GCC Indirect Tax Weekly Digest

KSA developments

GAZT and Saudi Customs publish guidance on VAT and Customs rate increases

The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) and Saudi Customs have published guidance in relation to the imminent increases in the country’s Value Added Tax (VAT) and Customs duty rates in response to the economic impact of the COVID-19 crisis.

GAZT has published a guide in English on the transitional provisions relating to the increase in the standard VAT rate from 5% to 15%, which will take effect from 1 July 2020. The guide was previously published in Arabic and summarizes the transitional rules governing the impact of the VAT rate increase. For details about the transitional provisions, please refer to Deloitte’s alert.

Meanwhile, Saudi Customs has published a guide on the increase in Customs duty rates on a number of commodities set to take effect from 10 June 2020. Affected commodities are listed in both Arabic and English with their current Customs duty rate and the rate applicable from 10 June 2020. For more information about the increase in Customs duty rates, please refer to Deloitte’s alert.

The increases in VAT and Customs duty rates pose significant challenges for businesses, and it is critical for businesses to take action to ensure that they are in compliance when the increases come into effect.

Due to the volume of goods, services, and commodities which will be subject to rate changes in the coming weeks, we recommend that businesses conduct a thorough review of their transactions in order to determine the impact of the rate increases on cash flow.

Additionally, businesses should expect heightened scrutiny from authorities as VAT and Customs duties take on a more significant portion of government revenue.
 

UAE developments

FTA publishes Excise Tax Public Clarification on DTS scheme milestone postponement

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published an Excise Tax Public Clarification providing further details following its announcement that the final step of Phase 2 of the Digital Tax Stamps (DTS) scheme is to be postponed to 1 January 2021.

The Public Clarification pertains to water pipe tobacco and electronically heated
cigarettes. These Designated Excise Goods were previously due to become banned from being supplied, transferred, stored, or possessed in the UAE from 1 June 2020 if they did not bear a DTS-compliant stamp.

The FTA has postponed this milestone to 1 January 2021, due to the fact that businesses may have been unable to sell remaining non-DTS compliant stock due to business closures resulting from COVID-19 precautions.

All previous DTS scheme milestones are still in effect, meaning that unmarked Designated Excise Goods may not be imported into the UAE. Also, the separate
timeline for cigarettes, which reached its final milestone on 1 August 2019, still applies.
 

Bahrain developments

NBR publishes VAT guide for the retail and wholesale sectors

The Bahrain National Bureau for Revenue (NBR) has published a VAT guide for the retail and wholesale sectors in Bahrain.

The guide is relevant to a wide range of businesses, and clarifies the VAT rules and implications of many situations retail/wholesale businesses are likely to face,
including:

• Prices displayed (i.e. VAT inclusive or exclusive);
• Consideration and adjustments (discounts, service charges, trade-ins, bad debts, and deemed supplies);
• Supplies through an agent or intermediary;
• Concessions in retail stores;
• Asset financing;
• Application of the profit margin scheme;
• Vouchers, gift cards, and coupons;
• Loyalty programs;
• Inventory and stock;
• Warranties; and
• Tax invoice rules.

We recommend that affected businesses familiarize themselves with the guidance and take action to ensure that their transactions and arrangements are in compliance

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.