The FTA has published a new Public Clarification regarding zero-rating of export of services where it explains the application of the conditions prescribed in Article 31(1)(a)(1) of the UAE VAT Executive Regulations.
Namely, there are two main conditions which must be met to apply the zero-rate VAT as per Article 31(1)(a)(1) Executive Regulations:
The Public Clarification provides further explanation on the two conditions.
Condition 1. The recipient of services should not have a place of residence in an Implementing State.
The Public Clarification confirms the Clause (2) of Article 32 of the VAT Law remains effective, where the place of residence of a supplier/recipient of services is determined by the establishment that is most closely related to the supply.
The following factors should be taken into consideration to identify the most closely related establishment:
Condition 2. The recipient of the services should be outside the UAE at the time the services are performed.
This requires consideration to the nature of the services supplied and the period or duration during which the services are performed by the supplier and consumed by the recipient.
The Public Clarification further explains the the term “outside the State” under 31.2 of the UAE VAT Executive Regulations as follows:
For completeness, the other conditions set by Article 31 of the Executive Regulation for the supply of services to qualify for zero-rate are as follows:
Practical updates – Contract reporting requirement and VAT Guides issued by the General Authority for Zakat and Tax (“GAZT”)
GAZT has enabled an ‘e-services’ option on their portal for taxpayers to report contracts entered into between commercial establishments as well as Government authorities exceeding the threshold value of SAR 100,000. Such contracts are required to be reported within 3 months from the execution date.
Although there are specific provisions in the Saudi Income Tax law which govern this contract reporting along with consequential penalties, there are no specific provisions available covering this reporting in the VAT law and Implementing Regulations.
The guidance refers to Article 51 of the VAT law enabling GAZT to require taxpayers to submit contract related information. There are no specific penalties prescribed by GAZT, however we are of the view that GAZT may impose general penalties as per Article 45 of the VAT law in case of non-compliance.
GAZT issued a detailed guidance in this respect (available in Arabic) which can be accessed through this link.
A PwC news alert issued earlier on this development can be accessed here:
GAZT continues to issue the amended guides explaining the impact of the VAT rate increase. As per the information available on the website, a new page has been added in the guides issued earlier to cater to the VAT rate increase (in both English and Arabic).
The guides can be accessed on GAZT’s website: https://gazt.gov.sa/en/HelpCenter/guidelines/Pages/default.aspx
GAZT issued a guide (available in Arabic) explaining the VAT implications on supply of real estate by individuals. GAZT has clarified that the supply of real estate is a VAT-able transaction in general unless it qualifies for conditional exceptions/ exclusions specified by GAZT. Exclusions mentioned in the guide are:
For further details, please access the guide here.
Extension of the customs duty collection postponement initiative
Based on a Royal Decree issued on 02 July 2020, the KSA government has decided to extend a number of initiatives issued to reduce the financial and economic impact on the private sector due to the measures taken to address the COVID-19 pandemic.
From a customs perspective, the Royal Decree grants an additional three months to "postpone the collection of customs duties for a period of 30 days”. The measures announced allow importers to defer payment of custom duties for 30 days from the customs release date for the shipments imported during the three-month period between July, August and September.
The 30 day deferral for the collection of custom duties is granted with the condition that an importer provides a bank guarantee. Additionally, as an alternative to the bank guarantee, Saudi Customs provides qualified low/medium risk importers the option to opt for an electronic declaration undertaking to pay the customs duties and all other fees within the permitted payment period. Saudi Customs has issued a detailed guidance on this (available in Arabic): https://www.customs.gov.sa/ar/CP
The National Bureau for Revenue (NBR) has released General and Technical FAQs in Arabic on their website. These FAQs had previously been published in English.
The link to the Arabic FAQs on the NBR website is: https://www.nbr.gov.bh/faq
The NBR has now released the VAT Digital Economy guide in Arabic. This had previously been published in English.
The link to the VAT Digital Economy Guide in Arabic is: https://www.nbr.gov.bh/vat_guideline
On 12 July 2020, The General Administration of Kuwait Customs (“Kuwait Customs”) issued Customs Notice No. 94/2020 on the implementation of the personal importation into Kuwait.
Kuwait Customs will exempt customs duties on goods imported into the country of a value of 100 Kuwaiti Dinars or less (approximately US$322).
The Customs notice can be accessed through the following link to the Kuwait Customs website:
Oman Tax Authority presented the draft VAT law ("as a matter of urgency") to the Economic and Financial Committee of the Shura Council and representatives from the Oman Chamber of Commerce and Industry (OCCI) and Public Authority for Consumer Protection (PACP) on Monday, dated 13 July 2020 for their review and deliberation.
On 21 July 2020, the Shura Council referred the VAT law to the State Council, with some amendments and recommendations for those with limited income and in line with the interests of the State and the citizens.The State Council would look at it in a fast track manner (within 15 days rather than the usual 45 days in a normal scenario). Once approved by both Councils, the Chairman of the State Council shall submit the VAT law to His Majesty the Sultan along with the opinion of both Councils for his consent and a formal announcement via a Royal Decree.
This accelerated approval process may result in the VAT law being finalised within a few months (tentatively by September/October 2020) with a possible implementation date in early to mid 2021. Although, to date there is no formal announcement on the timelines and the Tax Authority has maintained that it intends to give businesses at least six months to prepare for VAT.
The Executive Regulations to the Excise Tax Law have been issued on 13 July by way of Ministerial Decision (MD 51/2020) in the official gazette of Oman, providing further legislative support on the rules and procedures for Excise Tax. The Executive Regulations are divided into twelve chapters, and include details relating to the procedures and conditions around the implementation of excise tax in Oman, such as:
The link to the Excise Tax Executive Regulation is below for your reference (In Arabic)
Indirect Tax Leader
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Indirect Tax Partner
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Antoni A Turczynowicz
Tax Partner & Managed Services Lead
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Partner, Middle East Customs & International Trade
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Partner, Tax Leader, Bahrain
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Middle East Tax & Legal Services Leader
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Chadi Abou Chakra
Partner, Indirect Tax and Fiscal Policy
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Partner, Zakat and Tax
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Zakat and Tax Leader
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Partner, International Tax and M&A Services
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Partner, Oman Tax Leader
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Partner, Middle East Indirect Tax and Fiscal Policy
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