GCC Tax & Other Regulatory Communique January 2025

1.?UAE VAT UPDATES

World's first Tax Refund System for E-Commerce Retail Purchases for Tourists

The FTA of UAE has announced the launch of a new VAT refund system for e-Commerce Retail Purchases for tourists during their stay in the UAE. It allows tourists to recover refundable VAT on all their purchases during their stay in the UAE, whether from traditional stores or e-commerce platforms registered with the Authority.

Decision on Mechanism for Correction of Error or Omission in VAT Return?

The Federal Tax Authority ('FTA')?of UAE has issued a Decision on "Mechanism for Correction of Error or Omission in the Tax Return Submitted to the FTA for VAT". Same is effective from 01 January 2025. It is to be noted that as per the said Decision, when a Taxpayer discovers an error or omission in the VAT Return submitted to the FTA and where there is no difference in Due Tax, Voluntary Disclosure is required to be submitted to correct/rectify said error in scenarios such as incorrect emirate wise reporting, incorrect reporting of zero rated supplies and incorrect reporting of exempt supplies.

Updated List of Charities

The Federal Tax Authority ('FTA') of UAE has issued an updated list of Charities that may recover input VAT. "Sheikh Rashid Bin Saied Islamic Institute" has been added under Dubai Emirate while "Hamda Taryam Charitable Foundation" and "Friends of Cancer Patients" have been added under Sharjah Emirate which may recover input VAT provided certain other conditions with respect to input VAT recovery are complied with. Further it is to be noted that said list is effective from 16 December 2024.

2.?UAE CORPORATE TAX UPDATES

Ministerial Decision No. 301 of 2024 – Tax Group

The UAE Ministry of Finance has recently issued Ministerial Decision No. 301 of 2024 (“MD 301 / new decision”) while replacing erstwhile Ministerial Decision No.125 of 2023 (“MD 125 / old decision”) on Tax Group for the purposes of Federal Decree-Law No. 47 of 2022 (“UAE CT Law”).

Article 8 – Arm’s Length Principal and Transfer Pricing Documentation Requirements and the Calculation of the Taxable Income of the Tax Group

Tax Group is required to calculate the Taxable Income attributable where new member joins an existing Tax Group which has unutilised tax losses.

Pre-grouping tax losses / pre-grouping net interest expenditure of a member of Tax Group must be utilised to the max extent possible for determining taxable income of Tax Group before any remainder can be carried forward to subsequent tax period.

Ministerial Decision No. 302 of 2024 – Participation Exemption and Foreign Permanent Establishment Exemption

The UAE Ministry of Finance has recently issued Ministerial Decision No.302 of 2024 (“MD 302 / new decision”) while replacing erstwhile Ministerial Decision No.? 116 of 2023 (“MD 116 / old decision”) on the Participation Exemption and Foreign Permanent Establishment Exemption for the purposes of Federal Decree-Law No. 47 of 2022 (“UAE CT Law”).

Article 6: Subject to Tax

A Participation shall be considered to have met the requirement of paragraph (b) of Clause (2) of Article (23) of the Corporate Tax Law for a given Tax Period when it is resident for tax purposes throughout this same Tax Period in another country or foreign territory that levies a tax that meets all of the following requirements:

a. The tax is applied on a similar basis to Corporate Tax, taking into account the conditions set out in Clauses (2), (3), (4) and (5) of this Article.

b. The tax is levied at a statutory rate not less than (9%) nine percent.

As per the new decision, for the purpose of Article 23(11) read with Article 23(2) and Article 23(2)(c) of UAE CT Law, a Taxable Person will be treated as having a Participating Interest in a Participation where the aggregated acquisition cost of the ownership interests in that juridical person is equal to or exceeds AED 4,000,000

3.?UAE OTHER REGULATORY UPDATES

Updated Guide on Whistle Blower Program for Tax Violations and Evasion

The Federal Tax Authority ('FTA') of UAE has issued an updated user guide on 'Whistle Blower Program for Tax Violations and Evasion'. It is to be noted that the scope of Federal Taxes applicable (VAT, Corporate Tax and Excise Tax) in UAE has been updated. Further list of common errors identified by the FTA during submissions have been added which may be used as a checklist to assist informants to avoid the submission of incomplete or incorrect information and supporting documents.

4.?OMAN VAT UPDATES

VAT Guides issued on Charities and Non-Profit Organisation

The Oman Tax Authority ('OTA') has recently issued a VAT guide in Arabic on “Charities and Non-Profit Organizations” explaining principles and rules applicable to Charities and NPOs. It is pertinent to note that the application of VAT requires a careful analysis of economic and non economic activities although there is no special tax treatment for charities and non-profit organizations. However, special exceptions such as tax exemption may be available.

5.?BAHRAIN VAT UPDATES

Updated manuals issued on Return submission, Simplified return form and De-registration

The National Bureau of Revenue ('NBR') of?the Kingdom of Bahrain has recently issued updated manuals on “VAT Return Submission”, “Simplified VAT Return form” and “VAT De-registration”. Said manuals aims to provide taxable persons with detailed instructions and guidance on various tax-related services by offering clear, step-by-step instructions.

6.?KSA OTHER REGULATORY UPDATES

Extension of Fine Cancellation and Financial Penalty?exemption initiative

The?ZATCA of KSA has announced the extension of its initiative for cancellation of fines and exemption of financial penalties for six months starting from 01 January 2025 until 30 June 2025. It is to be noted that said initiative is a part of the incentive initiatives taken by?ZATCA to mitigate the financial implications resulting from COVID-19 which affected the establishments.