GCC Indirect Tax Digest

KSA developments

Phase one of electronic invoicing (e-invoicing) has been implemented

The first phase of e-Invoicing was implemented in KSA on 4 December 2021. Businesses in KSA should take action as a matter of priority to ensure that they are in full compliance with the e-invoicing requirements to avoid penalties for non-compliance.

The go-live date for the second phase is 1 January 2023. This phase will be implemented in a phased roll-out, and ZATCA will inform targeted/selected taxpayers six months before integrating with the Authority’s system.

Saudi Finance Minister approves amendments to GCC Customs Law

On 27 November 2021, the Saudi Finance Minister approved amendments to the Executive Regulations of the GCC Common Customs Law as follows:

Customs duties on foreign commodities re-exported outside the Gulf Cooperation Council should be refunded, in whole or in part, provided that the exporter (re-exporter) is the importer in whose name the foreign commodities are received, or any person who proves ownership to the Customs Department.

In addition, the re-exported foreign commodities whose customs duties are to be refunded should be from one dispatch, to identify and match them with the import documents.

It should be noted that the value of the foreign commodities to be re-exported and on which the new rules are applicable should not be less than SR20,000 ($5,332) or its equivalent in other GCC currencies.

The refund should be requested within six months from the date of re-export.

UAE developments

FTA publishes VAT Public Clarification on mobile phones, airtime, and data packages made available to employees for business use

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a new Value Added Tax (VAT) Public Clarification on mobile phones, airtime, and data packages made available to employees for business use.

VATP028 clarifies the FTA’s position on input tax recovery for businesses which provide mobile phones, airtime, and data packages to their employees.

The Public Clarification states that input tax is recoverable only where the above is provided to employees solely for business use and has a strict policy in place to restrict non-business use. The FTA specifically clarifies that backdated policies will not be accepted; i.e. the policy must have already been in place for the input tax to be recoverable.

In addition to having a strict policy in place, businesses must also demonstrate that they have a system in place to monitor employees’ use of airtime and packages, and that appropriate action is taken in accordance with the documented policy against employees who use the airtime or data for personal use.

The monitoring system must compare employees’ actual use to the average business use for that employee’s specific role, with any use in excess of the average considered to be personal use (unless the use in excess of the average is charged to the employee with output tax, or it can be proven that the use in excess of the average was for business purposes).

Further, businesses must retain valid tax invoices to be able to recover the input tax. Where all the above conditions are not met, the input tax will not be recoverable. 

Businesses in the UAE should carefully review their policies in relation to employee mobile phone use and prior input tax recovery to determine if the above requirements were met.

The FTA has taken a strict view, and where any of the above requirements were not met and the input tax should have been blocked, businesses may be required to correct the over-recovery by filing Voluntary Disclosures.

UAE Federal Customs Authority (“FCA”) signs a Mutual Recognition Agreement (“MRA”) with the General Administration of Customs in China

The UAE's FCA has signed a trade cooperation explanatory memorandum with the General Administration of Customs in China which includes an Authorized Economic Operator MRA.

The MRA is expected to:

• Extend the reach of the respective AEO statuses of the parties;
• Facilitate mutual market access and;     
• Accelerate the flow of goods between the 2 signatory parties. 

 The above would lead in turn to an increase in the import/export quantities between the 2 signing parties.  
 

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.