GCC Indirect Tax Weekly Digest

UAE developments

FTA publishes Excise Tax Public Clarification on stockpiling of Excise goods

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published Excise Tax Public Clarification EXTP003 on stockpiling of Excise goods.

EXTP003 explains the Excise Tax obligations for businesses which expect to hold stock of the following Excise goods for business purposes on 1 December 2019 (the date of expansion of the UAE Excise Tax regime):

• Sweetened drinks;
• Electronic smoking devices and tools;
• Liquids used in electronic smoking devices and tools; and
• Tobacco products which have been subject to Excise Tax at a price lower than the minimum Excise Price introduced on such products by Cabinet Decision No. 55 of 2019 on the Excise Price for Tobacco Products.

EXTP003 provides guidance that is more detailed than previously available regarding stockpiling of Excise goods. It provides valuable insight into the FTA’s approach and expectations in terms of business’ Excise Tax accounting and reporting obligations.

As the new guidance makes clear, any business which holds stock of the above products could potentially be considered a stockpiler for Excise purposes and be subject to Excise compliance requirements (and penalties for lack of compliance).

Any business holding stock of the above products is required to perform a complex two-stage stock- and sales-based calculation on every individual product type within each category of Excise goods. For example, orange juice under the category of sweetened drinks must be calculated separately from apple juice also under the category of sweetened drinks.

Further, such businesses are required to keep records audited by an external third party which show the quantity of Excise goods for the 12-month period prior to 1 December 2019. The results of the required calculations and audit could result in a liability to register for Excise Tax, even where there are no other ongoing Excise obligations.

KSA developments

GAZT publishes guide on Real Estate Investment and Financing

The Kingdom of Saudi Arabia (KSA) General Authority for Zakat and Tax (GAZT) has published a new Value Added Tax (VAT) VAT guideline in relation to Real Estate Investment and Financing in KSA. The guide is currently published in Arabic only.

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 on 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.

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.