GCC Indirect Tax Weekly Digest

KSA developments

GAZT publishes guide on extension of VAT amnesty

The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has published a guide on the extension of the Value Added Tax (VAT) amnesty from 30 June 2020 to 30 September 2020. The guide is available in Arabic and English.

For details about the original announcement about the extension, please refer to Deloitte’s alert.

The guide provides additional detail on the extension as it relates to late payment penalties, late filing penalties, failure to register, and other compliance
issues.

It is unlikely, in our view, that the above measures will be extended beyond the
end of September 2020. Therefore, we strongly suggest that taxpayers review
their current and historic VAT position to ensure that their compliance and tax
affairs are in order in good time.

Bahrain developments

NBR publishes VAT guide on economic activity

The Bahrain National Bureau for Revenue (NBR) has published a new VAT guide on economic activity.

The guide clarifies the NBR’s interpretation of what it considers an ‘economic activity’, the determination of which is a key component for assessing VAT registration obligations. The guide includes the following:

• Indicators to consider in order to determine whether or not an economic activity is being carried out;
• Types of economic activity;
• Requirements for an economic activity to exist;
• Activities indicating the start and end of an economic activity; and
• Special cases (e.g. contract staff, board members, charities, joint ventures, and public sector entities).

The guide further states that VAT incurred on expenses by a taxable person are recoverable to the extent they are incurred for making taxable supplies and subject to other VAT recovery rules. VAT incurred on expenses which relate to both economic and non-economic activities must be apportioned between their economic and non-economic use.

NBR publishes VAT guide on the transfer of a going concern

The NBR has published a new VAT guide on the transfer of a going concern (TOGC).

The transfer of an economic activity from one business to another may either be a straightforward sale of assets, and thereby subject to VAT on each asset at the applicable rate, or a TOGC, whereby the transfer of the economic activity is outside the scope of VAT.

In order for a transfer to qualify as a TOGC, certain conditions must be met. The new guide clarifies the NBR’s interpretation of these conditions, which include the following:

• The transfer includes all or part of a business capable of being operated on an independent basis;
• The transferee must be VAT registered or become liable to be registered as a result of the TOGC;
• The transferee must immediately use the assets acquired to conduct the same or a similar economic activity; and
• Both the transferor and transferee must independently notify the NBR of the transaction within 30 days of the sale/transfer.

In addition, the guide details the VAT implications of situations that may arise during a business transfer, such as a transfer of assets over a period of time, certain assets not used to continue the business, and successive transfers of business assets. The guide also discusses the treatment of input VAT incurred in relation to a qualifying TOGC, the application of TOGC rules to VAT groups, and the treatment of capital assets under a TOGC.

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.