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GCC Indirect Tax Weekly Digest
April 30, 2018
GAZT releases English translation of Digital Economy Guide
GAZT has released the official English translation of its Digital Economy Guide, which was originally published in Arabic in January. The guide is intended to help suppliers who supply goods and services electronically to customers in KSA, and to help customers in KSA who are involved in the digital economy.
The guide defines ‘digital economy’ as “economic activities carried out through electronic means, where goods or services are purchased through a website or electronic platform, or services are provided over an electronic or digital medium.” Please note that ‘digital economy’ is not a formal VAT term, but merely a way of describing all the activities covered in the guide.
Electronic services, which are defined in the VAT regulations, fall under digital economy. The guide discusses various issues regarding electronic services - including registration, place of residence of supplier and customer, place of supply – covering use and enjoyment rules, importing goods in the digital economy, and transitional rules applicable to the digital economy.
While many will have reviewed the treatment of affected transactions using unauthorized translations, it would be advisable to consider reviewing the past treatment in light of the authorized translation in order to ensure compliance.
FTA releases guide on Clarifications
FTA releases user guide on procedure for seeking Clarifications from the FTA. The guide discusses what Clarifications are, what the requirements are to apply for a Clarification, and who can submit a Clarification request on a person's behalf.
A Clarification, often referred to as a "ruling" in other tax jurisdictions, is the FTA's means of setting out in writing its position on questions or uncertainties regarding the tax legislation and regulations.
In this regard, essentially, the Clarifications process is intended to address situations where:
- The matter is still uncertain after the person has analyzed the relevant tax legislations, regulations, and guidance issued by the FTA
- The person has a material interest in the matter
- The matter has not been addressed by a previous Clarification issued by the FTA
For valid and complete Clarification requests, a response may take up to 40 business days. For incomplete requests, the FTA will request additional information, and a response can take up to 40 business days after the resubmission.
If, after submitting the request for Clarification, the response is not what was hoped for, the applicant may apply for a Reconsideration here within 20 business days from the date that the Clarification was received. The applicant must provide detailed reasons for disagreement, and the FTA will issue a revised decision within 20 business days of the Reconsideration request.
Deloitte is clearly well placed to assist businesses with any applications for Clarification, and has a wealth of local and international experience in assisting businesses in precisely this area of the application of the VAT laws applicable to businesses operating in the region.
FTA and GAZT call for filing of VAT Returns within
The FTA in the UAE and the GAZT in KSA have released press releases calling for VAT registered businesses to file and pay their tax liabilities within the due dates.
FTA stated that approximately 90,000 companies are required to submit their VAT returns and pay their taxes by April 29. Of the 90,000 companies, around 85,000 companies would be filing their quarterly VAT returns for the first time, whilst the remainder on monthly tax periods would have the same deadline for their March returns.
The FTA stressed that payment of the tax liability must reach the authority by the deadline (noting that payments require time to be processed through banks). It confirmed that an administrative penalty would be imposed where funds reach the authority after the deadline.
GAZT called for companies with an annual turnover of SAR 40 million or less, to file their VAT return for the first quarter of this year by April 30. Companies with turnover of more than SAR 40 million on monthly tax periods also have the same due date.
The fine for failure to file the return would be between 5% to 25% of the VAT due. Separately, a penalty equal to 5% of the unpaid VAT due would also be levied for delaying payment of the tax.
GAZT publishes VAT import and export guide
GAZT has issued a press release announcing the publication of a guide on the treatment of importing and exporting goods and services into/out of KSA. The press release noted the following from the guide:
- The transitional treatment of goods and services imported between GCC countries has been clarified.
- Goods supplied prior to customs clearance would not be subject to VAT, but would be subject to VAT after official customs clearance.
- When goods are imported into KSA, the customs declaration must be filled with all the required information on the imported goods, including the customs code, country of origin, description of the goods and the monetary value.
- The guide lists tax-exempt imports, including zero-rated goods such as eligible medications and medical equipment.
Currently, the guide is not available in English on the website, please contact us if you would like to discuss this topic further.
Timely implementation of VAT and Excise Tax essential for Oman economy according to the IMF
The IMF has issued a press release with its preliminary findings on the economy of Oman following a visit to the country. Amongst other things, it found that the timely implementation of VAT and Excise Tax would be essential for the economy of Oman.
This observation was made against a background of lower oil prices, decrease in oil production and large budget deficit impacting the revenue of the Government.
The Oman Ministry of Finance has yet to officially confirm the date that VAT and Excise Tax would be implemented.
GAZT has amended the format of the VAT return relating to the sale of first homes to Saudi Citizens
The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has amended Box 2 of the VAT return relating to the sale of first homes to Saudi citizens. The reference to first home (referred to as first house on the old version of the VAT return) has now been removed from the VAT return.
Earlier this year, GAZT has indicated that the government would bear the VAT amount on behalf of citizens on purchases of first homes up to SAR 850,000. Until now the mechanism for this relief was unclear. It now appears that the taxable person making the sale of a first home to a Saudi citizen is required to charge VAT on the full amount (including the first SAR 850K).
Taxpayers impacted by this change will be banks & finance houses (Islamic financing) and property developers (selling directly to customers). These taxpayers may have to revisit the VAT treatment of previous transactions.
We will publish further details as they become available.
Please note that 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.