GCC Indirect Tax Weekly Digest
March 5, 2020
FTA publishes Excise Tax Public Clarification on renewal of Designated Zone registration
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a new Excise Tax Public Clarification on the renewal of Designated Zone (DZ) registrations.
EXTP005 sets out the procedures required for a warehouse keeper to renew the registration of their Excise Tax DZs, which is required every 12 months for each DZ.
The Public Clarification states that if a DZ registration is not correctly renewed on time, it will no longer be considered an excise DZ and Excise Tax will immediately be imposed on the excise goods held within the DZ, which will be treated as being released for consumption in the UAE.
It is therefore extremely important that warehouse keepers responsible for Excise Tax DZs note their responsibilities regarding renewal of the DZ status in order to avoid costly implications for themselves, and for third parties who may store goods within the DZ.
As part of the renewal process, a warehouse keeper is required to:
- Review the registration expiry dates of its DZs;
- Submit the DZ renewal (amendment) form and pay the renewal fee separately for each DZ; and
- Review the value and type of excise goods held in the DZ so that the FTA may determine if an updated financial guarantee is required.
EXTP005 also details the procedures related to the renewal form, the update of the financial guarantee, and payment of the renewal fee, which is AED 2,000 per DZ per 12-month period.
The renewal form must be received by the FTA before the expiry of the DZ registration, while the renewal fee must be received by the FTA within 20 business days of this date. If the renewal fee is not paid by the deadline, the DZ will be treated as suspended for an additional 20 business days, after which it will be treated as expired, and Excise Tax will be imposed on the excise goods held within.
Non-DTS compliant water pipe tobacco and electrically heated cigarettes banned from import as of 1 March 2020
In line with FTA Decision No. 2 of 2019 on Implementing the Marking Tobacco and Tobacco Products Scheme, on 1 March 2020 it became prohibited to import water pipe tobacco (commonly known as Shisha tobacco) and electrically heated cigarettes into the UAE if they do not bear a Stamp which is in compliance with the Digital Tax Stamps (DTS) scheme.
The next milestone for the DTS scheme in relation to water pipe tobacco and electrically heated cigarettes will be 1 June 2020, when it will be prohibited to supply, transfer, store, or possess these goods in the UAE if they do not bear a DTS-compliant Stamp.
FTA publishes updated VAT Designated Zones list
The FTA has published an updated version of the list of Value Added Tax (VAT) Designated Zones (DZs).
Two DZs have been renamed, as follows:
- No. 5 in the list of Dubai DZs has been renamed from “Free Zone Area in Al Qusais” to “DAFZA Industrial Park Free Zone – Al Qusais”; and ·
- No. 1 in the list of Ras Al Khaimah DZs has been renamed from “RAK Free Trade Zone” to “RAK Port Free Zone”
No other material differences have been noted in the updated list, and no new VAT DZs have been added. Note that VAT DZs are distinct from Excise Tax DZs and are subject to a different set of rules.
FTA publishes updated guide on Expo 2020 VAT refunds
The FTA has published an updated version of its guide on refunds of VAT paid in connection with Expo 2020 Dubai.
The update brings the guide in line with the recently published Cabinet Decision No. 1 of 2020 which sets out the rules relating to VAT refunds which may be requested by Official Participants of Expo 2020 Dubai in relation to expenses incurred in exhibiting at the event.
The Cabinet Decision expanded the scope of eligible expenses to expenses in connection with all operations, services and activities provided for the purpose of participation in Expo 2020 Dubai, whether located within or outside the boundaries of the Expo 2020 site.
GAZT publishes guideline on incentive rewards for whistleblowers
The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has published a new guide on providing incentive rewards to whistleblowers. The guide is currently available in Arabic only.
The guideline is based on Cabinet Resolution No. 458 of 17 April 2019 granting the GAZT's Board of Directors the ability to pay bonuses to all persons other than GAZT employees who contribute to revealing violations of laws and regulations relating to:
- Income Tax
- Excise Tax
Examples of violations include not issuing valid tax invoices, not fulfilling registration obligations, and charging VAT without being registered.
Violations are reported through the Authority's portal using the form prepared for that purpose by the Authority, provided that the required information and supporting documents are provided.
Once the department receives the notification, they will review it and check if it has met the conditions for the entitlement to bonuses and duties of the rewards committee.
Under the guideline, rewards for whistleblowers are granted at the lower of 2.5% of the collected tax and penalties and SAR 1,000,000, with a minimum of SAR 1,000.
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.