GCC Indirect Tax Weekly Digest
August 21, 2019
UAE FTA publications
First Excise Tax Public Clarification on scenarios requiring the return of Digital Tax Stamps
The FTA has recently issued an Excise Tax Public Clarification EXTP001 to clarify on scenarios where Digital Tax Stamps (DTS), also known as marks, must be returned to the FTA. Specifically, the FTA has focused on Article 6(3)(1) of the Cabinet Decision No.42 of 2018 on Marking Tobacco and Tobacco Products which provides that where the person becomes aware that he no longer has the intention to use the marks for the purposes of affixing them to designated excise goods, the marks must be returned to the FTA.
The FTA will interpret this provision broadly to include any scenario in which the person knows that they will no longer have the ability or intention to use the marks i.e. ceasing of business, ceasing of trade in a particular product line, wastage or damage during the production process, damage of marks outside the production process etc. The return of marks also carries with it certain reporting obligations to confirm the return.
As a result, businesses which now have a requirement to mark excise goods under the DTS scheme should ensure they are aware of their obligations around the return and reporting of unusable DTS marks.
FTA launches new electronic system to register excise goods
The FTA has launched a new electronic system for registering excise goods on the price list of all excise goods maintained by the FTA, as part of its plans to continuously develop the tax system as a whole, and Excise Tax procedures, in particular.
Through a press statement issued on 17 August 2019, the FTA urged all businesses dealing with excise goods to follow the new process of registering excise goods on the price list, which now requires additional supporting documentation to be uploaded to support the declared price of the goods. Businesses should therefore ensure all required documents are readily available when submitting the registration request to add goods to the price list.
The press statement also refers to new compliance and reporting requirements for excise tax which have been launched as of 17 August and represent a significant change in the nature of excise tax reporting requirements. These new declarations and tax return forms introduce amendments to current declarations on import and production, as well as new declarations for release from designated zones, local purchase scenarios amongst others. According to the FTA press statement, the changes introduced build on the current focus of the FTA to increase transparency and accuracy.
The use of the new declarations and forms are clarified in the updated manuals and guides published in the guidance section of the FTA’s website. The following Excise Tax guides have been updated in August 2019:
- Excise Tax User Guide (Registration, Amendments and De-registration);
- Warehouse Keeper and Designated Zone User Guide (Registration, Amendment, Renewal and De-registration);
- Import Declaration User Guide Excise Tax – Registered & Non-Registered; and
- Excise Tax Returns User Guide.
As such, it is crucial that businesses are well-informed of the new procedures to ensure compliance from the next Excise Tax return filing deadline of 15 September.
NBR publishes VAT Public Clarification on services provided by travel agents
With effect from 1 August 2019, the Bahrain National Bureau for Revenue (NBR) released a VAT Public Clarification on services provided by travel agents which states that where a travel agent provides ticketing services that are directly related to international transportation, any commission charges, service charges or administration fees charged by the travel agent, whether to the airline, shipping company or to the person travelling will be zero-rated for VAT purposes under Article 68(C) of the VAT Executive Regulations provided that the place of supply of the ticketing services is in Bahrain.
The Public Clarification also clarifies that where a travel agent acts as a disclosed agent for the passenger and books an international transportation service for the passenger, the cost of the ticket as charged by the airline, when passed on to the travel agent’s customer will be treated as a disbursement for VAT purposes. As such, it will be outside the scope of VAT and should not be reported in the VAT return.
Furthermore, only in this disbursement scenario, the NBR confirmed that for invoicing purposes, there is no requirement to identify or separately show the travel agent’s fees from the cost of the ticket on the VAT invoice. However, the VAT invoice must clearly state the amount being charged includes a zero-rated supply. Where the VAT invoice includes other supplies subject to the standard rate, then it must specify which line items include supplies that are subject to the zero-rate.
For other supplies made by a travel agent, the normal VAT rules will apply. Accordingly, taxpayers should review their current arrangements and to ensure that the correct VAT treatment has been applied.
Bahrain’s VAT Transportation Guide issued in August 2019
The NBR has published the VAT Transportation Guide to provide an overview of the VAT treatment of the supply of international and local transportation in Bahrain. Specifically, it provides guidance on the following topics:
- International transport and certain associated services;
- Qualifying means of transport;
- Local transportation services;
- Input tax deduction for local and international transportation; and
- Chartering services.
The guide is important for any business in Bahrain which is involved in the supply of transportation supplies. Businesses should ensure that the VAT treatment applied is in line with the new guidance.
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.