GCC Indirect Tax Weekly Digest

FTA publishes VAT payment user guide 

The FTA has published a user guide on VAT payment on its website. The guide covers the four methods of paying Value Added Tax (VAT) and Excise Tax via:

• e-Dirham or credit card;
• eDebit;
• bank transfer (GIBAN) – local transfer; and
• bank transfer (GIBAN) – international transfer.

It provides a step by step procedure on how to make payments by each option. However, there are some restrictions in using the first two methods listed above which includes payment using an authorized bank.

It is important to note that payment through the credit card option will incur a handling fee of 2-3% of the total payment amount. Using the GIBAN option also incurs a small fee.

GAZT publishes new Excise Tax guidelines

GAZT has published Excise Tax guidelines on their website. The guidelines are a useful reference on Excise Tax and provide guidance for Excise taxpayers on following main topics such as registration, payment, returns, refunds and movement of goods. 

It’s likely that the KSA tax authority is now comfortable with its understanding of the practicalities of Excise compliance. As such, the possibility of GAZT commencing more widespread audits has increased. You should ensure that your books and records are in a state of readiness for a tax audit.   

Non-oil private sector growth slows in UAE & KSA due to implementation of VAT 

The National newspaper reported this week that the Emirates NBD Purchasing Managers’ Index (PMI) for the UAE and KSA non-oil private sector dropped in the month of March. This was largely attributed to a rise in prices at the beginning of 2018 due to the introduction of VAT decreasing demand on purchasing. Recent international experience suggests that this may not be unusual, on the basis that an impending tax introduction often brings forward purchasing decisions by consumers where more durable goods are at issue. As a consequence, this is then followed by a short lull in economic activity in those sectors.

PMI is an economic indicator of the private sector. The data is gathered by polling a selection of purchasing managers in the field of manufacturing. It is based on five main indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. 

The UAE PMI dropped to 54.8 in March from 55.1 in February; whereas as the KSA PMI dropped to 52.8 in March from 53.2 in February. Although the readings in both countries have shown a slight drop, the non-oil private sector is still overall in growth territory, as a reading above 50 suggests expansion while below 50 suggests contraction.

GAZT publishes guide on recovering VAT

General Authority of Zakat and Tax (GAZT) has published a new guideline on input tax deduction on its website.The guideline is currently only available in Arabic.  

The two key points of uncertainty which we understand GAZT has addressed in the guideline are:

• Arabic invoicing – This is an issue that has caused many businesses some difficulty.  It now appears that while suppliers are still required to continue to issue valid tax invoices in Arabic, customers may be able to recover input VAT on English invoices in certain circumstances, if they have other evidence of having incurred the VAT (eg if they can show that payment has been made).
• Import VAT – We understand that GAZT has clarified that import VAT cannot be recovered on the import of goods not owned by the importer on the basis that the importer does not incur the VAT as part of its taxable business activities. Only the recipient of the supply (as distinct from an entity to which the goods supplied has been provided) can recover input VAT.

Please note that this digest is for information purposes only and should not be construed as an 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.