Saudi Arabia
SPECIAL EDITION OF SAUDI E-INVOICING
FATOORA portal (Go-Live)
On 23rd December 2022, ZATCA ended pilot testing on FATOORA portal, deleted the historical data and previously onboarded solutions were revoked.
Starting from 26th December 2022, FATOORA portal is fully available (Go-Live) and you can start onboarding your production systems.
Any invoices shared with FATOORA portal will be considered as official tax invoices as per the VAT Implementation Regulation and E-invoicing Regulation.
FATOORA simulation portal
ZATCA announced that a new "FATOORA simulation portal” is available from 27th December 2022 for testing purposes which will be a replica of the ZATCA's FATOORA Portal.
The portal is a testing environment that simulates the production environment, aimed at enabling taxpayers to test and experience the end-to-end e-Invoicing journey including onboarding, clearance and reporting of e-Invoices similar to production environment.
ZATCA announces the criteria for selecting second wave taxpayers for e-invoicing integration phase
On 23 December 2022, ZATCA announced the criteria for selecting resident taxpayers for the second wave of the e-invoicing integration phase.
Wave two will include all taxpayers who reported revenues subject to VAT exceeded SAR 500 million (half a billion Saudi riyals) during 2021.
VAT registered taxpayers meeting the criteria should integrated their E-invoicing solutions with FATOORA Platform starting from July 1, 2023
You can access the press release from ZATCA here: https://zatca.gov.sa/en/MediaCenter/News/Pages/News_987.aspx
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E-Invoicing Regulations
On 18 March 2021, the General Authority of Zakat and Tax (GAZT) published the draft of the E- invoicing resolution for public consultation providing the controls, requirements, technical specifications, and procedural rules for Implementing the provisions of the E-Invoicing regulation.Implementation timeline:
An unofficial English translation of the resolution can be found here.
The associated technical specifications can be found as follows:
Electronic Invoice Data Dictionary
Electronic Invoice XML Implementation Standard
Electronic Invoice Security Implementation Standards
Please visit the Public Consultation Platform to share your comments through the below button.Saudi Arabia’s First Special Economic Zone
General Authority of Civil Aviation (GACA) has launched the first Special Economic Zone (SEZ) under the name of Special Integrated Logistics Zone (ILBZ) located adjacent to the King Khalid International Airport in Riyadh following the issuance of Royal Order (A/17) dated 10 October 2018.
The zone development will offer incentives to companies to establish operations at its site adjacent to the international airport in Riyadh, including:
- 50-year Tax Holiday to include VAT suspension while under customs suspension
- Zero-rated corporate, income and withholding tax on certain payments
- 100% business ownership.
- 100% suspension of customs and import restrictions
- no restrictions on capital repatriation
GACA has now issued the Special Tax Rules explaining the tax and customs incentives with the associated conditions that apply to entities established in ILBZ to carry out specific activities.
To find out more about the new SEZ, click here.
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E-Invoicing detailed guidelines
ZATCA published a new detailed e-invoicing guideline.
The guideline provides a detailed overview of e-invoicing in KSA, which will be introduced in two phases as previously announced.- The generation phase: The implementation date is 4th December 2021
- The integration phase. The implementation date is 1st January 2023, which will be in rollout phases and ZATCA will be informing the selected taxpayers six months before the integration with its portal.
This guide contains requirements for E-Invoicing (FATOORAH) as well as technical and security requirements for taxpayers and E-Invoicing providers. It also includes detailed technical requirements such as invoice specifications, data dictionary and security specifications for the E-Invoicing application.
In addition, the guideline provides details about the technical requirements for both phases for the e-invoicing system to be compliant with ZATCA requirements, and the prohibited functions which the compliant Solution must not have.
New e-commerce VAT guide
ZATCA published a new VAT guideline on electronic commerce (e-commerce).
The guide is directed to all taxpayers who are involved with e-commerce activities which are subject to VAT in KSA. It provides further clarifications regarding e-commerce and activities related to electronic platforms and portals in the Kingdom.
What is e-commerce?
E-commerce means the process of buying and selling goods or services through a website, electronic platform, social media store, or application, and transferring money and data to complete the sale.
Place of supply
Goods
Under the general rules, the supply of goods will be treated as inside KSA only if the goods are in KSA at the time of delivery to the customer. If the goods are outside KSA at the time of delivery, the supplier will not impose VAT on selling the goods, but the tax will be charged at the time of import.Services
Special rules will be applied to determine the place of supply of electronic services. Mainly, VAT is applied in the country in which the actual use or benefit of these services takes place.The VAT treatment
Goods:
Scenarios related to the movement of goods: Depending on the location of the supplier, recipient and goods, the supply can take any of the following basic forms:Services:
Summary of the tax treatment of various scenarios related to supplies of electronic services:
Businesses involved with e-commerce in KSA should familiarize themselves with the guideline to determine if they are correctly accounting for VAT on their transactions.
You can access the Arabic version of e-commerce guideline, here.
New VAT guide on government bodies
ZATCA published a new VAT guideline on Government Bodies in KSA. This guideline is directed towards Saudi Government bodies and provides clarifications with respect to the interpretation of Economic Activity for VAT purposes, in addition to the VAT treatment of transactions between persons and such bodies.
The VAT application:
- Government Bodies who carry on an Economic Activity must register for the purposes of VAT if so required, and such bodies must collect the VAT applicable to their taxable activities, and pay the tax collected to the Authority.
- Where Government Bodies carry out the designated activities assigned to them by the State through the Law, Royal Decree or order establishing those bodies to carry out public functions, this does not constitute an Economic Activity and falls outside out of VAT scope.
Below is a flow chart to determine the VAT determines on the activities carried out by the government bodies:
You can access the full guidelines on government body, here.
ZATCA clarifies the exemption mechanism on private educational services provided to citizens
On 4th September 2021, ZATCA has published a press release providing additional clarifications on the mechanism of how the government will bear the VAT due on educational services provided to the Saudi nationals.
This initiative covers the VAT applied on tuition fees and textbooks provided directly by the following institutions that are considered as taxable persons for VAT purposes:
- Private and international schools accredited by the Ministry of Education (MoE)
- Educational services provided by private universities (for bachelor’s degrees) that fall under the supervision of the MoE
- Educational and training programs supervised by the Technical and Vocational Training Corporation, which are equivalent to the corresponding and similar educational certificates at the MoE, and whose duration exceeds two training years.
ZATCA also explains that the mechanism for applying the state’s tax bearing as follows:
- VAT on covered educational services is not collected from the citizens.
- The citizen’s data should be included in the tax invoice, including the national identification number and the contact details,
- The educational provider should declare the value of the supply within the field designated for it in the tax return without paying the tax due on that supply.
To access ZATCA press release, click here.
ZATCA launches the educational journey for electronic invoicing
The ZATCA has launched an educational journey for e-invoicing on its website, allowing the public to know all the details related to e-invoicing to be implemented on December 4, in an interactive way that contains videos, images and interactive questions, in order to facilitate and simplify it for everyone.
The educational journey includes many information and details related to e-invoicing, covering the categories subject to the regulation, the benefits and stages of its application, the requirements for each phase, and types of tax invoices, in addition to a detailed explanation of the differences between the electronic and paper invoices.
You can access the e-invoicing educational journey from here.
ZATCA propose amendments to the VAT implementing Regulations
The Zakat, Tax and Customs Authority (ZATCA) has proposed amendments to the VAT implementing Regulations in order to be aligned with the regulations stipulated for the new e-invoicing system. The main amendments are related to:
- Clarification on the transactions subject to issue a tax invoice (Intra- GCC supplies and export of goods and services).
- Detailed requirements of the simplified tax invoice.
- It provides power to the Tax Authority to cancel or suspend the application of the e-invoicing regulation to a specific taxpayer or category of taxpayers.
- Documents and records must comply with the cybersecurity regulations and the e-invoicing regulations for storage.
Currently these amendments are under public consultation that will be closed by 23rd October 2021.
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Amendments to the date of supply rules of the supplies made to the government
On 8th of October 2021, ZATCA approved the amendments made to the provisions of Article (20) of the VAT Implementing Regulations, which shall come into effect as of 1st November 2021.
The change is aimed to reduce the impact on cashflow when taxable supplies made directly to the Saudi government entities.
Supplies made to government bodies
ZATCA will change the date of supply rule for all goods or services provided to government agencies in accordance with the new Government Tenders and Procurement Law.Currently, according to the date of supply rule, VAT is due at the date of issuing the invoice or claim to the government entity, or the date of receiving the consideration for the supply fully or partially.
In the new date of supply rule, the VAT will be due according to either of the following two dates, whichever is earlier:
- The date of the payment order issued by the government agency
- The date of receiving the consideration for the supply fully or partially.
Reporting of the supplied made to the government agencies:
A new box will be added in the KSA VAT Form for supplies, subject to the standard rate that are made to a government entity, and the value of the supplies. These supplies must be declared in that box and should not be declared within the basic field in the return form.The below diagram compares the VAT entitlement process when taxpayers are dealing with government agencies before and after the new amendments:
Cases not covered by the new decision
ZATCA has also clarified that certain scenarios will not be covered by the amendments, as follow:- Supplies made from one taxable person to another (B2B).
- Supplies made from a taxable person to individuals (B2C).
- Supplies made by subcontractors to a main contractor who is contracting with the government.
- Supply to a government entity without a contract
- Supplies made to government-owned companies, even if the government’s ownership percentage is 100%, but the concept of government agencies does not apply to them.
The amendments are published in Arabic only by the official Gazette and can be accessed, here
ZATCA also published new guidelines in Arabic providing more information about the legislation changes:
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Oman
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Oman: VAT Registration
Oman became the fourth Gulf Cooperation Council (GCC) member state to implement VAT, following the UAE, Kingdom of Saudi Arabia and Bahrain. According to the Royal Decree No. 121/2020, Oman will apply VAT at the standard rate of 5% which comes into force in from the 16th April 2021.
Who is required to register?
- Any person who has a place of residence in Oman, and conducts a commercial, industrial, professional or other activity and has annual supplies that exceed or is expected to exceed the mandatory registration threshold.
- Any person who does not have a place of residence in Oman but is obligated to pay tax, regardless of the value of supplies made.
Mandatory and voluntary registration thresholds:
- The mandatory registration threshold: The value of annual supplies shall be OMR 38,500.
- The voluntary registration threshold: The value of annual supplies shall be OMR 19,250.
Calculation of annual supplies:
Value of supplies for the purpose of registration shall include the following:- The value of taxable supplies (Standard rated and zero-rated supplies) - Except supplies of capital assets.
- The value of the goods and services supplied to the taxable person and subject to the reverse charge mechanism.
- The value of Intra GCC supplies of goods and services.
VAT registration due dates and effective dates:
The Oman Tax Authority (OTA) published the guide on VAT registration determining the VAT registration due dates and effective dates.1. The mandatory VAT registration will take effect in a phased manner as follows:
2. The Voluntary registration due dates shall start from February 1, 2021, and the effective date of registration is per the date specified in the registration certificate.
You can access all VAT registration guides on the Oman Tax Authority website, here.
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The Official VAT Return template has been released
On 29th June 2021, The Oman Tax Authority (OTA) released the VAT return filing format with the guidelines on the requirements.
By end of July 2021, all taxpayers who registered for VAT on 16th April 2021 are required to submit and pay any tax due in the first VAT period from 16th April 2021 to 30th June 2021 using the specific format published on the OTA website.
The guide provides clarifications on how to file the VAT returns template and explains the information that should be outlined in each box of the template.
The Return format contains 7 boxes where taxpayers have to report their output, input, and any adjustment transactions in specific boxes as follows:
Note: If the taxpayer is in a refund position where the input VAT claimed is greater than the output VAT due, and he is eligible for a refund that is greater than OMR 100 request to be refunded, then he has two options:
1. Carry forward the net VAT credit to subsequent return periods. (Which is the default option)
2. Claim a refund of the net VAT credit (The taxpayer has to complete the “Taxpayer Checklist” excel sheet, and submit all supporting documentation with the VAT return for which the refund request is made)
However, If the amount to be refunded is under OMR 100, then the refund amount shall be transferred to future periods.
You can download the full VAT taxpayer guide - VAT return filing from here.
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United Arab Emirates
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VAT on the all supplies made by artists and Social Media Influencers (SMIs)
The United Arab Emirates Federal Tax Authority (FTA) has published a basic tax information bulletin clarifying that the supplies made by artists and SMIs are subject to VAT.
VAT registration:
Tax invoices:
Normal tax invoices are required for all standard-rated supplies provided by artists and SMIs, and simplified tax invoices are required to be issued where the supply is made to an unregistered recipient or where the consideration for the supply made to a registered recipient does not exceed AED 10,000.VAT Input Recovery:
Artists and SMIs making taxable supplies are eligible for a full recovery of input VAT, except for blocked items such as:- Certain entertainment services
- Purchased, leased, or rented motor vehicles that are available for personal use
You can access the basic tax information bulletin, here.
VAT public clarification on bad debt relief
The Federal Tax Authority (FTA) issued a new VAT Public Clarification (VATP024) on adjustment on account of bad debt relief.
As per Article 64 (1) of the VAT law, the suppliers may be able to adjust the VAT on the bad debts, if their customers do not pay (fully or partially) for any supplies within a specified period.VATP024 confirms that in order for a taxpayer to recover VAT on bad debts, the following four conditions must be met:
For more clarification you can download VATP024 from here.
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VAT public clarification on the tax treatment for some medical equipment
Background:
- On 1st September 2020, the UAE Cabinet issued a Cabinet Decision No. 9/12 of 2020 confirms that 0% VAT will be temporarily applicable on certain supplies and imports of medical equipment.
- On 6th December 2020 the Ministerial Decision No. 380 of 2020 was issued by the Minister of Health and Prevention.
- The FTA issued a new VAT Public Clarification (VATP025) on temporary zero-rating of certain medical equipment which replaces the old Public Clarification (VATP023)
- In accordance with Cabinet Decision No. 15/3 of 2021, the above decisions shall be effective until 31st December 2021
Applicability of Zero Rating on Medical EquipmentVATP25 provides a summary of the zero-rating rules introduced by the above-mentioned Decisions.
The “medical equipment” to which the temporary zero-rating rules apply are personal protective equipment used for the protection from Covid-19, and which contain the features and meet the specifications determined and specified by the Ministerial Decision. Such medical equipment are limited to:
The medical equipment mentioned in the Ministerial Decision are zero-rated in the following circumstances:
1. In respect of supplies of medical equipment, a supply can be zero-rated where the date of supply takes place, and the medical equipment is delivered to the recipient or placed at the recipient’s disposal in the period from 1st September 2020 to 31st December 2021.
2. In respect of imports of medical equipment, an import can be zero-rated when the medical equipment is imported in the period from 1st September 2020 to 31st December 2021.
For more clarification you can access VATP025 from here
New amendment relating to VAT recovery of the new residence for UAE nationals
The FTA has amended Clause (3) of Article (66) of the VAT Executive Regulation, with Cabinet Decision No. 24 of 2021.
The new clause changed the time limit for UAE nationals to submit their new residence special refund application from 6 months to 12 months from the date of completion of the newly built residence.According to this change, the FTA has published an updated version of the real estate guide which modifies the time limit from 6 to 12 months.
To access the amended VAT Executive Regulations, click here | To access the updated VAT real estate guide, click here.
Basic tax information bulletin for the automotive sector
The FTA has published a new basic tax information bulletin for the automotive sector clarifying the following:
Repair services and parts provided under warranty
VAT is applicable in the first instance on:- Sale of vehicles that include warranty
- Warranty packages purchased separately by the customer
Any subsequent supply of repair services and parts under warranty claims is not subject to VAT separately as long as no other amount is paid.
Repair and maintenance services
Where repair and maintenance services are physically provided in the UAE in relation to motor vehicles, such services are subject to VAT at the standard rate, even if the costs are charged to an entity based outside the UAE.You can access the basic tax information bulletin, here.
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Tax penalties amended
On 28 April 2021, the United Arab Emirates Government has amended the Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE by issuing the Cabinet Resolution No. (49) of 2021.
The new resolution has provided a relief to taxpayers in the UAE with reduction in the penalties on account of VAT and Excise Tax. The new changes will be applicable from 60 days of its issuance.
The new structure of tax penalty has been introduced to encourage the early submission of voluntary disclosures.
You can access the Cabinet Resolution No. (49) of 2021, here
The FTA also published two new Public Clarifications related to the updated tax penalties in the UAE.
Amendment of Penalties - TAXP001TAXP001 provides an overview of the amended penalties, and the new mechanism explained for specific penalties.
The document provides several examples of how the new penalties would be applied in practice.
For more clarification you can download TAXP001 from here
Redetermination of administrative penalties levied prior to the effective date of cabinet decision No. 49 of 2021 - TAXP002
TAXP002 provides detailed information on the redetermination of some of the penalties that imposed before 28th April 2021, with practical examples.
For more clarification you can download TAXP002 from here
Conditions to apply for a reduction or exemption of tax penalties
On 26 may 2021, The FTA issued a press release stating that any person or group has the right to apply for a reduction or exemption for Tax Law violation penalties imposed under the tax legislation, , provided that there is an excuse acceptable to the FTA, which is supported by evidence that justifies the existence of the excuse and the violation that led to the imposition of administrative penalties.
To submit such a request to the FTA to reduce or exempt from the penalties imposed by the FTA, the following conditions should be met:
The FTA would notify the applicant of the decision within 10 business days from the date of issuance.
To access the FTA press release, visit
New amendment relating to VAT recovery of the new residence for UAE nationals
The FTA has amended Clause (3) of Article (66) of the VAT Executive Regulation, with Cabinet Decision No. 24 of 2021.
The new clause changed the time limit for UAE nationals to submit their new residence special refund application from 6 months to 12 months from the date of completion of the newly built residence.According to this change, the FTA has published an updated version of the real estate guide which modifies the time limit from 6 to 12 months.
To access the amended VAT Executive Regulations, click here | To access the updated VAT real estate guide, click here.
Basic tax information bulletin for the automotive sector
The FTA has published a new basic tax information bulletin for the automotive sector clarifying the following:
Repair services and parts provided under warranty
VAT is applicable in the first instance on:- Sale of vehicles that include warranty
- Warranty packages purchased separately by the customer
Any subsequent supply of repair services and parts under warranty claims is not subject to VAT separately as long as no other amount is paid.
Repair and maintenance services
Where repair and maintenance services are physically provided in the UAE in relation to motor vehicles, such services are subject to VAT at the standard rate, even if the costs are charged to an entity based outside the UAE.You can access the basic tax information bulletin, here.
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Egypt
March 2022
New amendments to the VAT Law
On 26th January 2022, new amendments (law no.3 of 2022) were published in the Egyptian official gazette effective 27th January 2022.
Below is a summary of the major amendments introduced to the VAT law no. 67 of 2016:
- Medicines and the relevant production materials, vaccines, blood and its derivatives, and family planning products are exempt from VAT.
- Suspending the payment of the VAT on machinery and equipment imported or purchased from the local market for industrial production use for a period of one year from the date of the customs release or local purchase.
- Agricultural products such as seeds, seeds, seedlings, vegetables, and fruits produced locally are exempt from VAT
- Services provided by the Suez Canal authority for the transiting ships, including the transit fees are exempt from VAT
- Tax refund for foreigners leaving the country for their purchases in case the amount is not less than EGP 1,500 for each invoice
- Introduced a new simplified registration system and the registration for reverse charge purposes.
You can download the new amendments, here
March 2021
Paper invoices are not accepted for deducting or refunding VAT from January 2022
On 10th March 2021, The Egyptian Tax Authority (ETA) announced that with effect from 1st January 2022, paper invoices will no longer be accepted for deducting or refunding VAT.
The Minister of Finance issued a decision to add a new paragraph to Article 38 of the Executive Regulations for the VAT Law which states that only electronically issued invoices (e-invoices) will be accepted, with the exception of invoices issued before the obligation to implement the e-invoices system and invoices issued by companies that ETA has exempted from e-invoicing.
E-invoicing implementation timeline in Egypt:
You can access the latest announcement from the ETA, here.
Global
Microsoft faces investor call to publish global tax affairs
According to Reuters Investors managing more than $350 billion of assets have demanded that Microsoft (MSFT.O) publish more transparent tax and financial information, as tech giants face growing scrutiny globally over their tax affairs. The resolution calls on the company to publish financial and tax information on a country-by-country basis outside its home market of the United States so investors can assess whether it is paying fair taxes and identify any risks posed by tax reforms. It also calls on Microsoft to produce a tax transparency report in line with the tax standard of the Global Reporting Initiative, a standards organisation. (Source: https://www.reuters.com)
WHY IS THE RESOLUTION IMPORTANT:
- Shareholders at Microsoft have asked the company to disclose their financial data and tax information in each jurisdiction they operate outside USA.
- Shareholders want to make sure the Company is paying fair taxes and identify any potential risks posed by tax reforms.
Cisco and Amazon shareholders have also filed similar proposals, calling for greater tax transparency in order to assess a company’s tax risk profile and appetite.
KEY TAKE AWAY:
- Tax Authorities and OECD initiatives are not just requesting greater tax transparency - Tax Authorities are evolving, adopting new technologies to get data from Taxpayers in real time, focusing on POS (e-invoicing) in order to drive greater tax compliance.
- Increasingly now, shareholders are becoming concerned about tax transparency, and are using investor-led resolutions to drove positive changes in a company’s ESG (Environmental, Social & Governance) strategy and profile.
ROLE OF THE TAX DEPARTMENT:
- Tax teams are no longer just in charge of filing returns and meeting tax payment deadlines
- The role of the tax department is now more strategic. They are being asked to build a Tax Strategy which will be sustainable in the long term, align their tax strategy with changes in global tax regulations, and make sure the investment of the shareholders are not at risk
WHY TAX TECHNOLOGY IS IMPORTANT NOW MORE THAN EVER:
Whilst Tax may be able to execute the Tax Strategy well, the company should put in place certain control systems to prevent tax leakage, make sure they are paying the correct tax. Benefits of adoption of tax technology:
- Will enable the company to achieve their goals
- Increase accuracy
- Improve tax processes and manage risks.
- Comply with increasing reporting requirements (Global Minimum Tax, Country by Country Report, BEPS, Transfer Pricing, Indirect Tax, etc)
IMPLICATIONS OF LACK OF TAX TRANSPARENCY IN AN ORGANIZATION:
- Potential reputational damage
- Lack of trust of the shareholders
- Potential closure of the business in case there is a major tax controversy with the Tax Authorities (Huge amount of penalties).
- Additional administrative costs
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