GCC Indirect Tax News Roundup - Quarter Four 2022

VAT in the Digital Age

In response to the ever-increasing digitisation of the economy, on 8 December 2022, the European Commission (EC) published its long-awaited proposals to revamp the EU’s VAT system. The proposals have three main objectives:

1. Modernising VAT reporting obligations, by introducing Digital Reporting Requirements, which will standardise the information that needs to be submitted by taxable persons on each transaction to the tax authorities in an electronic format. At the same time it will impose the use of e-invoicing for cross-border transactions;

2. Addressing the challenges of the platform economy, by updating the VAT rules applicable to the platform economy in order to address the issue of equal treatment, clarifying the place of supply rules applicable to these transactions and enhancing the role of the platforms in the collection of VAT when they facilitate the supply of short-term accommodation rental or passenger transport services, but also for the supply of goods in almost all cases; and

3. Avoiding the need for multiple VAT registrations in the EU by introducing a Single VAT Registration process. That is, improving and expanding the existing systems (One Stop Shop, OSS and Import One Stop Shop, IOSS) for certain transactions as well as introducing the mandatory reverse charge mechanism.

We see similar developments in the GCC e.g. the launch of the second phase of e-invoicing implementation in the KSA as of 1 January 2023 (in waves) and the introduction of additional reporting requirements in the UAE for taxpayers making supplies through e-commerce, effective from 1 July 2023.

The United Arab Emirates (UAE)

Value Added Tax

United Arab Emirates: Amendment of the VAT Decree-Law

On 26 September 2022, the President of the UAE, H.H. Sheikh Mohamed Bin Zayed Al Nahyan issued the Federal Decree-Law No.18 of 2022 amending some provisions of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (the VAT Law). 

In total, 24 articles were changed and one article on the statute of limitation was added to the VAT Law. The amendments will take effect from 01 January 2023. 

An overview of the major changes is provided below:

• Statute of limitations: a new article (Article 79 bis) was added to the VAT Law, concerning exceptional situations when the FTA can conduct a tax audit or issue a tax assessment after the expiry of 5 years from the end of the relevant tax period.

• Domestic reverse charge: The domestic reverse charge mechanism will apply to Pure Hydrocarbons (i.e.“any kind of different pure combinations of a chemical equation made only of hydrogen and carbon”).

• Recovery of input VAT: A taxable person could recover VAT paid or declared on the import of goods or services incurred by them before VAT registration (on meeting certain requirements). Moreover, government entities and charitable organisation can recover input VAT that is incurred for the provision of sovereign and charitable activities respectively.

• Output tax adjustment and timelines for credit notes: a taxable person should issue a credit note when the tax treatment applied to a supply was incorrect. Moreover, a tax credit note should be issued within 14 days from the date on which any of the instances provided in Article 61(1) of the VAT Law occurs.

• Payment of tax - A taxable person has to pay the VAT to the FTA in cases where it issues a tax invoice stating VAT on it or receives an amount as VAT.

Further information on the amendments of the VAT Law are accessible through this link.

Amendment of the UAE VAT Executive Regulations

On 21 October 2022, the UAE Cabinet issued Cabinet Decision No. 99 of 2022 amending the provisions of articles 3 and 72 of the UAE VAT Executive Regulations. The amendments are effective from 01 January 2023. 

The amendment includes:

• VAT treatment of functions performed by members of a board of directors: changes under Article 3 of the UAE VAT Executive Regulations stipulates that the functions of a member of a board of directors are no longer considered a supply of services. The FTA has issued a public clarification (VATP031) to clarify the VAT treatment for performing the function of director on a board of directors by a natural person.
  

• Introduction of new record keeping requirements for taxable supplies made through electronic commerce: Article 72 requires taxable persons making taxable supplies through electronic commerce to keep records of the transaction to prove the Emirate in which the supply is received.

Further information on the amendment of the UAE VAT Executive Regulations are accessible through this link .

Excise Tax

Amendment of the Excise Tax Decree-Law

A new Federal Decree-Law No. 19 of 2022 has been issued to amend some provisions of the Federal Decree-Law No. 7 of 2017 on Excise Tax. The amendments take effect from 14 October 2022. 

Additionally, The FTA has issued a new public clarification (EXTP009) on 13 October 2022 detailing the articles that have been amended with guidance and explanations on the key changes introduced.

The main changes to the Excise Tax Decree-Law relate to the following topics: 

• Exception from registration: An exception from the registration requirement arises for the following activities, if conducted for purposes other than business: import of excise goods and/or release of excise goods from a designated zone.

• Payment of Excise Tax amounts received: Any amount received by a person purporting as excise tax, or any invoice issued which mentions excise tax, is deemed to be excise tax and needs to be paid to the FTA.

• The statute of limitations: The FTA should not conduct a tax audit or issue a tax assessment after the expiry of 5 years from the end of the relevant tax period, except in the following cases: if the taxpayer is notified of the commencement of the tax audit / issuing of the tax assessment before the expiry of the 5-year period; if the tax audit / tax assessment relates to a voluntary disclosure submitted in the 5th year from the end of the tax period; tax evasion and failure to register within the prescribed period.

• Timeframe for submission of voluntary disclosure: The submission of a voluntary disclosure by taxable persons should take place no later than 5 years from the end of the relevant tax period.

Other changes have also been introduced as part of the amendments of Law, e.g. the addition of new technical definitions (“Tax Audit”, “Tax Procedures Law”, etc.), among others.

Please refer to this link for further details on the amendment of the Excise Tax Law and the newly issued public clarification.

Tax Procedures Law

New Tax Procedures Law

On 30 September 2022, the President of the UAE, H.H. Sheikh Mohamed Bin Zayed Al Nahyan issued Federal Decree-Law No. 28 of 2022 on Tax Procedures (the new TPL) which revokes Federal Decree-Law No. 7 of 2017 on Tax Procedures as amended by Federal Decree-Law No. 28 of 2021 (the current TPL). The new TPL will be effective as of 1 March 2023.

An overview of the major changes is provided below:

• Voluntary disclosures process: Taxpayers are now required to submit a voluntary disclosure to correct an error or report an omission even in cases where the error or omission does not result in a difference in the tax due.

• Statue of limitation: the statute of limitation of 5 years will not apply to cases where the FTA has issued a notice to audit the taxable person, provided such an audit is completed within 4 years from the date of issuance of the notice. If the taxable person files a voluntary disclosure in the 5th year from the end of the relevant tax period, the statute of limitation will be extended by one year. A voluntary disclosure cannot be filed by the taxable person after the lapse of 5 years from the end of the relevant tax period.

• Dispute resolution process: a taxpayer can submit an application to the FTA to review its tax assessments and related administrative penalties (in part or in full) issued within 40 business days from the date of receiving the tax and penalty assessment, and subject to that the person has not submitted a reconsideration application in relation to the same assessment prior to submitting the tax assessment review request. 

• Tax crimes and applicable penalties: tax evasion crimes and penalties have been amended. Moreover, a reconciliation procedure between the taxpayer and the authorities is available now for tax crimes.

Please refer to this link for further details on the new TPL.

Customs

Introduction of attestation fees on commercial invoices for imports to the UAE local market

Dubai Customs has issued Customs Notice No. 11/2022 on procedures and fees of commercial invoices attestation by the Ministry of Foreign Affairs & International Cooperation (“MoFAIC”) for imports to the UAE local market. 

This notice will come into force on 01 February 2023.

A fixed service fee of AED 150 for attestation of each commercial invoice of imported goods valued AED 10,000 or more under import to local and import for re-export declarations. It is important for businesses to engage with this requirement to be fully compliant with customs regulations and avoid the risk of incurring fines or penalties.

Please refer to this link for further details on this matter.

EmaraTax

The new platform of the FTA, EmaraTax went live

On 05 December 2022, the new platform of the FTA, EmaraTax went live.

EmaraTax can be accessed via https://eservices.tax.gov.ae/. This is the same web address as the previous portal. 

EmaraTax significantly enhances the way that taxpayers can access the FTA’s services, pay their taxes and obtain refunds. The new online platform also greatly enhances the ability of the FTA to administer taxes in the UAE, enables better, faster decision-making and earlier engagement with taxpayers that need support.

If you already have an account with the FTA, your details have been migrated to EmaraTax along with any draft returns and other declarations.

You will only need to reset your password the first time you login to EmaraTax. Detailed password reset instructions will be emailed to you and included on our dedicated EmaraTax webpage https://tax.gov.ae/en/emaratax.aspx. This webpage also links to FAQs and Walkthrough videos.

You may approach the FTA for any inquiries or issues you may be facing through your account on EmaraTax or directly call the new call center number 80082923.

The Sultanate of Oman (Oman)

Value Added Tax

Oman: Amendments to the VAT Executive Regulations

On 16 October 2022, the Oman Tax Authority (‘OTA’) has issued Ministerial Decision No. 456/2022 (MD 456/ 2022) amending certain provisions of the Oman VAT Executive Regulations (issued under MD 53/ 2021).

The amendments are effective from 17 October 2022.

The amendments are currently available only in Arabic and are accessible here.

The major amendments to the Oman VAT Executive Regulations are summarised below:

• Telecommunication services: changes to the place of supply for telecommunication services based on various scenarios (irrespective of whether customer is taxable or non-taxable). 

• Financial services: the extension of the VAT exemption beyond regulated bodies and could also be applicable to any businesses providing financial services (such as financing group companies).

• Time limit for issuing tax invoices: The amendment specifies a 15 days period from the date of supply to issue a tax invoice (including full tax invoices, simplified tax invoices and summary tax invoices). 

• Refund of tax paid by foreign Governments, diplomatic, consular bodies, etc.: The amendment removed specific conditions and procedures have from the VAT Executive Regulations. The refund will now be available subject to conditions and controls determined by the OTA, in coordination with the Ministry of Foreign Affairs (MoFA) and after approval of the Ministry of Finance (MoF).

• Electronic tax invoice: Introduction of a new definition for electronic tax invoice.

• Failure to issue tax invoices: Administrative penalty prescribed for failure to issue tax invoices.

Please refer to this link for additional information about the amendments to the VAT Executive Regulations.

Qatar

Excise Tax

Qatar: Implementation of Digital Tax Stamps on Cigarettes

Based on Article no. 13 of the Minister of Finance’s Decision No. 2 of the year 2022 regarding the Digital Tax Stamps to be placed on Excisable Goods, which states that the commencement date of the implementation of Digital Tax Stamps on Excisable Goods for each stage shall be announced on the GTA website or by any other means.

It has been decided that the implementation of Digital Tax Stamps on cigarettes will be applied according to the following schedule:

Excise Tax

Qatar: General Tax Authority issued Minister’s decision No. 12 on excise tax refunds 

On 29 September 2022, the Minister of Finance issued the Ministerial Decision No.12 2022 on Excise Tax refund. 

The decision was published in the Official Gazette No.13-2022 dated 9 November 2022. This decision takes effect from 10 November 2022. 

In addition to the cases mentioned in Article 12 of the Excise Tax Law, the decision specifies the additional cases of refund of excise tax paid on excisable goods released for consumption but not consumed in Qatar. These cases include damaged, lost or stolen excise goods, excise goods which are sold locally but are intended to be consumed outside Qatar (e.g. goods to be sold in the duty free shops, on-board consumption, etc.)

In reference to Article 12 of the Excise Tax Law, the Minister of Finance issued decision No.12 for the year 2022 to specify the additional cases of excise tax refund as follows:

1. Excise goods that are damaged or lost outside a tax suspension arrangement and the taxable person proves that the damage or loss is due to reasons beyond their control;

2. Excise goods that are acquired locally by military authorities in accordance with regional and international agreements to which Qatar is a party of the agreement;

3. Excise goods that are purchased locally by the duty free shops and where exemption conditions are met;

4. Excise goods that are picked up locally by airlines or international shipping companies and sold or consumed during international passenger transportation for which exemption conditions are met;

5. Excise goods that are used exclusively for therapeutic purposes by health institutions and where the conditions of exemption are met; 

6. Excise goods that are exported or re-exported by a person who is not obligated to pay tax.
   
   Businesses dealing in excisable goods are required to review the decision and assess the impact of the additional refund scenarios on their business.