GCC Indirect Tax Weekly Digest

Bahrain developments

NBT confirms hundreds of VAT inspections underway

The Bahrain National Bureau for Taxation (NBT) announced on 7 January 2019 that the Consumer Protection Unit of the Ministry of Industry, Commerce and Tourism (MoIC) had conducted 430 inspections of businesses to ensure compliance with the Value Added Tax (VAT) legislation.

Further, it announced that 224 complaints had been addressed, and that approximately 1,000 calls were being answered each day.

The fact that hundreds of inspections were conducted in just the first few days of the new VAT regime (and continue to be conducted) indicates that the NBT and MoIC are taking a proactive approach to ensuring compliance with the Bahrain VAT legislation, and will apply financial and criminal penalties accordingly.

NBT adds taxpayer lookup feature to website

The NBT has added a taxpayer lookup feature to its website, which allows users to confirm the tax registration status of a business based on either the VAT Account Number or Commercial Registration Number provided by the business.

The feature is intended to be used by taxpayers to verify the tax registration status of their suppliers, and to confirm the validity of the supplier details on the invoices they receive.

List of 1,400 exempt government services published

The Legislation & Legal Opinion Commission has published the list of newly exempt government services. This follows the Cabinet previously approving a memorandum submitted by the Ministry of Finance and National Economy (MoFNE) exempting 1,400 government services from VAT.

The list, which is currently only available in Arabic, is predominantly made up of government services relating to licensing and the issuance of documents and is organized by services provided by specific government entities.

VAT refunds to be available for citizens on electricity and water within threshold

The NBT announced that VAT refunds will be available for Bahraini citizens for their primary residence on electricity and water up to a threshold. The announcement specified that the threshold for electricity consumption will be 3,000 units (a threshold for water consumption was not provided).

The announcement further stated that the Ministry of Labour and Social Development will launch a dedicated website for registration for the refund process.

VAT tourist refund scheme preparations in process

The MoFNE announced that the NBT is in the process of completing technical preparations for a VAT tourist refund scheme (TRS), to be implemented in 2019. The TRS would allow visitors to Bahrain to claim refunds on a portion of the VAT paid on taxable goods and services during their visit.

The TRS will be introduced in partnership with a global operator and will link registered companies to the departure area of Bahrain International Airport, where the refund system will operate.

The United Arab Emirates (UAE) introduced a TRS in late 2018, and it is expected that the Bahrain TRS will operate similarly.

KSA GAZT publications

Capital assets guideline released in English

The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has published the English version of its guideline on capital assets. The guideline was previously published in Arabic.

This guideline provides additional clarity to taxpayers with respect to the treatment of capital assets from a VAT perspective. It addresses the definition of capital assets, the deduction of input tax on purchases of capital assets, adjustments to VAT recoverability arising from a change of use of the assets, as well as the deduction of input tax on capital asset purchases made before a taxpayer’s VAT registration in KSA comes into effect.

Given the often high value of capital asset purchases and the resulting VAT obligations, this guide should prove useful for companies making such purchases.

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.