GCC Indirect Tax Digest - 19 September 2022

This is the GCC Indirect Tax Digest, reporting news of Indirect Tax developments in the Middle East region on a bi-weekly basis. The digest is also available in Arabic on the following?link .

UAE developments

FTA publishes Excise Public Clarification on calculation of financial guarantee for Excise Designated Zones

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a new Public Clarification (PC) on the calculation of financial guarantees for Excise Tax Designated Zones (DZ).

EXTP008 ?sets out the FTA’s new methodology for calculating financial guarantees for Excise DZs, which is designed to acknowledge warehouse keepers with good governance of their tax affairs by reducing the amount of the required financial guarantee based on the warehouse keeper’s and the taxable person’s?compliance history.

Summary

As per the new PC, from 1 September 2022, financial guarantees imposed in order to register a DZ for Excise Tax will be determined using a different risk-based approach which considers certain variables. This approach benefits warehouse keepers with a good compliance history as a proven record of Excise compliance will result in a lower financial guarantee amount, which is calculated using the following steps:

1. The guarantee base will be calculated based on the Excise Tax due on the average month-end stock over a period of twelve months.
2. The FTA will determine the applicable and appropriate financial guarantee percentage based on multiple factors,?including the compliance history of the relevant taxable person and the warehouse keeper, as well as the financial situation of the person required to provide the financial guarantee.
3. The rate determined in Step 2 will be applied to the guarantee base calculated in Step 1 to calculate the preliminary financial guarantee amount.
4. The FTA will further determine the required financial guarantee amount in respect of the specific DZ by adjusting the preliminary financial guarantee amount if either the minimum (AED 175,000) or the maximum (AED 25,000,000) threshold applies.?The capped (maximum) threshold of AED 25,000,000 will not apply if the warehouse keeper has not been compliant in the past.

Non-compliance is described in the PC as being flagged by the following factors:

• Receiving an Excise Tax assessment with a value of tax which deviates by more than 5% of the tax liability declared by taxpayers in their tax returns and declaration, at any point in the preceding 5 years;
• Previous liquidation of a financial guarantee by the FTA in the preceding 5 years in relation to the Warehouse Keeper’s DZ; and
• Facilitation of tax evasion by the Warehouse Keeper or any of its key employees.

As a result, any of the above – and in particular the receipt of a previous Excise Tax assessment from the FTA – will potentially give rise to a requirement for warehouse keepers to lodge financial guarantees exceeding AED 25 million in order to renew their Excise DZ and continue to benefit from the associated cash flow benefits which can be achieved by that regime.?

Given the commercial practicalities and costs associated with securing large financial guarantees in favor of the FTA, it is extremely important that warehouse keepers in particular maintain strong governance around their compliance.

Next steps?

Given the FTA’s increasing focus on Excise Tax compliance, Deloitte has designed an approach and methodology for an Excise Tax Health Check service to support businesses in identifying and correcting any past errors or difficulties with respect to Excise Tax in a practical and effective manner. Based on our practical experience with Excise Tax Audits, we know that the FTA will first informally request Excise Tax compliance related information under Article 18 and 19 of Cabinet Decision No. 36 of 2017 on the Executive Regulations to the Tax Procedure Law.?

Such information requests can be seen as a precursor to a formal Excise Tax Audit in the UAE and as such, our Health Check service is designed to identify deficiencies and to provide practical and executable guidance which businesses can follow to put in place required processes and documentation so that it can comfortably meet the FTA auditors’ requirements in the event of an information request or a Tax Audit.?

KSA developments

ZATCA and Mawani sign service level agreement to enhance collaboration?

The Zakat, Tax, and Customs Authority (ZATCA) and the Saudi Ports Authority (Mawani) have recently signed a service level agreement (SLA) to monitor their joint tasks, develop and implement service-level operations and automation mechanisms at Jeddah Islamic Port to maximize efficiency, boost productivity, and improve the customer experience.

This collaboration is expected to be gradually implemented in additional KSA ports and is a significant step in growing trade operations and the efficiency of Saudi ports.

For the full notice please click?here .

Saudi Cabinet approves duty free markets at ports

The Saudi Cabinet has authorized the formation of duty-free markets at air, sea and land ports. This will permit duty free sales at the ports and is aligned with other countries in the region.

The Cabinet also approved the establishment of the Saudi-Thai Coordination Council.

Tax Technology Consulting and Support

Your strategic advisor for tax transformation in the Middle East

The role of the tax function in businesses across the Middle East (ME) is rapidly evolving.??

Under a backdrop of accelerated changes to the global tax landscape and worldwide regulatory and reporting requirements, the ME itself has transformed its own tax footprint remarkably in the last few years. The combination of these global and regional factors means that the tax function of businesses operating in the ME region are more important than ever.

Cost pressures, e?ciency in delivery, real time visibility of tax obligations, expert technical advice and implementation of a digital roadmap are just some of the competing priorities that need to be balanced by in-house tax and ?nance teams.

Deloitte’s Tax Technology Consultancy and Support (TTC) team in the ME region can help assist your business with these issues plus much more, as well as partner with you to ensure your tax function, tax technology and processes are prepared to meet the needs of tomorrow.

Deloitte events

Qatar tax conference

We are pleased to invite you to attend our forthcoming Qatar tax conference taking place in?Doha, Qatar on Wednesday, 5 October 2022.?

For the past years, Deloitte has organized this annual tax conference to update clients on the rapidly shifting global and local tax environment. With this in mind, we have developed a diverse agenda to cater to the needs of the various businesses operating in Qatar.?The topics that will be discussed are listed below:

• Qatar tax update
• Value Added Tax (VAT) and other Indirect Tax developments in Qatar?
• Transfer Pricing developments in light of the new global tax framework
• Pillar 1 and 2 and the impacts on Qatari businesses
• Role of technology in the modern tax world
• Customs and Global Trade in a changing environment

To launch this event, please join us for a light breakfast and networking from 8:30 am with our opening session beginning at 9:00 am and the main program concluding at 1:00 pm, followed by lunch. You can also?send us ?your questions ahead of the conference that we can tackle during our Q&A sessions.?

The fee for attending the event is QR 1,500 and includes the training, materials and meals.

Register here

Note:?This digest is for information purposes only and should not be construed as an advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.?