GCC Indirect Tax Digest
January 20, 2022
UAE Committee for Goods & Materials Subjected to Import & Export Control publishes case studies report on targeted financial sanctions
The Executive Office of the United Arab Emirates (UAE) Committee for Goods & Material Subjected to Import & Export Control recently published its ‘Strategic Review on Targeted Financial Sanctions – Case Studies 2020/2021’ report.
The Committee has published over 20 cases in the above report; these cases establish how economic sectors or activities are misused to support Terrorist Financing and Proliferation Financing activities through different scenarios.
As per the aforementioned report, the UAE must implement the United Nations Security Council Resolutions (UNSCRs) given that it is a member of the UN. The UAE is applying UNSCRs on the suppression and combatting of terrorism, terrorist funding, and countering the financing of the proliferation of weapons of mass destruction, in particular, UN-defined targeted financial sanctions (TFS) regimes.
The UN sanctions regimes include a variety of measures that countries must implement; however, the report focuses solely on how the UAE can implement targeted financial sanctions such as freezing measures and prohibitions on the provision of funds and services in accordance with UNSC resolutions on terrorism and proliferation financing.
Further to the above, individuals and legal entities in the UAE should also refer to relevant rules, regulations, and guidance published by the Executive Office of the Committee for Goods and Materials Subject to Import and Export Control, Supervisory Authorities and the UN Security Council.
Trading and commodities in the United Arab Emirates
The UAE has strong credentials in commodity trading, from its integral contribution to the old Silk Road to technical commercial innovations in present day trade. There are a wide range of participants and products in the market, and technological innovation has resulted in more complex and fast paced trade.
The tax legislation may not address these complexities, which are often a result of rapid non-tax related developments. This has resulted in a range of potential risks areas for commodity market participants in the UAE.
The years following the introduction of VAT in the UAE have tested its interpretation and practical application. The Federal Tax Authority (FTA) has proactively reacted with the publication of legislative amendments, taxpayer guidance, and private and public clarifications. Tax audits and enforcement actions by the FTA are also becoming increasingly sophisticated, with a focus on common errors and industry specific issues. Significant penalties may apply to non-compliance, particularly on errors which are not voluntarily disclosed.
Deloitte has created a document to support businesses with identifying potential risks areas for commodity market participants in the UAE, and effective risk mitigation actions.
FTA selects taxpayers for review of records from those who fulfilled the conditions of the Redetermination of Administrative Penalties
The Federal Tax Authority (FTA) has notified registered taxpayers that it is currently reviewing the records of those who have fulfilled the conditions mentioned in article (3) of the Cabinet Decision No. (49) of 2021 regulating the Redetermination of Administrative Penalties unpaid before the date of June 28, 2021. The FTA has stated that it will work to complete its review on the accounts within 30 working days from December 31, 2021.
The FTA has requested registered taxpayers who receive an email notification from the FTA requesting information in respect of this review to respond within 5 working days to allow the FTA to complete its procedures for redetermining the administrative penalties.
We recommend taxpayers who have fulfilled the conditions for the 70% penalty reduction proactively monitor FTA correspondence and have relevant documentation to hand to allow for a response within the requested timeframe.
Regulatory initiative announced on product export prevention and restriction procedures
On January 4, 2022, the Saudi Export Development Authority announced its initiative to support the diversification of the Kingdom of Saudi Arabia (KSA) economy, which will increase the non-oil sector contribution to the GDP.
The regulation was issued and adopted by a decision of the Saudi Council of Ministers, thereby highlighting its importance in terms of improving the efficiency of the export environment in the future, as well as boosting the non-oil economy sector. It also aims to regulate the decision-making process in terms of preventing or restricting a list of products to-be exported; and such by means of a competent committee to whom all prevention/restriction-related decisions are referred in order to examine all their aspects in the interests of the KSA economy.
Furthermore, it should be noted that the regulation revolves around the following:
- The formation of a competent committee linked to the Board of Directors of the Saudi Export Development Authority and the membership of a number of relevant government bodies as well as the private sector.
- Clarifying the policies on financial charges imposed on procedures, licenses or facilities related to the export of products from the KSA.
- Explaining the mechanism for determining the procedures for preventing, restricting, lifting or amending the export of products.
- Determining the general policies related to the export of products.
A periodically updated e-list of the restricted and prohibited products
OTA issues VAT guide for the Oil and Gas sector
The Oman Tax Authority (OTA) has recently issued its Value Added Tax (VAT) guide for businesses within the Oil and Gas sector in English.
The guide provides an interpretation and guidance on the application of the VAT Law, and the Executive Regulations to the Oil and Gas industry in Oman. The guide also provides definitions for commonly used terms within the Oil and Gas sector such as, operator, contractor, partners, farm-in and farm-out, etc.
Important practical aspects on the applicability of VAT for upstream, midstream and downstream activities performed by the sub-contractors, contractors, and operators are discussed through the guide including the scope of zero-rating under Article 93 of the Executive Regulations, which is one of the critical areas for businesses operating within the sector.
For a detailed overview of the guide, please refer to Deloitte’s alert which
discusses the following in relation to the guide:
- Clarification on applicability of zero-rating under Article 93 of the Executive Regulations
- VAT implications on upstream activities
- VAT implications on midstream activities
- VAT implications on downstream activities
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.