GCC Indirect Tax Weekly Digest
December 11, 2019
VAT registration deadline approaching for businesses with BHD 37,500-500,000 in annual taxable supplies
Businesses in Bahrain who make or expect to make between BHD 37,500 and BHD 500,000 in annual taxable revenue are required to register for Value Added Tax (VAT) by 20 December 2019.
This milestone represents the final stage in the phased approach that the National Bureau for Revenue (NBR) adopted for VAT registration in Bahrain, where VAT was introduced on 1 January 2019. As a result, the mandatory VAT registration threshold in Bahrain has been brought into line with the threshold outlined in the GCC VAT Treaty, and already in place in the United Arab Emirates (UAE) and Kingdom of Saudi Arabia (KSA) i.e. the equivalent of SAR 375,000 in local currency.
Businesses which are required to register by this deadline and have not yet initiated the process should do so as a matter of priority, in order to avoid penalties for non-compliance. Deloitte can assist your business with preparing and submitting the VAT registration application.
Businesses making or expecting to make more than BHD 5,000,000 in annual taxable revenue were required to register by 20 December 2018, while businesses making or expecting to make between BHD 500,000 and BHD 5,000,000 in annual taxable revenue were required to register by 20 June 2019.
Excise Tax scope expanded as of 1 December 2019
The expansion of the Excise Tax regime in the United Arab Emirates (UAE) took effect on 1 December 2019. Excise Tax is now applicable in the UAE on the following products (in addition to those originally subject to Excise Tax):•
- Sweetened drinks – 50%
- Electronic smoking devices and tools – 100%
- Liquids used in electronic smoking devices and tools – 100%
Businesses which import, produce, or stockpile any of the above goods face new compliance and potential registration obligations due to the expansion. Non-compliance with the expanded legislation could have a significant commercial impact (in addition to the risk of penalties), as businesses could face issues clearing shipments of stock at the border if certain compliance obligations are not fulfilled (e.g. registration of new excise goods on the FTA’s portal).
Further, any business holding stock of the above listed products was required to perform a complex two-stage stock- and sales-based calculation on every individual product type within each category of Excise goods by 1 December 2019. The result of this calculation should be included within the Excise Tax return for the December tax period, which should be submitted by 15 January 2020. Businesses are also required to keep audited records of the quantity of such goods held in the 12-month period prior to expansion.
Guide on supplies of services to non-GCC residents
The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has published a new guideline on the Value Added Tax (VAT) treatment of supplies of services made to non-GCC residents. The guide is available in Arabic and English.
The guide seeks to clarify amendments which were made to the KSA Implementing Regulations in July 2019. Article 33 of the Implementing Regulations was amended in the updated Regulations to narrow the scope of exceptions under which zero-rating will not apply to exported services.
The new guide clarifies the following:
- If the customer has any type of fixed establishment in KSA, then the zero-rate will not apply.
- Guidance is provided on the meaning of ‘direct benefit’ and a deductibility test is provided that helps clarify if a direct benefit was received in KSA, thereby precluding the zero-rate from applying.
- The examples in the guideline also imply that a consultant providing advice to a non-resident in a meeting held in KSA would trigger the exception, meaning that the zero-rate would not apply, unless the advice is high level and non-specific or possibly ancillary to a qualifying supply.
- The guideline also clarifies the types of services relating to goods that would fall under the exception, which includes those involved in logistics and transportation. When those goods are located in KSA, then such supplies to non-residents would not qualify for the zero-rate.
- The amendments were effective from 18th July 2019.
While the guide clarifies a number of issues raised by the amendments, there are still a number of situations where the VAT treatment may be unclear or specific guidance has not been provided. Businesses should therefore carefully review their current application of the zero-rating provisions, as this is known to be an area of focus for GAZT officers during tax audits.
Guide on Real Estate Investment and Financing (English version)
The guide is aimed at property investors and financiers, and gives a high-level overview of the main implications and obligations of Real Estate financing and investment activities. The guide describes the VAT treatment of real estate financing transactions, including those involving third party finance, and sets out the corresponding VAT obligations for a seller, purchaser and financer within a Real Estate financing transaction.
The guide also describes the most common financing arrangements for the sale and purchase of real estate: murabaha, ijara and a conventional finance product. For each financing arrangement, it sets out the different VAT implications for the parties in the transaction and provides worked examples.
Finally, the guide includes details about the special treatment whereby the Saudi government bears the cost of VAT for Saudi citizens purchasing their first house, up to a maximum value of SAR 850,000. Readers will also find examples and practical application of the VAT relief in the case of financing sales.
Tax framework developing quickly
The tax framework in Oman continues to develop quickly. Royal Decree no. 66/2019 was recently promulgated in the Sultanate, realigning the structure of the existing Secretariat General for Taxation (SGT) and establishing a new Tax Authority, with more financial and administrative independence, and reporting directly to the Council of Ministers. Existing staff of the SGT were transferred to the Tax Authority, and His Excellency Sultan Al Habsi declared head of the new Tax Authority.
We understand timelines and plans for modernizing Oman’s tax framework are being reviewed; the mandate appears to be about making tax easier for both the Tax Authority and taxpayer to manage. Businesses need to do their part too, by starting to prepare with foresight for VAT and other taxes to be introduced. Other developments to anticipate include the release of Excise Executive Regulations, which are due to be published by mid-December as per the Excise Royal Decree.
GTA begins desktop audits of Excise Tax returns
The tax landscape in Qatar is quickly evolving. Businesses have been occupied recently with Corporate Tax Country-by-Country Reporting requirements, normally due by the end of December 2019. In the meantime, the new tax administration system of the Qatar General Tax Authority (GTA), Dhareeba, is expected to go live shortly. Dhareeba is where taxpayer related data (including for Excise Tax and VAT in the future) would be accessed.
The GTA has also started to carry out desktop audits of Excise Tax returns and sending assessment notices where applicable, and similar audits are expected to become increasingly frequent. This is because the Authority has all the data available to it from taxpayer returns and information coming from the General Authority of Customs, which will allow it to carry out desktop audits in an efficient manner. Taxpayers should consider performing a year-end review to assess their level of compliance and to manage risks of assessments.
With these new taxes and reporting obligations on the horizon, businesses should consider strengthening their existing tax function within the organization, to make sure appropriate and skilled personnel deal with tax matters efficiently and effectively.
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.