Hello and welcome to the october edition of VAT newsletter
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Updates related to Value Added Tax
Updates related to Excise Tax
Direct Tax Updates
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GCC VAT: One year On
The first year in review and the lessons to carry forward
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About GCC VAT: One Year On webinar
According to the UAE VAT Law, this timeframe should only apply to residential buildings and not to charitable buildings. Therefore, this has now been amended and clarified that the first supply of a charitable building will be zero-rated, and the subsequent supply of such charitable building will be standard-rated.
Voluntary registration has been removed from the obligation for an Owners Association to register for VAT.
Section 8.2. Is an Owners Association required to be registered for VAT purposes?
The new VAT Real Estate Guide can be accessed using the following link:
Direct tax Updates
Excise Tax Updates
VAT implementation has been a learning curve for businesses in the region. One year after VAT first went live in the UAE and KSA, we now have a clearer picture of how business communities are managing it, along with its associated challenges & consequences.
Given that it has now become an integral part of the business landscape, it is important to realize that VAT compliance is an ongoing journey. Any business relying too heavily on manual VAT processes to manage invoicing, VAT determination and their overall VAT compliance process, is unnecessarily increasing its risks of non-compliance.
Breaching VAT compliance can have severe financial, reputation and personal consequences in the region, for example, jail term in Bahrain. It is therefore critical for businesses to leverage available technology to get insights into their daily operations and how they can improve going forward.
To discuss this further, Thomson Reuters, in collaboration with Grant Thornton, would like to invite you for an exclusive webinar, where we will discuss the first-year journey, lessons learnt, the role of technology for VAT compliance and best practices that can be carried forward by businesses in other GCC countries, such as Oman, that will also go live on VAT in the coming months.
11:00 – 11:05 – Welcome Remarks
11:05 – 11: 20 – Recapping Year 1: VAT experience in UAE and KSA
Steve Kitching, Partner, Tax Advisory, Grant Thornton
11:20 – 11: 35 – Role of technology: automating VAT compliance
Ramy Rayan, Pre-Sales Functional Specialist, VAT, Thomson Reuters
11:35 – 11:45 – Q&A
Register for the webinar now
- Steve Kitching
Partner, Tax Advisory
- Ramy Rayan
Pre-Sales Functional Specialist, VAT
1. Cabinet Decision No. (1) of 2019 on the Refund of Value Added Tax Paid on Goods and Services Connected with Expo 2020 Dubai
The Federal Tax Authority (‘FTA’) has published a Cabinet Decision which specifies the conditions that allow Official Participants to claim a refund of Tax which was incurred on the import or supply of Goods and Services relating to their participation in Expo 2020 Dubai.
The Cabinet Decision defines Official Participants as “Countries and intergovernmental organisations which have received and accepted the official invitation from the State to participate in Expo 2020 Dubai in a non-commercial capacity as an exhibitor.”
The claim for the refund must be submitted to the Bureau Expo 2020 Dubai which will perform an initial audit.
The FTA and the Bureau Expo 2020 Dubai will then determine the procedural, evidential, and verification requirements which must be met in order to be eligible for the refund claim.
In addition to the A User Guide was published on the FTA portal providing information to the foreign business visitors to claim refund of VAT from the authorities.
Foreign Businesses are eligible to apply for VAT Refund if the following conditions are fulfilled:
Cabinet Decision, the FTA has also published ‘User Guide for Official Participants’ for the Refund of VAT Paid on Goods and Services Connected with Expo 2020 Dubai.
The Cabinet Decision can be accessed using the following link:
Additionally, the Guide on Expo 2020 VAT Refunds can be accessed using the following link:
2. VAT Refund for Business Visitors User Guide
• The business does not have a place of establishment or fixed establishment in the UAE or in any VAT Implementing GCC State;
• The business is not considered as a Taxable Person in the UAE;
• It is not carrying any business in the UAE;
• It is not operating any business and registered as an establishment with a competent authority in the jurisdiction in which they are established; and
• The Foreign Business is from a country that also provides VAT Refunds to UAE businesses in a same situation.
The guide further clarifies and lays out the procedure to successfully complete the ‘Business Visitor (VAT Refund Scheme for Foreign Businesses) VAT Refund Form’. Foreign Businesses will need to create an e-Services account with the FTA in order to access the Refund Form.
Link to the VAT Refund for Business Visitors User Guide:
New Guide on Financial Services
1. Digital Tax Stamp (‘DTS’) Guides
The FTA published a number of guidance documents and forms with regards to the application of DTS. The documents added on the page are as follows:
• Registration for Manufacturer (form);
• Registration for Importer (form);
• DTS Overview (guide);
• DTS Milestones (guide);
• Duty Free Clarification; and
• Workaround Vs. Full Aggregation (guide)
The entities that will be subject to DTS include:
1. Manufacturers (UAE Based as well as International),
2. Licensed Importers who purchase Cigarettes in bulk from domestic or international manufacturers, and sell and distribute the same in the UAE mainland or UAE Duty Free markets; and
3. Distributors, Supply Chain Agents or Warehouse Keepers who will receive the formally imported goods in order to sell them in the domestic UAE market or the UAE Duty free outlets.
Link to the Digital Tax Stamp Page:
2. Other Excise Tax Updates
The UAE’s Ministry of Finance released a statement on the 31st of March informing the public of numerous technical studies conducted alongside officials in the Kingdom of Saudi Arabia (‘KSA’) on including new goods to the selective Excise Tax list. Excise Tax is currently levied on three categories of goods including tobacco products, energy drinks and carbonated drinks.
Although the Statement did not specify which goods may be added to the selective Excise Tax list, it is expected that taxes will be imposed with the aim of reducing consumption of harmful substances and modifying consumer behavior, particularly to combat high diabetes and obesity rates in the UAE.
Updates related to VAT
1.Double Taxation Avoidance Agreement (‘DTAA’ or ‘Treaty’) between the UAE and the Kingdom of Saudi Arabia (‘KSA’)
The Treaty was signed between the KSA and UAE on the 23rd of May 2018 and it is the first DTAA to be signed between members of the Gulf Cooperation Council. In early March 2019, the KSA published the Treaty in its official its Official Gazette, ‘Um Al-Qura’, however the UAE has not yet published the Treaty in the Official UAE Gazette.
The ‘Entry into Force’ provisions mentioned in the Treaty, state that the DTAA shall enter into force on the first day of the second month following the date when the UAE notifies KSA. The notification will be in writing, through diplomatic channels, confirming the completion of the procedures required by the UAE law for the bringing into force of this Convention (or Agreement).
Some of the key benefits arising as a result of the DTAA include:
• Exemption of investment income made by Sovereign entities from tax;
• Exemption of interest and service fees from withholding tax;
• Reduced withholding tax rate on royalty payments;
• 0% tax rate on income from debt-claims; and
• Maximum of 5% withholding tax rate on the gross amount of dividends.
2. UAE and Oman added to ‘EU Blacklist’
On the 12th of March 2019, the European Union (‘EU’) Economic and Financial Affairs Council announced that the UAE and Oman (amongst eight other jurisdictions) have been placed on the list of EU’s non-cooperative jurisdiction for tax purposes, also known as the ‘EU Blacklist’.
Although the decision to include the UAE and Oman on the EU’s Blacklist does not result in the imposition of any sanctions or penalties, it will likely have indirect repercussions such as scrutiny of financial transactions, increased monitoring and audits from EU member countries.
Excise tax Updates
The Kingdom of Saudi Arabia ('KSA')
1. Islamic Finance VAT Guide
The General Authority of Zakat and Tax (“GAZT”) in the KSA has published an Arabic version of the Islamic Finance VAT guide which provides clarity on VAT treatments of Islamic Finance. The guide is aimed at institutions such as banks, insurance companies and financial services companies providing Islamic Finance products and services as well as the recipients of these products and services.
Link to the Islamic Finance VAT Guide:
2. Business Transfers VAT Guide
GAZT has published an Arabic version of the guide clarifying the Tax Implications and obligations with regards to Business Transfers.
Link to the Business Transfers VAT Guide:
Other GCC Updates
The Kingdom of Bahrain ('Bahrain')
1. VAT Financial Services Guide
The National Bureau for Revenue (‘NBR’) have recently published a VAT Financial Services Guide which provides an overview of the VAT obligations and procedures pertaining to financial services institutions and insurance companies.
Link to the VAT Financial Services Guide: https://s3-eu-west 1.amazonaws.com/nbrproduserdata/media/xdp1eKePDRtoM4IBWAb2mY67CwXdyeykdHMH40yR.pdf
2. VAT Digital Economy Guide
The NBR published a Guide which provides an overview of the VAT implications concerning the Digital Economy with particular focus on the E-commerce of goods, goods imported as part of an E-commerce transaction, electronic services and the required compliance measures.
Link to the VAT Digital Economy Guide:https://s3-eu-west-1.amazonaws.com/nbrproduserdata/media/hOLhJKSh8QwUx0uUAcn9Ovhcv9H9L3SHfhrNb4YW.pdf
3. VAT Healthcare Guide
4. Zero-rated VAT on Medical Devices
The National Health Regulatory Authority in Bahrain published a circular announcing that all medical devices are subject to a VAT at the zero-rate. A list of all the medical devices relating to this announcement is mentioned on the Circular.
Link to the Circular on Medical Devices: http://nhra.bh/Departments/MDR/MediaHandler/GenericHandler/documents/departments/MDR/Circulars/vat%20circular.pdf
VAT Real Estate Guide Update