GCC Indirect Tax Digest

UAE developments

Dubai Customs issued the new Customs Notice No. (15/2021) related to the
Customs procedures for Cross Border e-Commerce Companies

On 21 December 2021 Dubai Customs published the Customs Notice No. (15/2021) which is describing the new customs procedures for all e-Commerce Companies. A customs notice was issued to reversing the previous customs notices No. (9/2021), (13/2021) and (14/2021).  

The notice applies to commercial companies (SMEs, Free-Zone Companies, Logistics Companies, and Customs Warehouses) that provide online retail and selling services for goods and products through e-Commerce channels. Both B2C and B2B transactions are covered in the notice.

In respect of the Customs Clearance, companies will gain benefit of processing Customs declarations automatically based on e-Commerce orders and return orders through the Platform for Personal customers (B2C). For B2B transactions, companies are required to complete the e-commerce declarations via Dubai Trade according to applicable procedures.

The Customs Notice No (13/2021) provided logistical advantages for the private sector by simplifying, facilitating and improving the regulations of custom procedures and the movement of goods between companies via e-Commerce channels. Whilst the new Customs Notice No (15/2021) provides custom procedures and regulations on the movement of goods through “Cross-Border” e-Commerce channels.

The following compliance provisions must be met under Customs Notice No (15/2021):

• Companies must declare the value in customs transactions according to the price actually paid or payable.
• Companies must obtain necessary approvals from the competent authorities for restricted goods or goods that are subject to a control procedure.
• Goods are subject to inspection and examination upon import and export in accordance with Dubai Customs procedures.
• Companies’ electronic declaration and invoice shall be accepted for Customs clearance and claims settlement.
• Companies, couriers, logistics and postal companies should keep all documents/orders, records of entry and exit of goods in an approved e-archiving system and must be produced upon request by Dubai Customs.

KSA developments

The Zakat, Tax and Customs Authority has recently published the Guideline to the Procedure to Issue Rules of Origin Reports

Following the KSA Minister of Finance, the Chairman of the Zakat, Tax and Customs Authority (“ZATCA”) Board of Directors issued on 22/11/1442– 02 July 2021 the Ministerial Decision no.3852 which approves the new National Rules of Origins (“RoO”) in Arabic.

ZATCA has recently issued a detailed Guideline on the Procedures and the mandatory steps for the Chartered Accountants to issue and obtain an Origin Report. Please find below the summary of the procedures which apply to GCC manufactured products that are being imported into KSA and looking to benefit from the duty exemption “Preferential Treatment”:

As per the Origin Report guideline, producers are required to engage with a Chartered Accountant to obtain an Origin Report in Arabic, as a mandatory requirement in order to claim preferential treatment upon entry into KSA. Producers should initially review KSA National rules of Origin and Conditions for verification of proof of Origin and engage an eligible Chartered Accountant. Moreover, the Producers should;

• Acknowledge understanding the objectives of the procedures
• Engage the Chartered Accountant to execute the procedures
• Ensure that all information and documentation provided to the Chartered Accountant is accurate, sufficient, and clear
• Provide background, clarifications and descriptions to the Chartered Accountant, where required, including who would be the recipients of the Origin Report
• Maintain suitable accounting and other records and make reasonable estimates supporting the content of the Product Information Declaration Form
• Design, implement and maintain adequate controls, including the application of the relevant policies and prevention and detection of frauds and errors around the preparation of the Product Information
• Declaration Form to ensure it is prepared in accordance with the KSA national Rules of Origin
• Prepare the Bill of Materials relevant to the Product

Following collecting all the information and documents from the producers, the Chartered Accountant should;

• Obtain an understanding of Ministerial Resolution No. (3852) dated 11/22/1332 related to the KSA National Rules of Origin
• Hold confidential all information provided by the Producer in accordance with relevant professional obligations
• Collect data required to produce the Origin Report
• Maintain records of collected information in accordance with the applicable professional rules, local laws, and regulations of the Country of Origin
• Perform the procedures described in the guideline
• Issue an Origin Report, in the Arabic language, including his conclusion (which may be modified based on the nature of findings)

The validity of the Origin Report is a period of 6 months, starting from the date of issuance of the report, only if no modification has been made to the product, including a change in its customs tariff classification and description.

Moreover, where there are any material changes that may cause a change of the Origin Report to the KSA authority, the Producer must disclose all the changes.  If issues or changes are identified during the KSA authorities’ verification procedures, the authority may take what they deem an appropriate decision regarding the termination of the validity of the Origin Report.

ZATCA has announced the updates on the items and addresses of goods in the tariff, which are implemented from 1st January 2022

ZATCA has launched the updated list of items and addresses of goods in the tariff which will be effective from the 1st of January 2022. The authority included a detailed list of the new items in the regulations which can be found here and items that will stop working in the systems here.

Bahrain developments

NBR publishes guide and FAQs on transitional rules applicable to VAT rate increase

The Bahrain National Bureau for Revenue (NBR) has published a guide and Frequently Asked Questions (FAQs) setting out the transitional rules applicable to the increase of the Value Added Tax (VAT) rate in Bahrain.

The NBR has clarified that the enforcement date is 24 December 2021. The VAT rate to be applied to certain supplies with effect from 1 January 2022 will depend on several factors, including whether a contract is signed before or after the enforcement date.

Sections 3 and 4 of the Guide provides for specific transitional rules impacting one-off supplies and continuous supplies, respectively, entered into before and after 24 December 2021. These include the following scenarios:

• Contracts for one-off supplies entered into before 24 December 2021 where the date of supply is on or after 1 January 2022;
• Contracts for one-off supplies entered into after 24 December 2021 where the date of supply is on or after 1 January 2022;
• Contracts for Continuous Supplies entered into before 24 December 2021 where some or all of the supply occurs on or after 1 January 2022; and
• Continuous supply contracts entered into before 1 January 2022 where the above rule does not apply.

Businesses making supplies in Bahrain should carefully consider the specifics of each scenario to determine the correct VAT treatment applicable to their supplies during the transitional period.

Oman developments

Supplies to Government bodies/entities subject to VAT

The Oman Tax Authority (OTA) has issued a notice on the applicability of VAT on supplies made to units of the Administrative Apparatus of the State (e.g. government bodies or entities). It is clarified that the VAT Legislation does not exclude units of the State’s Administrative Apparatus from bearing VAT; thus, they are equally obliged to pay VAT on taxable supplies of goods and/or services procured by them.

Clarification on submission of cash security deposit in lieu of bank guarantee by non-resident persons

The OTA has updated its earlier guideline on the VAT registration procedures for non-resident persons. As per the revised guideline, a non-resident person seeking VAT registration (without appointing a responsible person in Oman) can provide a cash security deposit in lieu of a bank guarantee or fiscal undertaking. The cash deposit must be made via bank transfer to OTA, for a value not less than 5% of taxable supplies for a tax period or OMR 100,000 (where the value of taxable supplies cannot be estimated). The revised guideline is available in both Arabic and English.

Bank account details to remit cash security deposit amount:

Determination of fees for establishing of Excise Tax warehouse

The OTA has recently released a Ministerial Decision No. 339/2021 dated 16 December 2021, to determine the licensing fees for establishing or renewing of Excise Tax warehouse. An Excise Tax warehouse is a place where an Excise Tax registered person is permitted to produce, transform, possess, store, transport or receive any Excise Goods in a Tax suspension situation. Tax suspension is a situation where the payment of Excise tax is deferred; and this can give businesses an opportunity to optimize their cash flow position. The amount of licensing fees for the establishment or renewal of Excise Tax Warehouses would differ based on the bank guarantee amount to be submitted by a business at the time of the application to establish or renew an Excise Tax warehouse. 

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.