GCC Indirect Tax Weekly Digest

KSA developments

GAZT Internal Settlement Committee no longer accepting VAT cases

The Internal Settlement Committee (ISC) of the Kingdom of Saudi Arabia (KSA) General Authority for Zakat and Tax (GAZT) is understood to no longer be accepting cases related to Value Added Tax (VAT).

The ISC serves as an independent committee to assess open disputes between tax/zakat payers and GAZT related to tax and zakat assessments.

With the discontinuation of new VAT cases at the ISC, VAT appeals may instead be made to the VAT First Instance Committee and the VAT Appeals Committee which are still active.

This development follows the recent announcement of an increase in the VAT rate in KSA to 15% from the current 5%, effective 1 July 2020, and indicates a
tightening of procedures as VAT becomes a significantly more important source
of government revenue.
 

Bahrain developments

NBR publishes VAT Guide in relation to the oil and gas sector

The Kingdom of Bahrain (Bahrain) has recently published an Oil & Gas VAT Guide which sets out the general principles of VAT in relation to the oil and gas
sector in Bahrain. The main purpose of the guide is to provide the reader with:

• An overview of the VAT rules and procedures in relation to the oil and gas sector in Bahrain and, if required, how to comply with them;
• The necessary background and guidance to help you determine how a supply is treated for VAT purposes.

It should also be noted that the guide is intended to provide general information only and contains the current views of the National Bureau for Revenue (NBR) on its subject matters and should be read together with the VAT General Guide issued by the NBR.

The Guide summarizes the VAT treatment of various common transactions within the Oil and Gas sector, including specifics in relation to upstream, midstream and downstream supplies within the industry.
 

COVID-19 Indirect Tax management

Focus on: Tax Disputes in the UAE

Michael Towler
Senior Executive Consultant, Indirect Tax
United Arab Emirates

It is important that taxpayers know how to challenge decisions of the tax authority and where there are grounds to do so, and are aware of the short deadlines for contesting the tax authority's decision, since failing to follow the correct process could mean permanently losing this right.

In the United Arab Emirates (UAE), the main stages in the tax dispute resolution process are:

1) application for Reconsideration;

2) objection to the Tax Dispute Resolution Committee (TDRC); and

3)  appealing to the Federal Courts.

Below, we have set out some key observations in relation to each stage, based on our recent experiences.

As an overall comment, each of the abovementioned stages has a unique process to follow, with some of the administrative formalities having already changed since inception e.g. introduction of forms for reconsideration and TDRC levels. That, combined with the growing number of judgments from the TDRC and courts, and guidance from the Federal Tax Authority (FTA), means this is a rapidly evolving area and advice on navigating the process, including drafting tax
technical arguments, should be sought from the outset.

Application for Reconsideration

• A taxpayer can seek reconsideration of the FTA’s “decision” within 20 business days of being notified of the FTA’s decision.
  
• What is a “decision”? Aside from formal notifications e.g. assessments, clarification decisions etc., a “decision” could include FTA communications via email and the tax authority portal. Taxpayers should actively look out for FTA communications and consider whether it potentially “starts the clock” for the reconsideration application, as failing to do so, could jeopardize its ability to challenge the decision altogether.  
• FTA has a maximum of 25 business days to issue a decision e.g. in response to a request for reconsideration, but responses take longer than this. In the absence of a timely response from the FTA, taxpayers can potentially move to the next stage of the dispute resolution process – TDRC. Such strategies should be considered alongside other factors such as the requirement to settle amounts in dispute to proceed to the next stage.

Objection to the TDRC

• TDRC requires taxpayers to pay the tax and penalties in dispute to proceed with an objection. The timing and evidencing of payment has given rise to issues and advice should be sought at the earliest to avoid dismissal of the objection or protracted litigation on procedural matters.
• The wording of the VAT and Federal Tax Procedures legislations have been a key focus of judgments that we have seen. For this reason, taxpayers should carefully consider the relevant Articles of these legislations in their TDRC objection grounds.

Federal Court

• Either the FTA or the taxpayer can appeal an unfavorable TDRC decision to the Court of First Instance, and Court of Appeal and Supreme Court thereafter.
• Unlike the other stages, an appropriately licensed lawyer must be enlisted to lodge the appeal.
• It is not yet clear how Supreme Court rulings may (or may not) be applied to other tax payers with similar or identical grounds.

How can we help?

Deloitte’s Dispute Resolution Group can provide assistance with all stages of the disputes process:

(i) assistance with responding to the tax authority's queries;

(ii) provision of representation at any meetings;

(iii)  provision of full range of tax and litigation support in developing tax technical and litigation arguments, drafting legal and expert submissions, and gathering and reviewing evidence. When required, we work with the best local law firms to represent you in courts.

Tax Dispute Resolution key contacts: Michael Towler, Nurena Tarafder

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.