GCC Indirect Tax Weekly Digest
April 16, 2018
GAZT has published the Financial Services Sector VAT Industry Guide in English
The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has published the English version of its guide on Value Added Tax (VAT) and the Financial Services Sector on its website.
The guideline is now available in Arabic and English
and it discusses the VAT treatment of Financial Services and Insurance including single supply and multiple supplies, VAT recovery, application of VAT exemption and place of supply among other key points.
GAZT publishes the import and export guideline
The General Authority of Zakat and Tax (GAZT) has published a new guideline on Imports & Exports on its website.
The guideline is currently only available in Arabic. We expect the English translation to be available in due course, but we understand the key points GAZT has addressed in the guideline are:
- Definitions – the published guideline includes definitions that are not defined terms in KSA law or regulations. Such as Direct Export (an export of goods where the supplier is responsible for transporting the goods outside of GCC Territory), an Indirect Export (an export where the customer is responsible for transporting the goods outside of GCC Territory) and Export of Services (supplies of services made from a supplier in the KSA to recipients without residence in the GCC).
- Import procedures: the guideline states that Saudi Customs will automatically calculate the VAT due as part of the declaration. The customs declaration also includes amounts for handling, storage and other charges which are collected by Saudi Customs on behalf of transportation and logistics suppliers. These amounts are also included in the value relevant for calculating VAT.
- Amendment of customs declarations: in case the VAT amount payable is incorrect, the importer has the right to amend the custom declaration and pay any additional VAT amounts required or deduct any overpayment of VAT as input tax.
- Exempt imports: the guideline has included a section with respect to goods that are exempt from import VAT – in reference to the GCC VAT Agreement.
- Zero-rating of Goods exports: The export of Goods outside the GCC territory is subject to the zero-rate of VAT. Transitionally, a supply involving the movement of goods outside of KSA territory to other GCC member states is also considered an export subject to the zero rate.
- Export of Services: Transitionally, a supply of services to recipients in GCC member states without a VAT system – or to any GCC state before the introduction of an Electronic Services System - is, subject to meeting the criteria, considered an export of services subject to the zero rate.
- Transitional provisions:
- The procedure for the filing of customs declarations and collection of VAT by Saudi Customs with respect to the import of Goods from GCC states are the same as for an import of goods from outside of GCC territory.
- The conditions and evidence requirement for a supplier to apply the zero-rate to an export of goods to another GCC state during the transitional period are the same as those applicable to an export of goods outside of GCC Territory.
- The rules for internal trade between GCC countries will not be operational until the other GCC Member states have introduced a VAT system. In addition to this, an Electronic Services System will need to be in operation between the other GCC Member states and KSA. Until such time, the other GCC states are considered to be outside of the GCC territory. Supplies to those Member states are considered to be made as if they were to a third country outside of the GCC territory. Residents in those Member states are treated as if they were residents of a non-GCC country for VAT purposes.
Deduction of VAT on imports: Deduction of VAT is only available for the person who acts as importer of the goods into the KSA. As a condition of input VAT deduction, a taxable person must hold the customs documents proving that he imported the goods in accordance with the Common Customs Law. If a taxable person does not act as importer, it is not possible to deduct VAT on the import of goods. In case a customer or third party broker acts as the importer of goods under the instruction of another entity, the customer or third party broker may only deduct VAT if the goods are to be used by that person for the purpose of their economic activities in the course of making taxable supplies.
Oman Government budget to factor revenue from VAT and Excise Tax
A Ministerial Decision has been issued by the Oman Minister of Financial Affairs to confirm that the budget income will in the future include Excise and VAT as a source of income. The law cancelled anything that may be contrary to this decision. This is a necessary precursor to the implementation of VAT in Oman, although no decision has been announced as yet as to the date that VAT would be implemented from in Oman.
FTA issues warning to businesses that fail to register for VAT
The Director General of the Federal Tax Authority (FTA) has said that action will be taken against businesses that fail to register for VAT.
The FTA postponed the penalty for not registering until the end of April to give companies more time to prepare, however, the Director General stressed that this did not mean these companies were exempt from registering and action would be taken against those failing to register in time.
It was noted that offenders will be liable to several penalties like Dh20,000 for late registration, another penalty for late payment, fine for not submitting returns and even conducting business without VAT registration could also attract fine under tax evasion.
A roadshow is planned in April to help unregistered companies to “help them register, if they are having technical issues.
It should be noted that, although there is the concession for the imposition of a penalty for late registration, there does not appear to be any concession in relation to the fact that the taxpayer has failed to account for VAT or been late in submitting VAT returns since 1 January 2018.
VAT refunds for tourists in the UAE
The Federal Tax Authority (FTA) has confirmed that it is in the final stages of selecting an operator to administer VAT refunds for tourists.
Per the Executive Regulations, the refund scheme will only applicable to tourists that are not resident in a GCC Implementing State purchasing goods in the UAE.
The mechanics of the refund scheme is expected to be detailed in a future cabinet decision.
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.