GCC Indirect Tax Digest
November 11, 2021
Federal Tax Procedures Law amended
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published an amended version of the Federal Tax Procedures Law (FTP Law).
The FTP Law aims to outline the mutual rights and obligations between the FTA and taxpayers with regards to Value Added Tax (VAT), Excise Tax, and any future taxes to be introduced in the UAE.
For a summary of the changes, please refer to Deloitte’s alert.
The update to the FTP Law provides some welcome changes that will support businesses to more effectively manage the appeals, whereby taxpayers now have more time to file Reconsideration requests and TDRC objections, and no longer need to settle the penalty amount in question prior to filing an objection to the TDRC.
That being said, we expect that businesses should now have more flexibility in pursuing appeals, avoiding cashflow challenges, and have further time to develop their grounds for appeal.
Deloitte has extensive experience in assisting clients with submitting Reconsideration requests, as well as an in-house VAT dispute resolution team with extensive experience in managing appeals processes and working closely together with the appointed legal counsel.
VAT rules for Designated Zones amended
The UAE VAT Regulations have been amended with changes to the rules applicable to Designated Zones (DZs), and the FTA has issued a corresponding VAT Public Clarification (VATP027). Specifically, these changes are in Article 51(5 10) of the Regulations.
VATP027 summarizes the updates which were made recently to the VAT Executive Regulations, amending the existing VAT rules applicable for supplies made in a Designated Zone (DZ).
In particular, where goods were supplied within a DZ for consumption (within or outside the DZ), the place of supply of these goods was generally treated to fall in the UAE, unless a specific exclusion applied.
In lieu of such an exclusion, such supplies were subject to double taxation in some cases, for instance, on the transfer of ownership of the goods in the UAE mainland as well as on their importation into the UAE mainland.
On account of the amendment, a supply of goods in a DZ for consumption in the UAE mainland, will be considered outside the scope of UAE VAT, provided that the supplier is able to establish that VAT was accounted for upon importation of the goods to the UAE mainland.
Following the changes to the Executive Regulations, the tax treatment for certain scenarios has been amended where goods are supplied in aDZ, including:
- Goods delivered in the UAE;
- Goods delivered outside the UAE; and
- Shipping and delivery services.
Further, the document states that persons to whom Private Clarifications were issued in relation to Article 51 of the Regulations should consider the impact of the amendments, and may apply for new Private Clarifications where applicable.
If any of the above scenarios are relevant to your business, we recommend reaching out to us to discuss the amended rules in detail and how these impact your transactions.
This should involve a review of the VAT treatment currently applied to assess not only whether any corrections are required due to the changes set out in VATP027, but also whether any other amendments to the supply chain or documentation would be helpful in order to strengthen the support for the technical position. We would be happy to help you determine the revised and corrective VAT treatment when conducting business within a DZ in the UAE.
Less than one month to e-invoicing implementation
The go-live date for the first phase is 4 December 2021, and the go-live date for the second phase is 1 January 2023. The latter will be implemented in a phased roll-out, and ZATCA will inform the targeted/selected taxpayers six months before integrating with the Authority’s system.
The first phase of electronic invoicing (e-invoicing) is expected to be implemented in the Kingdom of Saudi Arabia (KSA) by the end of this year.
As previously announced, there will be two major phases: (1) the Generation phase and (2) the Integration phase.
Businesses in KSA should take action as a matter of priority to ensure that they are in compliance with the e-invoicing requirements by the applicable deadlines. There is now less than one month remaining until the go-live date for the first phase, and as such, businesses should ensure that they are in a compliant position by the deadline to avoid penalties for non-compliance.
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.