GCC Indirect Tax News Roundup - Quarter Three 2023

The United Arab Emirates (UAE)

Tax Procedures

Issuance of a new Tax Procedures Executive Regulations 

The Prime Minister of the UAE, H.H. Sheikh Mohammed Bin Rashid Al Maktoum, issued Cabinet Decision No. (74) of 2023 on the Executive Regulation of Federal Decree-Law No. (28) of 2022 on Tax Procedures (“New Executive Regulation”), which repealed Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures and its amendments (“Previous Executive Regulation”).

The new Executive Regulation was published in the Official Gazette and was effective from 1 August 2023.

The main changes in the New Executive Regulation are in relation to the following topics:

• Definitions

• Recordkeeping

• Period of record keeping

• Language

• Tax registration amendments

• Deregistration

• Voluntary disclosures

• Means of notification

• Tax agents

• Tax audits

• Disposal of seized goods

• Reconciliation process for tax evasion crimes 

• Extension of deadlines  

Further details of the New Executive Regulations are available in PwC’s news alert that can be accessed via this Link.

In addition, the FTA issued a public clarification (TAXP006) on the New Tax Procedures Executive Regulation that can be accessed via this Link. 

Value Added Tax

Introduction of a special reverse charge mechanism for the supply of electronic devices

Cabinet Decision No. (91) of 2023 was published in the official gazette issue No. 758 dated 30 August 2023 to introduce a special reverse charge mechanism applicable to the local supply of electronic devices. 

The new decision sets the conditions and requirements that should be met for the application of VAT through the reverse charge mechanism. The effective date of the new decision is 60 days from the date of its publication in the official gazette i.e. effective from 29 October 2023.

An Electronic Device, as defined in the new decision, refers to “mobile phones, smart phones, computers, tablets, and their spare parts”. A new mechanism to apply VAT on the supply of electronic devices is provided as follows: 

Where a supplier makes a supply of electronic devices to a registered recipient in the UAE, and the recipient intends to either resell such devices or use them to produce or manufacture electronic devices, the following rules shall apply:

• The supplier shall not be liable for calculating VAT in relation to the supply of electronic devices and shall not include it in his VAT return.

• The recipient of electronic devices shall calculate VAT on the value of electronic devices supplied to him and shall be responsible for all applicable VAT obligations related to the supply and for calculating the due VAT in respect of such supplies.

Further details of the special reverse charge mechanism for the supply of electronic devices are available in PwC’s news alert that can be accessed via this Link. 

In addition, the FTA issued a public clarification (VATP034) on the application of the reverse charge mechanism on electronic devices among registrants in the UAE that can be accessed via this Link. 

Customs and Trade

New Free Trade Agreements

The UAE has entered into new Comprehensive Economic Partnership Agreements (CEPAs) with Turkey, Indonesia and Georgia. Further details are listed below.

• Turkey - UAE CEPA

The CEPA between Turkey and the UAE entered into force on 1 September 2023. The agreement aims to reduce or eliminate eliminating duties on 82 percent of UAE product lines. This measures are expected to boost the UAE trade with Turkey to $40 billion within the next five years. The full text of the agreement can be found here.

• Indonesia - UAE CEPA

The CEPA between Indonesia and the UAE entered into force on 1 September 2023. The agreement aims to reduce or eliminate customs duties for most of the UAE products lines. This measures are expected to boost the UAE trade with  Indonesia to $10 billion within the next five years. The full text of the agreement can be found here. PwC news alert on this CEPA can be found here. 

• Georgia - UAE CEPA

The CEPA between Georgia and the UAE was signed on 10 October 2023. The agreement, which is expected in enter into force in the coming months, will reduce the customs duty rates on 90 percent of UAE product lines. 

EU Carbon Border Adjustment Mechanism

On 1 October 2023, the European Union (EU) Carbon Border Adjustment Mechanism (CBAM) was implemented. CBAM will effectively add a ‘carbon price’ to designated goods that are imported into the EU. This would apply to exports from the Middle East in the following product categories:

• Aluminium

• Iron and steel

• Fertilisers

• Hydrogen

• Electricity

• Cement

CBAM may be extended to other products groups, such as polymers and organic chemicals (2025) and other product groups under the EU Emissions Trading System (EU ETS) (crude petroleum, petroleum products, inorganic chemicals, industrial gases, synthetic rubber, non-ferrous metals, aviation and shipping, etc.).

The transitional period of CBAM (1 October 2023 - 31 December 2025) requires EU importers to report quarterly the carbon footprint of imported products. The entity required to import is the ‘authorised declarant’, i.e. the importer into the EU. This must be an EU established entity. If you are a non-EU entity importing via an indirect representative, then your representative may be liable to register and report for CBAM.

The first report is due on 31 January 2024. During this period, Middle East exporters need to:

• Align with businesses and customers in the EU to ensure they are registered for CBAM.

• Gather the necessary carbon and greenhouse gases (also known as GHGs) information relating to their products.

• Carry out a CBAM impact assessment.

• Preparation of the necessary information and documents to provide to EU importers to report. 

The definitive CBAM reporting period will commence from 1 January 2026, which will require the authorised declarant to purchase CBAM certificates which are linked to the carbon cost of their imported goods and must be provided as part of an annual declaration. 

The Kingdom of Bahrain (Bahrain)

Value Added Tax

NBR issued a ‘VAT Deregistration Manual’

On 30 August 2023, the National Bureau for Revenue (‘NBR’) in Bahrain issued a ‘VAT Deregistration manual’ on their website.

The manual aims to provide taxpayers with the necessary guidance for the deregistration procedures and an overview of voluntary and mandatory deregistration requirements. 

The ‘VAT Deregistration Manual’ is available in English and can be accessed here.

Excise Tax

NBR issued an Excise Guide

On 17 August 2023, the NBR issued an Excise Guide which provides an overview of the Excise rules and procedures in the Kingdom of Bahrain and how to comply with them, together with the necessary background and guidance to help with determining how an activity is treated for Excise purposes.

The ‘Excise Guide’ is available in English and can be accessed here.