GCC Indirect Tax Digest
June 30, 2021
Amended tax penalty regime now in effect
The amended tax penalty regime in the United Arab Emirates (UAE) came into effect on 28 June 2021.
As part of Cabinet Decision No. 49 of 2021, the UAE Cabinet amended the rules concerning administrative penalties applicable to tax violations in the UAE. The Cabinet Decision is available in English.
The Cabinet Decision makes a number of fundamental changes to the Administrative Penalties regime, including regarding the mechanism for calculating the penalties for late payment of taxes and for making errors in tax return, tax assessments or refund applications. The new penalty structure encourages the early submission of voluntary disclosures for errors by applying lower percentages for more timely disclosures of errors.
Importantly, the Cabinet Decision also introduces a concessionary measure which may allow a VAT-registered taxpayer to reduce the amount of penalties that have been imposed under the current penalties regime and that are still unsettled as of 28 June 2021.
For more details about the amended penalties, please refer to Deloitte’s recent alert.
Action to take
Businesses should consider how the changes announced to the UAE tax penalty regime apply to them specifically. We recommend that businesses should, as a matter of priority, speak to their tax advisers on conducting a comprehensive review of their tax affairs.
Deloitte has extensive experience in this area, and we would encourage businesses to reach out to us to discuss how we can assist you with conducting an effective and efficient health check exercise.
ZATCA publishes updated version of the real estate VAT guideline
The Kingdom of Saudi Arabia (KSA) Zakat, Tax and Customs Authority (ZATCA) has published an updated version of its real estate Value Added Tax (VAT) guideline in Arabic.
The update relates to changes to the real estate VAT rules in KSA, including those relating to property and land sales in the KSA from 4 October 2020 and applying the Real Estate Transaction Tax (RETT).
The main topics addressed in the guideline are:
- Summary of the updated tax treatment for supplies of real estate in KSA.
- Transitional situations related to registration and de-registration for VAT in KSA.
- Disposals of real estate, including: what constitutes a disposal, what is included in the VAT exempt disposal transaction, date of disposal and transitional cases.
- The VAT treatment of rental of real estate, including for commercial properties, residential properties and mixed use properties.
- VAT treatment of real estate related services.
- Input tax deduction rules including proportional deduction, ancillary disposals as part of an ongoing taxable activity, property financiers and transitional rules.
In addition, a new section has been added in the guideline that relates to property developers and which addresses claiming refunds of tax, licensed developers, refund mechanism, evidence, and processing of refund claims.
ZATCA publishes guide on insurance and reinsurance activities
ZATCA has published a new VAT guideline on insurance and reinsurance activities. The guideline is available in Arabic and English.
The guideline is intended to set out ZATCA’s interpretation of the KSA VAT legislation as it relates to insurance and reinsurance activities. This includes the VAT treatment of life insurance, general insurance, and rules relating to VAT recovery and input tax apportionment.
Businesses operating in the insurance sector in KSA should familiarize themselves with the guideline to ensure that they are applying the correct VAT treatment to supplies relating to insurance and reinsurance.
ZATCA publishes circular on reverse charge mechanism
ZATCA has published a new VAT circular on the application of the reverse charge mechanism (RCM) in KSA. The circular is available in Arabic and English.
The circular clarifies the scope of the RCM, the rules relating to the import of taxable services by a VAT-registered person, considerations relating to the import of goods, the tax due date and reporting obligations under the RCM, and the rules relating to input tax deduction for transactions under the RCM. In addition, the circular includes example scenarios of RCM transactions.
Business engaged in imports of goods or services in KSA should review the circular to ensure that they are correctly reporting such transactions.
Guidance on Filing Returns is now available
The Oman Tax Authority (OTA) has issued guidance on VAT return filing requirements. Taxpayers who registered from 16 April 2021 will come to the end of their first return period ending 30 June 2021. These VAT registrants will need to file their first returns and pay any net tax due by the end of July 2021.
The guide provides a step by step approach for preparation, process, review and submission of the return. The guide also provides an example of the VAT return requirements template which outlines the required information that should be added into each field. Deloitte will be hosting a webinar to provide a thorough overview of the guidance, the full details of this session will be shared imminently.
One important point to note is that where the VAT return shows a net credit of VAT due to the taxpayer, the VAT registrant will have the option to claim a refund of the net VAT credit (where input VAT claimed exceeds output VAT due); or carrying forward the net VAT credit to subsequent return periods. The default is the carry forward; where the taxpayer opts to claim a refund of the net VAT credit by checking the appropriate box on the return. A “Taxpayer Checklist” can be downloaded from the OTA’s website and followed accordingly. The completed checklist and supporting documentation will need to be submitted with the VAT return for which the refund request is made.
We understand that more information will likely be released pertaining to the payment and settlement mechanisms for net VAT due to the OTA. We will continue to monitor the situation and provide you with an update once available.
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.