GCC Indirect Tax Weekly Digest

UAE developments

FTA publishes Ministerial Decision and Public Clarification on e-commerce record keeping requirements

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a Ministerial Decision and Public Clarification relating to record keeping requirements for electronic commerce (e-commerce) supplies.

Ministerial Decision No. 26 of 2023 on the Criteria and Conditions for Electronic Commerce for Purposes of Keeping Records of the Supplies Made states that a supply will be considered an e-commerce supply if all of the following criteria/conditions are met:

• The goods and services are listed or advertised on an Electronic Commerce Medium
• The goods and services are ordered through the Electronic Commerce Medium, regardless of whether the payment is made online or not
• In the case of a supply of goods, the goods are delivered to a location specified by the customer whereby this location is not owned by the supplier nor operated by that supplier
• In the case of a supply of services, the services are provided, or the right to receive the services is granted to the customer with minimal or no human intervention.

The criteria have been provided following recent amendments to the UAE Value Added Tax (VAT) Regulations, whereby from 1 July 2023, resident and non-resident taxable persons supplying goods and services through e-commerce which exceed AED 100 million over a calendar year (‘Qualifying Registrants’), are required to report supplies made through e-commerce in box 1 of the VAT Return based on the Emirate in which the supplies of the goods or services are received by the customer. The taxable persons should also keep the relevant supporting evidence.

The Ministerial Decision therefore sets out the conditions to determine if a supply is an e-commerce supply and therefore subject to the new recordkeeping requirements.

In addition, the FTA has published VAT Public Clarification VATP033 on amendments to Emirates reporting for electronic commerce supplies by Qualifying Registrants. VATP033 provides further details on the definition and criteria of e-supplies, the implications of undisclosed agent arrangements and incidental supplies, timelines applicable to the new rules, and guidance on the revised reporting mechanism.

KSA developments

ZATCA publishes guideline on VAT refunds under the Non-Resident Refund Scheme

The Kingdom of Saudi Arabia (KSA) Zakat, Tax and Customs Authority (ZATCA) has published a guideline outlining the requirements of a two-stage process for non-resident businesses to submit refund applications for VAT incurred on supplies. Although this process has been available in the law since the inception of VAT in KSA, it has only recently come into practical force.

Key considerations for non-resident businesses incurring VAT in Saudi Arabia:  

• Deadline – Businesses have six months from the end of the calendar year to submit the VAT refund application. For example, the deadline to submit the application for the calendar year ending on 31 December 2022 is 30 June 2023.
• Processing time – As per the guidelines, ZATCA has mentioned that the applications will be processed within a reasonable time. The authority highlighted that providing all the data accurately would significantly speed up the processing of the refund application.
• Disputes – In case ZATCA fully/partially rejects the refund claim, the non-resident business has the right to submit an objection to the dispute committee.
• Past period refunds – As per discussions with ZATCA regarding the VAT refund applications for calendar years 2018 to 2021, businesses who have submitted a protective claim letter within the deadline may be eligible to claim the refund.  Businesses who have not yet submitted the previous years’ claims may submit an application, however, it is at the discretion of ZATCA whether to accept these applications. 

The publication of this guideline is good news for non-resident businesses that have incurred VAT on costs in KSA, as the claims process is now up and running.

How can Deloitte help?

We have a dedicated team of KSA VAT refund experts within our Tax practice. We have successfully assisted businesses to apply for, and obtain the Eligible Person status from ZATCA. This is the first step for the businesses to recover the accumulated VAT and to optimize the absolute cash position of the business.

Given the relative novelty of this procedure, our experience has shown that close liaison with the tax authorities is important. Considering the complexity of the process and the information that will need to be gathered, coupled with the fast-approaching deadline, we suggest that businesses should start early in order to ensure that the refund application is submitted before 30 June 2023. 

ZATCA issues awareness email on loyalty programs

ZATCA has sent an awareness email to taxpayers summarizing certain points in relation to loyalty programs.

Loyalty programs are often utilized by financial institutions and presented as a marketing tool with the aim of attracting and retaining customers, encouraging existing customers to use the services provided by these entities and to maintain customer loyalty in general.

In general, customers earn loyalty points on the basis of their actions and are not separately charged consideration for the points. The calculation of the points due to the customer depends on the amount spent by the customer on the institution’s services, as per the specific rules of the loyalty programs. ZATCA has stated that it does not consider customers to supply services to earn loyalty points when engaging in transactions with the supplier.

Under loyalty programs, customers are often issued vouchers which can be used against future purchases. A qualifying voucher for the purposes of VAT is an instrument that can be transferred and exchanged or presentable by different persons and can also be exchanged for a supply of goods or services of the beneficiary's choice.

ZATCA has stated that in the case of qualifying vouchers, there is no specified form for the qualifying voucher. The qualifying voucher may be a physical document or an electronic card with a cash amount stored on it.

For detailed guidance on the VAT treatment of transactions relating to loyalty programs, please refer to the corresponding circular which is available in Arabic.

Oman developments

OTA commences VAT assessments

The Oman Tax Authority (OTA) has commenced VAT assessments for taxpayers for the tax year 2021 (i.e., 16 April 2021 to 31 December 2021) as well as for 2022 in certain cases. The process for assessment is initiated by the tax officer through an email communication to the responsible person or by issuing an assessment notice on the tax portal. 

The email/notice generally indicates the tax period of assessment, name of the tax officer, along with the request for certain details (e.g., taxpayer checklist, copies of the 7 highest tax invoices, etc.). In certain instances, the tax officer may also request for a more detailed explanation on the VAT treatments adopted, overall operations of the company, input VAT recovery methodology, etc. Usually, the time period provided to respond to such assessment notice is 30 days from the date of email/notice. 

It is therefore critical for all businesses registered for VAT in Oman to check at regular intervals for any email/communication on tax assessments received from the OTA. Also, it is important for businesses to initiate compiling the taxpayer checklist for the tax year 2021 and 2022 (if not done already) and have the supporting documents (e.g., copies of tax invoices, impact assessment reports/manual, transaction mapping documents, etc) ready in case requested by the tax officer. 

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.