GCC Indirect Tax Weekly Digest

KSA developments

ZATCA extends tax amnesty period until 31 December 2023

The Zakat, Tax and Customs Authority (ZATCA) has announced that the "Cancellation of Fines and Exemption of Financial Penalties” initiative, which had expired on 31 May 2023, has now been extended until 31 December 2023. 

The fines covered by the tax amnesty initiative include fines for late registration in all tax systems, late payment, late filing of returns fines in all tax systems, and fines to correct VAT returns, as well as fines for violations of VAT field control related to applying the e-invoicing regulations and other general regulations.

Next steps

It is uncertain whether the above measures will be extended beyond the end of December 2023. The extension of the tax amnesty provides a further opportunity for businesses that may have had a registration obligation to now register for VAT and submit their returns without any additional penalties. This is also an excellent opportunity for taxpayers to review past tax returns and make any required corrections.   

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. Please reach out to your usual Deloitte contact if support is required.  

Amendments to the Implementing Regulations on VAT

The ZATCA through decision number (01-04-23) dated 15 June 2023 has approved amendments and additions to the provisions of the VAT Implementing Regulations. 

Highlights

1. The conditions to be satisfied have been added to Article 9 (5) for activities performed by a government entity in its capacity as a public authority to not be considered an economic activity.
2. The conditions have been added under Article 9 (7) for workers under service secondment contracts to be considered as equivalent to salaried employees, with relation to excluding the consideration from the scope of VAT. 
3. The VAT exemption on the provision or transfer of a life insurance or reinsurance contract has been extended under Article 29 (7) to include fees and commissions paid, and commercial discounts, in relation thereof.
4. Additional conditions, detailed criteria to consider, and documentary requirements have been added to Article 34 (4), (9), & (10) in order to apply the zero rate on qualifying means of transport.
5. The threshold of correcting errors in subsequent VAT returns has been increased under Article 63 (3) from SAR 5,000 to SAR 15,000.
6. The clause under Article 75 (5) stating that tax rulings issued by ZATCA shall not be binding has been removed, meaning tax rulings should now in principle be considered as binding opinion by ZATCA.

The increase in the threshold for correcting errors (point 5) will be especially welcome for taxpayers as the previous limit was a relatively modest amount.  For more information and the complete list of amendments, click here to read the Arabic version of the approved amendments issued by ZATCA.

We strongly recommend that taxpayers review the approved amendments and ensure compliance from the effective date of 23 June 2023. 

ZATCA publishes new guidelines on tax ruling requests

The ZATCA has published a new guideline for tax ruling requests (the “Guideline”), serving as a guide for all persons, natural or legal, as well as representatives and agents acting on behalf of taxpayers who wish to submit a tax ruling request to obtain guidance and clarification from ZATCA on a particular issue.

As per the Guideline, a tax ruling should be considered as a reliable and binding opinion by ZATCA to interpret provisions of tax law or regulation applied in the KSA. This is a major change to the previous position whereby rulings were deemed to be non-binding on the ZATCA. This important change will be welcomed by taxpayers as it allows a greater degree of certainty to such requests.

The Guideline also contains essential information for submitting tax ruling requests, such as the purpose of tax ruling requests, the specific cases in which tax ruling requests can be submitted and cases in which they are prohibited, the eligibility criteria for applicants, administration, and the processing of tax ruling requests by ZATCA.

We encourage you to review the Guideline if you are contemplating submitting a tax ruling request to ZATCA.

UAE developments

31 August deadline for foreign business VAT refund applications

The window for qualifying non-resident foreign businesses to submit a claim for Value Added Tax (VAT) in the United Arab Emirates (UAE) under the Business Visitor Refund scheme is open from 1 March 2023 until 31 August 2023 for the calendar year 2022.

With the deadline of 31 August 2023 fast approaching, foreign businesses who have incurred expenses in the UAE during the 2022 calendar year and have not yet submitted their application, need to take immediate action before the deadline. The documentation and evidentiary requirements for such a claim are stringent and can require time to organise, therefore early action is recommended. For more information about the foreign business refund program please contact any of the individuals listed below or reach out to your designated Deloitte representative.

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.