Financial Services Tax & Legal Update - January 2022 - PwC Middle East

Amendment of certain Tax Procedures Law provisions in relation to tax disputes resolution

In brief

The UAE Cabinet of Ministers issued the Federal Decree Law No. 28 of 2021 to amend the provisions of Federal Decree Law No. 7 of 2017 on Tax Procedures relating to tax dispute and resolution in the UAE. The new Decree Law has extended the timelines available for any person to dispute decisions issued by the Federal Tax Authority (“FTA”) as well as the timelines for the FTA to issue its decision regarding the disputed case. The Decree law has also introduced amendments to the requirements for submitting objections and appeals.

In detail

The new Decree Law has introduced the following amendments to the Tax Procedures Law that entered into force as of 1 November 2021: 

1. Extension of timelines related to tax dispute resolution: Amendment of Articles 27, 30 and 33 of the Tax Procedures Law as follows:

• Procedures for application for reconsideration (Article 27)

  1. The timeframe for any person to submit a reconsideration request to the FTA has been extended to 40 business days (previous timeline of 20 business days);

  2. The timeframe for the FTA to review the reconsideration request and issue a decision has been extended to 40 business days (previous timeline of 20 business days).

• Procedures for submitting objections and cases of inadmissibility (Article 30)

  1. The timeframe to submit an objection to the FTA’s decision to the respective Tax Disputes and Resolution Committee (TDRC) in respect to a reconsideration request has been extended to 40 business days (previous timeline of 20 business days).

• Challenge procedures before Courts (Article 33)

  1. The timeframe for the person and the Authority to submit an appeal to the TDRC’s decision before the competent Court has been extended to 40 business days (previous timeline of 20 business days).

2. Amendment of requirements to submit objections and appeals

Amendment of Articles 30 and 33 of the Tax Procedures Law as follows:

• Requirements to submit objections to Committees (Article 30) The requirement for settlement of taxes and penalties prior to filing an objection to the FTA's decision has been amended to include the settlement of taxes only (not the penalties anymore).

• Requirements to submit appeals to Courts (Article 33) A new clause was introduced to Article 33 to provide the instances where the appeal is considered as inadmissible. These instances are as follows:

1. Existence of inadmissible case to file an objection with the TDRC;
2. Failure of the person to provide proof of payment of taxes to the FTA; and
3. Failure of the person to provide proof of payment of no less than 50% of the administrative penalties by means of cash payment or submission of bank guarantee to the FTA.

3. Enforcement of TDRC' decisions

Amendment to Article 32 of the Tax Procedures Law as follows:

• The decisions of disputes issued by the TDRC exceeding AED 100,000 shall be considered as exclusionary instruments if not appealed before the competent Court within 40 business days of notification of the outcome of objections (previous timeline of 20 business days);

• If the parties of dispute are federal or local government entities, the Cabinet shall issue a decision adopting an alternative mechanism of objections and appeal. Until then, the current mechanism shall apply [Article 32 (bis)].

4. Special waiver committee:

Amendment to Article 46 of the Tax Procedures Law as follows:

• The special waiver committee has been given additional powers in approving instalments of the penalty amount or refund it to the person according to the controls and procedures of a Cabinet Decision to be issued according to a suggestion by the Minister;

• The committee shall be formed by a decision issued by the Chairman of the Board of the FTA. The Committee is chaired by the Chairman of the board of the FTA or his deputy, with the membership of two board members.

What next

Decisions issued by the FTA, TDRC or Courts to follow the provisions of the amended Tax Procedure Law. Taxpayers have now more time (additional 20 business days) to dispute decisions issued by the FTA which will help to reduce the risk of missing the chance of disputing the penalties.

The takeaway

The new timelines and procedures shall apply to new decisions issued as of 1 November 2021 onwards by the FTA, TDRC or Courts, i.e. any decisions issued prior to the effective date shall follow the provisions of the old Tax Procedures Law. Taxpayers would now have more time (additional 20 business days) to dispute decisions issued by the FTA. Taxpayers have been given more flexibility in terms of settlement of taxes and penalties, whereby they will be only required to make the payment of taxes to be eligible of filing objections with the TDRC, and payment of 50% of administrative penalties or submission of an equivalent bank guarantee to the FTA to be eligible of filing appeals with the Courts.

VAT Registration Procedures For Non-Resident Applicants

In brief

The Oman Tax Authority issued guidance for resident and non-resident businesses seeking to register for VAT in Oman following the implementation of VAT in Oman on 16 April 2021. In furtherance to the earlier guidance, the Oman Tax Authority has released a guide for VAT registration procedures for non-residents applicants. 

The guide addresses several challenges faced by non-resident businesses, including the inability to appoint a Responsible Person resident in Oman or appoint a Tax Representative.

In detail

According to Article 57 of the Oman VAT law every person who has no place of residence in the Sultanate (but makes taxable supplies), shall register with the Authority. As per Article 2 of the Oman VAT law, Ministerial Decree 2/2021, any person with no place of residence in the Sultanate must appoint a Responsible Person having a place of residence in the Sultanate. The guide clarifies Article 2 of the Oman VAT law and provides the procedure for appointing a Tax Representative and provides options in case the non-resident person is unable to appoint local Responsible Person.

Where it is not possible to appoint a Responsible Person resident in Oman or appoint a Tax Representative

A non-resident person who has not appointed a Responsible Person resident in Oman or a Tax Representative in Oman may follow one of the two options below 

Option 1

A person with no place of residence in the Sultanate can register for VAT directly and specify a Responsible Person that is a related person. The applicant must also provide a copy of a bank guarantee or fiscal undertaking in favor of the Tax Authority.

The bank guarantee or fiscal undertaking must be issued from a bank in Oman in the name of the Tax Authority for a value not less than 5% of taxable annual supplies and valid for one year. In addition, the person must provide details of a bank account in Oman and pay the tax due in Omani Rials.

Option 2

A person with no place of residence in the Sultanate can register for VAT directly and specify a Responsible Person that is a related person. The applicant must also provide a copy of a bank guarantee or fiscal undertaking in favor of the Tax Authority or pay a cash security deposit.

The bank guarantee or fiscal undertaking can be issued from any bank in the name of the Tax Authority for a value not less than 5% of taxable annual supplies and valid for one year. The cash security deposit must be made via a bank transfer to the Oman Tax Authority’s bank account for a value not less than 5% of taxable supplies for a tax period, or OMR 100,000 if taxable supplies cannot be estimated. In addition, the person must pay the tax due in Omani Rials.

What next

The issuance of the updated guidance on the VAT registration procedures for non-resident applicants clarifies some challenges faced by the non-resident person in Oman (such as appointment of Responsible Person in Oman, furnishing a bank guarantee, etc.). This will hopefully ease the VAT registration process for non-resident business in the Sultanate.

Non-residents should follow the necessary options to undertake registration in Oman.

The takeaway

In cases where it is not possible to appoint a Responsible Person resident in Oman or appoint a Tax Representative, the Oman Tax Authority has allowed the payment of a cash security deposit instead of a bank guarantee for non-resident applicants.

Executive Regulations to the Commercial Companies Law

In brief

In implementation of the provisions of the Commercial Companies Law issued by Royal Decree No. (18/2019), His Excellency Qais bin Muhammad bin Moosa Al-Yousef, the Minister of Commerce, Industry and Investment Promotion, (MOCIIP), issued a Ministerial Decision No. (146/ 2021), promulgating the much awaited Executive Regulations (the ER) of the Commercial Companies Law. 

The ER were issued on 14th October 2021, published in the Official Gazette on 24th October 2021, and is effective from the following day of its publication, i.e. from 25th October 2021. 

The ER have set out controls, rules, and procedures for establishing and regulating the commercial companies. These regulations are applicable to all types of commercial companies, established in Oman or carrying out their principal activities in Oman, except public joint stock companies which are subject to separate regulations issued by the Capital Market Authority. 

The introduction of the ER forms part of the steps taken by the Omani government to enhance and improve the legislative framework for the commercial companies in a way that contributes to achieving the national priorities of Oman Vision 2040 of stimulating the private sector and activating the national economy.

In detail

The key features of the ER introduced

We believe that the ER have been set with the aim of creating a stronger and more transparent corporate governance regime in the country, speedier processing and ease of doing business in Oman and protecting the investors interest. We summarise below the key provisions provided by the ER, among many others that may not be listed below.

Use of electronic system of the MOCIIP

Major part of the procedures and communications with the MOCIIPare required to be made through the electronic system of the MOCIIP, including but not limited to: filing request to establish a commercial company, registering of a commercial companies or branches of foreign companies, updating share capital whether increasing or reducing it, request for approval for liquidation, transforming legal form of the company, mergers, appointment of board of directors, etc. In the case of filing any request, the MOCIIP may request for further information and documents and the company is required to respond to the same within 7 days from date of request made otherwise the MOCIIP has the right to reject such request.

Branches of foerign companies

The ER specified the controls for registering branches of foreign
companies with the MOCIIP through the electronic system, provided that the branch takes the legal form of the company in its head office and with the same purposes.

Establishment of commercial representative offices (CRO)

The ER also contained provisions related to establishment of CROs to take care of the interests of companies and institutions whose headquarters are outside the Sultanate. The ER specified the permissible and non permissible activities of the CROs.

Bank account

The ER obligated commercial companies to open a bank account in a bank licensed to operate in the Sultanate of Oman, in which the value of the shareholders contribution in cash as specified in the incorporation documents shall be deposited from the date of their registration with the MOCIIP.

Contributions to the Capital

Certain provisions of the ER has detailed rules related to evaluation of contribution to capital in-kind, as well as contribution by services or labour, when establishing the company or increasing its capital. The ER further provides that an agreement between the partners shall be made to guarantee the partners’ right to the assessed in-kind share that exceeds the value of the capital contribution according to the evaluation made by the approved valuators.

Corporate transformation and merger

One of the landmark provision is relating to allowing for one or more companies - even if it is under liquidation - to merge with another company of its own form or from another form, provided that the application is submitted to the Registrant through the electronic system.

The company buys its shares

A company wishing to purchase its shares must obtain the approval of the Registrar based on an application submitted for this purpose through the electronic system, provided that the application is accompanied by approval of the regulatory authorities under which the company is subject to control, the company’s board of directors’ decision , the form of the advertisement that must be approved by the Registrar before publication and any other data or information requested by the Registrar.

Employee Stock Option & preference shares

The ER has also set out provisions and rules related to issuance of employee stock options and preference shares.

Legal Advisor 

Every company must have a legal advisor, either by appointing a full-time worker in the company, or contracting with one of the law firms and legal advisors registered in Oman.

The Limited Liability Company 

The ER has provided detailed provisions in respect of the new form of legal companies introduced by the Commercial Companies Law
which is the One Person Limited Liability Company.

Disposal of Shares 

Every disposition of the partners’ shares must be published via the electronic system after being registered with the Registrar. Management of Limited Liability Company Partners in a limited liability company may not appoint a manager to work in another company, except after he terminates his services in the company in which he works. An exception to this is the appointment of managers in companies that own shares in the company in which he was appointed.

Information required to be shown in formal documents 

The ER requires commercial companies that wish to issue any advertisements, contracts or documents, warnings, receipts, papers or publications, to include the company’s name, legal form, address, work center, commercial registration number, means of communication, and any other data specified by the MOCIIP.

Closed joint stock companies 

The ER has detailed provisions related to rules of establishing a closed stock joint company, appointment of its board of directors, appointment & removal of external auditors, limits of remuneration & sitting fees of the board of directors, rules related to transactions with related parties etc. A new provision introduced on possibility of conducting ordinary general meetings via virtual means provided by Muscat Clearing & Depository SAOC.

The takeaway

The issuance of the ER has brought clarity to a number of provisions enacted in the Commercial Companies Law, which are in line with the overall direction of the country to strengthening the corporate governance regime, speedier processing and enhancing the ease of doing business for the local and foreign investors. We expect to gain more insights of the implications of the new ER as they start to be implemented in the coming period.