GCC Indirect Tax Weekly Digest


GCC Indirect Tax Weekly Digest

September 22, 2020

KSA developments

GAZT publishes Circular on real estate TOGC VAT rules

The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has published a Circular on the criteria for determining whether a transfer of real estate qualifies as a transfer of a going concern (TOGC).

A TOGC differs from a regular sale of assets in that it is a transfer of an existing business or economic activity and is out of scope of Value Added Tax (VAT) if certain conditions are met.

The Circular clarifies the conditions for a transfer of a business to be considered a TOGC as follows:

  • A bundle of assets (tangible and intangible) required to carry on the business are transferred;
  • There is cohesion between the assets, which collectively can operate as a separate business;
  • The transferee must use the assets for an economic activity as soon as commercially feasible;
  • The transferee’s business must be the same type of business conducted by the transferor before the transfer; 
  • The transferee should be a taxable person; and
  • The transferor and transferee must agree in writing that the transfer is of an economic activity for VAT purposes.

The Circular clarifies that in the case of transfers of commercial property, at least 50% of the market rental value must be transferred subject to existing leases to constitute an ongoing economic activity. Vacant properties are not considered an ongoing economic activity and are not eligible to be considered as a TOGC.

The Circular further states that residential property leasing is not eligible to be treated as a TOGC and hence would be subject to the regular VAT rules upon transfer.  However, where a property business is of mixed nature (residential and commercial leasing), the commercial portion that can be separately identified and meets the TOGC criteria can be separately transferred without VAT.  The remaining residential portion of the business should follow the regular VAT treatment. 

For more information about the VAT rules relating to TOGCs in KSA, or about VAT in KSA generally, please contact Michael Camburn or your usual Deloitte contact.

UAE developments

FTA publishes updated Excise Tax guides

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published two updated Excise Tax guides.

The Excise Tax User Guide and the Excise Tax Clearing Company User Guide (Imports, Release & Consumption) feature updated and streamlined guidance on navigating the FTA portal.

In particular, the Excise Tax User Guide now includes guidance on applying for a Clearance Certificate.

For more information about Excise Tax in the UAE, please contact Adrienne D’Rose, Andreas Agapiou, Yeji Moon Monda, or your usual Deloitte contact.

This digest is for information purposes only and should not be construed as 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.

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