GCC Indirect Tax Digest - 30 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 .
KSA developments
ZATCA publishes VAT guideline on Electronic Contracts
The Kingdom of Saudi Arabia (KSA) Zakat, Tax and Customs Authority (ZATCA) has published a Value Added Tax (VAT) guideline on Electronic Contracts.
An Electronic Contract is described in the guideline as a contract which may be negotiated and executed electronically over the internet, with the parties often interacting with one another exclusively in a digital format without the requirement to meet in person.
The guideline states that the offer and acceptance of contracts may be expressed by electronic means, and that Electronic Contracts are deemed valid and enforceable with the same legal recognition and effect as paper contracts.
ZATCA has clarified in the guideline that the VAT treatment of supplies is not impacted by the form of the contract. In addition, the guide includes a number of examples demonstrating the application of VAT to different types of contracts.
INTax e-invoicing solution: Ensure readiness for phase two of e-invoicing in KSA
E-invoicing was introduced into KSA with effect from 4 December 2021. There are two major phases for the introduction of e-invoicing in KSA, the generation phase which has already gone live, and the integration phase which will go live on 1 January 2023.
Dealing with these changes will require detailed systems, processes and other changes to be undertaken in order to be compliant with the regulations.
Deloitte has launched INTax, a powerful, robust and KSA hosted e-invoicing solution that is aligned with the requirements of the ZATCA. This tool will allow users to seamlessly deal with the transition into the integration phase
For more information, please refer to this document .
VAT refunds under the Licensed Real Estate Developer Scheme in KSA
Real Estate Transaction Tax (RETT) was introduced in KSA with effect from 4 October 2020 on supplies of land and property (including sales, assignments, transfers, and similar activities), subject to some exceptions. The applicable rate is 5% of the value of the land and property (and rights thereto).
VAT, in general, is no longer applicable to the sale and disposal of property, except in certain circumstances where both VAT and RETT can apply on the same transaction. Instead, the real estate supply will be treated as VAT exempt wherein related tax credits cannot be recovered through the VAT return.
A scheme known as the Licensed Real Estate Developer Scheme (LD) has been introduced allowing land and property development companies to recover input VAT on their expenses. Rules and conditions around the qualification as a LD have been issued by ZATCA. In a recent legislative update, the ZATCA released a set of rules and procedures in relation to the VAT refunds under the LD Scheme.
Deloitte has published an article highlighting some of the key considerations that businesses who wish to pursue the LD journey should consider.
The link between VAT, Transfer Pricing and Customs
The tax landscape in KSA is witnessing a rapid transformation. The consolidation of the Corporate Income Tax (CIT) authorities with the Customs authorities have led to the transition of the former General Authority of Zakat and Tax (GAZT) to the ZATCA.?
The objective of the transition was to ensure a greater level of coordination between the two authorities. This also meant a fresh set of challenges for taxpayers in addressing joint queries from ZATCA, covering VAT, Corporate Income Tax (CIT) and Customs.?
A frequent question that comes to mind is how do Customs, VAT and Transfer Pricing (TP) interplay and relate to the import of goods from related parties. The objective of the TP and Customs authorities is to ensure that goods are purchased at a value which is consistent and at a fair market value. However, the end result could be conflicting due to the nature of the transaction flow.??
For more insight on the changing Tax landscape in Saudi Arabia, download our new article .
UAE developments
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FTA and Planet Tax Free announce fully digital VAT refund scheme for tourists?
The United Arab Emirates (UAE) Federal Tax Authority (FTA) announced that it has launched, in partnership with Planet Tax Free, a fully digital process for refunds under the VAT tourist refund scheme (TRS).
The new system uses electronic invoices issued at the point of sale registered with the authority’s system, rather than traditional paper invoices. This is made possible by the electronic integration of retail outlets with the TRS system.
In addition, the FTA announced that in the first eight months of 2022, the number of TRS transactions increased by 104% compared to the same period in 2021, while the value of refunds under the TRS increased by 113% in the first eight months of 2022 compared to the same period in 2021. These increases were attributed to the easing of travel restrictions resulting from the COVID-19 pandemic.
Tax penalty relief deadline of 31 December 2022
At the beginning of this year, the FTA announced an extension of one year for taxable persons to benefit from the redetermination of administrative penalties, with a new deadline of 31 December 2022.
The relief mechanism potentially provides taxable persons with a 70% reduction in penalties which were applied prior to the changes to the UAE tax penalty regime (i.e. prior to 28 June 2021). For more information about the changes, please refer to Deloitte’s alert .
In order to benefit from the relief, the VAT-registered taxpayer would need to ensure that all tax due and 30% of the total unpaid administrative penalties are settled by 31 December 2022.
With only three months remaining until the deadline, we recommend that businesses which qualify for the relief take the required action prior to the deadline.
Oman developments
Businesses to update their communication details on the tax portal
The Oman Tax Authority (OTA) has recently issued a public notice urging all taxpayers to update their communication details on the tax portal by visiting www.taxportal.gov.om .
This is to ensure all communications are well received by the taxpayer and to allow them to access electronic services to be introduced by the OTA in the future.
Details to be updated include communication address, contact person name, phone number, and email address.
We suggest that all businesses visit the tax portal and confirm if the details provided are up to date. In addition, businesses should monitor for any new communication/announcement sent to them directly by the OTA over an email or on the tax portal.
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:
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.
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.?