods
  5. Warranty repair services for goods sold prior to VAT implementation date
  6. Recovery of VAT incurred by dealer established in Bahrain for the provision of warranty repair services

The clarification can be accessed by clicking here.