Bahrain
Cryptocurrency guidance
Bahrain NBR updated their VAT financial services guide by adding a new section (no. 2.9) regarding the VAT treatment of the cryptocurrency transactions.
Introduction:
Crypto assets are virtual or digital assets or tokens operating on a blockchain platform, protected by cryptography.
There following types of tokens are recognized in Bahrain:
- Payment tokens
- Utility tokens
- Asset tokens
- Hybrid tokens
The exchange of tokens for legal tender or other tokens, and vice versa, are supplies of financial services and then treated as exempt from VAT.
The new section also covers the VAT treatment of all types of tokens recognized in Bahrain.
To access the updated financial services guide, visit.
Saudi Arabia
ZATCA E-invoicing Clarifications
As Thomson Reuters is part of the pilot project for the integration phase, below are some of the business questions ZATCA clarifies during the Q&A sessions
| Question | Answer |
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Is there a limit on the number of decimals for unit price of an invoice? |
No, as specified in the table provided under paragraph 7.3 of XML Implementation Standard, there are no restrictions on the decimal places for Unit Price. |
What is the difference between error and warning? |
An error is a validation failure associated with a rejected document, while a warning is a validation failure associated with an accepted document. If a submitted document has even one error, it will be rejected entirely |
For Standard Tax Invoices, what should be done if the clearance fails before issuing the invoice to the buyer? |
If clearing fails (Response is 400 Error), then the taxpayer must submit another invoice for clearance after rectifying the errors. Please note that every document shall have its own hash and counter value. Rejected document׳s hash and counter value should not be changed or updated. |
In case a Standard Tax Invoices (B2B) is submitted and not cleared / rejected from ZATCA, should the invoice be resubmitted with different invoice counter value? |
Invoice counter value should not be re-used. Once a document is generated with an Invoice Counter Value (ICV), then that ICV cannot be mentioned on another document. A new document should have its own ICV. |
For Simplified Tax Invoices, what should be done if the reporting fails after issuing the invoice to the buyer? |
If the reporting fails, then the taxpayer must correct the error from to prevent it from happening on subsequent documents. The error in rejected document can be rectified and a new document can be submitted for Reporting. As the invoice would have already been issued to customer, there is no need to issue another invoice (in most cases customer may not be available to share the invoice again and therefore such a requirement would be impractical). |
Exemption of Penalties Initiative
On 1 June 2022, ZATCA announced an amnesty scheme and issued the Guideline for amnesty on waiver of penalties to mitigate the financial implications resulting from COVID-19 that is affected businesses in the kingdom, and published a simplified guide of the exemption of penalties initiative.
Who can benefit from this amnesty?
All taxpayers who are registered with ZATCA
What is the period of the amnesty?
The amnesty will be for six months during the period 1st June 2022 – 30th November 2022.
What are the types of taxes included in the initiative?
- VAT
- Withholding Tax
- Excise Tax
- Income Tax Real Estate Transaction Tax (RETT)
To access the simplified guide for exemption of penalties initiative, visit
Special Edition of Saudi E-invoicing
Implementing Phase Two (Integration Phase)
ZATCA has announced that the implementation of Phase Two of E-invoicing project will begin on 1st of January 2023 for selected taxpayers who will integrate their e-invoicing system in the first wave based on the revenue subject to VAT for the year of 2021 exceeding (3 billion) SAR.
During the workshops ZATCA is conducting with Thomson Reuters, they confirmed that the taxpayers who will fall in the first wave can integrate their e-invoicing solution with the Fatoora platform anytime until 30 June 2023, and ZATCA will support them with any technical problems.
This means taxpayers who are selected for the first wave have a six months grace period to fully comply with phase two requirements and there will be no penalty enforced for non-compliance integration before 1st July 2023.
Furthermore, ZATCA would gradually inform the following waves directly at least six months before the integration date.
The Integration Phase requires additional requirements, the most prominent are to integrate taxpayer's E-invoicing solutions with FATOORA, issue electronic invoices based on a specific format, and include additional fields in the invoice.
To read the full news regarding the implementation of the integration phase, visit
E-invoicing Integration Pilot project
In preparation for the integration phase, ZATCA are conducting integration pilot with selected solution providers and taxpayers
Participants of the project will have access to test version of ZATCA’s E invoicing Platform for extensive simulation and testing the end-to-end invoicing cycle on actual supplies to identify both technical and operational challenges
Participants will be sharing their clarifications and feedback with ZATCA throughout pilot preparation and execution phases
Thomson Reuters is also participating in the Integration Pilot Project for Phase 2
E-invoicing Resources Updates
Below are the most updated resources of the E-Invoicing Phase two (Integration Phase)
| Resource | Update Date |
|---|---|
24th June 2022 |
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29th June 2022 |
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29th June 2022 |
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24th June 2022 |
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24th June 2022 |
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24th June 2022 |
ZATCA E-invoicing Clarifications
As Thomson Reuters is part of the pilot project for the integration phase, below are some of the business questions ZATCA clarifies during the Q&A sessions
| Question | Answer |
|---|---|
Can both Invoice and Credit Note be included in the same invoice format? |
No, XML does not accept negative values and Taxpayer has to issue the credit note in a separate format including the reference to the original invoice. |
When is the second wave of implementing the e-invoicing phase two? |
There is no timeline announced by ZATCA yet. |
What is going to happen if taxpayers send the same invoice to the ZATCA E-invoicing portal multiple times? |
ZATCA will not reject the invoice. However, a warning message will appear in the portal stating that there is a duplicate |
After 1st January 2023, Can Taxpayers recover the input VAT on the invoices received which are not cleared by ZATCA? |
There is no prerequisite for input VAT deduction during the transition wave. Therefore, the taxpayer can recover their input VAT based on phase one requirements until all taxpayers are onboarded in the e-invoicing integration processes. |
In the case of issuing Credit/Debit notes, What the reference to the original invoice should be? |
ZATCA kept this field as free text in case a taxpayer is issuing the note referencing multiple series of invoices and the IRN of the original invoice should be part of it. For Example, a Credit Note issued against invoices with IRN starting from 305 to 310 |
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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
New VAT guidelines are published on the Oman Tax Authority website
The Oman Tax Authority published the following VAT guidelines:
- Profit Margin Scheme (In Arabic only)
- Education Sector (In Arabic only)
- Financial Services Sector
- Capital Assets (In Arabic only)
- Export and Import (In Arabic only)
Extension of the scope of Free Zones
The Sultan of Oman, issued a Royal Decree 10/2022 on 27 March 2022, establishing new free zones in Oman. The following free zones are established:
- Muscat International Airport Free Zone.
- Sohar Airport Free Zone.
- Salalah Airport Free Zone.
You can access the Royal Decree 10/2022 from here
Tax Compliance Awareness Campaigns
The Auditor Services Department of the Tax Authority has launched field awareness campaigns on the importance of tax compliance for those subject to VAT in the Governorate of Muscat from 24 July 2022 to 18 August 2022.
They provided all the necessary information to assist the subjects in the correct method of recording the tax and in the timely submission of tax returns through the electronic services portal of the tax authority.
Read full details here
New VAT guidelines are published on the Oman Tax Authority website
In February 2022, The Oman Tax Authority published the following VAT guidelines:
- Oil & Gas
- Transportation (In Arabic only)
- Related Persons (In Arabic only)
- Reverse Charge Mechanism (In Arabic only)
Extension of Zero-rated food items list
On 13 March 2022, The Oman Tax Authority published decision no. 89/2022 extending the basic food items list which is subject to VAT at zero rate.
The new zero-rated food items include additional 25 items which will be subject to zero-rate, thus the updated zero-rated food items will include 513 commodities.
You can download the news list of zero-rated food items, here
Also, for your reference you can download the existing list of 488 items, here
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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
100% digital VAT-refund scheme for tourists
On 14 September 2022, the FTA in partnership with Planet Tax Free lunched the 100% digital VAT-refund scheme for tourists during a joint press conference.
As per the press news, the paperless procedure is considered the most advanced solution of its kind in the world and reflects the government’s continuous adoption of proactive solutions based on the concept of proactive government work, to meets the requirements of the future and positively reflect on customers.
The new solution is integrated electronically between retail outlets and the tax refund scheme, ensuring a seamless digital process of issuing, sending, modifying and saving invoices for tourists.
To read the full news, please visit
Awareness Materials on Tax Obligations
The FTA published a new guide for the taxpayers in the UAE titled “Get to know your Tax Obligations”.
The guide provides high level information regarding VAT obligations which includes:
- VAT Registration and Tax Group
- Transactions subject to VAT
- VAT Rates
- Record keeping
- Tax invoices
- VAT Return submission and Payment
To access the awareness material, click here
Whistleblower Program for Tax Violations and Evasion
The FTA published a guide on a whistleblower program for tax violations and evasion to ensure compliance of the taxpayers with the applicable tax legislation.
In the new guide, the FTA further encourages reporting non-compliant business activities through the “Raqeeb” Program.
The guide also provides the process of submitting a whistleblower form, and additional information needed to complete the whistleblowing form.
To access Raqeeb guide, visit
VAT Public Clarification on Gold – Making Charge
The FTA published a new VAT Public Clarification on the application of the VAT legislation with regards to making charges received by gold jewelers “VATP029”
As per Cabinet Decision No. 25 of 2018, taxpayer who supplying gold are not required to impose VAT on the supply of gold and products which mostly consist of gold. Therefore, VAT in respect of the gold is accounted for under a special reverse charge mechanism which requires the registered recipient to account for VAT on the supply instead of the supplier.
This reverse charge mechanism only applies to the supply of goods by a registrant.
If the supplier charges separate considerations for the gold and the making service, or reflects the price of these components separately, the supplier is required to impose VAT on the service component, and the recipient will not apply the reverse charge on this service.
To access VATP029, visit
Time Limit for Claiming Refund by Tourists
The Federal Tax Authority published a new Decision No. 4 of 2022 setting out the time limit for VAT refunds to be claimed under the Tourist Refund Scheme (TRS).
The new decision states that the operator of the TRS shall set a one-year time limit for tourists to claim the refund of VAT through bank card or by cash, from the date of verification of the refund request, and to include this in its published list of terms and conditions
Also, the decision clarifies that if the operator of the TRS has any unclaimed tax amounts by tourists, the operator must deliver such funds to the FTA within one month of the expiration of the time limit.
You can access the new decision from here
The FTA increased inspection visits by 104 % in 6 months
On July 21, 2022, the FTA announced that during the first half of 2022, the FTA significantly expanded its efforts in collaboration with various government departments, ministries and authorities to protect consumers from non-compliant products, combat tax evasion, and ensure compliance with tax legislations and procedures.
The FTA carried out 9,948 inspection visits in local markets across the country in collaboration with the Ministry of Economy, the Federal Authority for Identity, Citizenship, Customs, and Port Security and various departments of Economic Development across the country. The number of visits represents an increase of 104% over the same period in 2021.
To read the full news article, visit
UAE introduces corporate tax for financial years starting on or after 1 June 2023
On 31 January 2022, the UAE Ministry of Finance (MoF) announced the introduction of a federal corporate tax (CT) in the UAE that will be effective for financial years starting on, or after, 1 June 2023.
The CT rates are:
- 0% for taxable income up to AED 375,000
- 9% for taxable income above AED 375,000
- Different tax rates for large multinationals that meet specific criteria set with reference to 'Pillar Two' of the OECD Base Erosion and Profit Shifting project
Businesses engaged in the extraction of natural resources will remain subject to Emirate-level corporate taxation and be outside the scope of UAE CT. Information on other UAE CT exemptions and exclusions will be provided in due course.
High-level details on the proposed CT regime are set out by MoF in the press release
A new Corporate page has been included on the FTA website
Updated Voluntary Disclosure user guide
The FTA has published an updated guide of the Voluntary Disclosure.
The updated guide includes new two sections related to the tax groups:
3.3. Voluntary Disclosure for Tax Groups
The new section clarifies that Voluntary Disclosures for tax groups can be submitted by the representative member of the tax group, and other members can only view the submitted disclosures.
3.4. Voluntary Disclosure for Deregistered Tax Groups
The last representative member of a deregistered Tax Group will submit the Voluntary Disclosure and see the tabs for managing the Voluntary Disclosures and Tax Assessments and for making payments for liabilities that may arise after the Tax Group was deregistered.
You can access the new guide, here
The tax penalty relief timeline has been extended to 31 December 2022
On 30 December 2021, a new Cabinet Decision No. 108/2021 was issued regarding the extension of the timeframe for taxpayers to benefit from the 70% redetermination of administrative penalties until 31 December 2022 (The previous deadline was until 28 June 2021)
This relief provides taxpayers a 70% reduction on their penalties which were applied prior to the changes to the UAE tax penalty regime.
New Public Clarification “TAXP004
The FTA published a new Public Clarification “TAXP004” which replaced Public Clarification “TAXP002” on redetermination of administrative penalties levied prior to the effective date of the Cabinet Decision No. 49 of 2021.
The new clarification mentioned that all the following conditions have to be met in order for the VAT-registered taxpayer to benefit from the relief:
| 1 | The administrative penalties have been imposed before 28 June 2021 as per the Cabinet Decision No. 40 of 2017 |
| 2 | The administrative penalties have been imposed in full before the effective date of the Decision (28 June 2021) |
| 3 | The taxable person has undertaken any of the following: |
| 3.1 | Settling the following amounts by 31 December 2021 |
| 3.1.1 | All payable tax up to 31 December 2021, regardless of whether such tax was payable before or after 28 June 2021 |
| 3.1.2 | 30% of the total unsettled administrative penalties referenced above which were imposed before 28 June 2021 |
| 3.2 | Settling the following amounts by 31 December 2022: |
| 3.2.1 | All payable tax up to 31 December 2022, regardless of whether such tax was payable before or after 28 June 2021 |
| 3.2.2 | 30% of the total unsettled administrative penalties referenced above which were imposed before 28 June 2021 |
To access TAXP004, visit
VAT Public Clarification on mobile phones used for business purposes
The FTA published a new VAT Public Clarification on mobile phones, airtime, and data packages made available to employees for business use “VATP028”
VATP028 clarifies that input tax is recoverable only where the employer has a strict policy in place to restrict the use of such Phones, Airtime, and Packages for business purposes only.
Note that backdated policies shall not be accepted and must have already been in place to be considered as recoverable input tax.
To access VATP028, visit
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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
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
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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