GCC Indirect Tax News Roundup - Quarter Four 2023

An overview of the current indirect taxes applicable in the GCC

UAE: 

VAT standard rate of 5% (reduced VAT rate 0%).

Excise Tax rates: 100% for tobacco, tobacco products, electronic smoking devices and energy drinks; and 50% on carbonated and sweetened drinks.

KSA:

VAT standard rate of 15% (reduced VAT rate 0%).

Real Estate Transaction tax (RETT) applicable at 5% (effective 4 October 2020).

Excise Tax rates: 100% for tobacco products, electronic smoking devices and energy drinks; and 50% on soft drinks and sweetened drinks.

Bahrain:

VAT standard rate of 10% (reduced VAT rate 0%). 

Excise Tax rates: 100% for tobacco (and related) products and energy drinks; and 50% on soft drinks.

Oman:

VAT standard rate of 5% (reduced VAT rate 0%).

Excise Tax rates: 100% on tobacco and related products, energy drinks and special purpose goods (pork & alcohol products), 50% on carbonated drinks.

Qatar:

VAT is not yet introduced in Qatar.

Excise Tax rates: 100% for tobacco products and energy drinks and special purpose goods (pork & alcohol products); and 50% on carbonated drinks.

Kuwait:

VAT and Excise Tax are not yet introduced in Kuwait. 

The United Arab Emirates (UAE)

Value Added Tax

Criteria to be followed in the determination of parts and pieces of Electronic Devices 

The Federal Tax Authority (FTA) issued a public clarification (VATP0035 dated 02 December 2023) to provide more clarity on the criteria of determining of parts and pieces of Electronic Devices that were set out in the Ministerial Decision No.262 of 2023 in relation to the introduction of a special reverse charge mechanism for the supply of electronic devices.

The Public Clarification addressed the three criteria specified in the said ministerial decision and expanded on explaining each criteria as follows:

• Normally used in the manufacturing or production and necessary for the normal operation - Criterion one applies to essential manufacturing components for mobile phones, smartphones, computers, and tablets. This includes items like coils, capacitors, and microchips. It also extends to features in smartwatches, like accelerometers and processors, linked to smartphones or operating independently on cellular networks. 

• Pieces and Parts that are not normally used for the manufacturing or production of Electronic Devices, but are normally necessary for the normal operation of Electronic Devices - Criterion two pertains to components not typically used in the manufacturing of electronic devices but are essential for their regular operation. 

• Pieces and parts that meet the third criterion are those pieces and parts that are a replacement for any of the goods that meet either of the first two Criteria - Criterion three refers to replacement pieces and parts, which are substitutes for components meeting the first two criteria. For instance, components like coils, capacitors, couplers, diodes, regulators, resistors, transistors, and microchips in smartphones, mobile phones, and tablets fulfill the first criterion.

For further details on the public clarification please follow the link. 

Excise Tax

Amendment of the Excise Tax Executive Regulation

Cabinet Decision No. 108 of 2023 was published in the official gazette issue No. 763 dated 15 November 2023 to amend some provisions of the Cabinet Decision No. 37 of 2017 (The Executive Regulation of the Excise Tax) effective starting 1 December 2023 except for clauses 3 and 4 of article 22 in relation to refund requests in special cases.

Non exhaustive list of key amendments is as follows:

• Introducing the definition of new terms which are “official evidence”, “commercial evidence”, and “shipping certificate”.

• Introducing rights for the tax authority to forcefully deregister an Excise Tax taxable person in specified cases.

• Excise Tax Designated Zones that fail to continue to comply with the conditions and requirements will be treated as normal lands forming part of the UAE mainland.

• Non taxable Persons who are exporting Excise Goods (direct and indirect export) may request a refund of the previously paid Excise Tax on such goods subject to compliance with the conditions and evidentiary requirements (effective from 1 June 2024). 

Further details of the Cabinet Decision can be viewed through this link. 

Tax Agents 

Professional Development Requirements for Natural Person Tax Agents

The FTA issued Decision No. 15 of 2023 on 13 December 2023 (Effective 1 January 2024) to set out the professional development requirements for qualified natural person Tax Agents. 

Based on the decision, Tax Agents listed in the Authority's Register for corporate or indirect taxes must:

• Undergo a minimum of 20 hours of structured continuous professional development annually, focusing on technical tax programs.

• Complete a minimum of 30 hours of structured continuous professional development annually. This should include a minimum of 15 hours each dedicated to corporate tax and indirect taxes.

• Fulfill the above specified hours in the following year, in case of failing to complete them in a given year, in addition to any remaining hours from the previous year.

• Maintain records documenting completed hours for both structured and unstructured professional development, using the form provided by FTA.

• Keep evidence of attended structured continuous professional development and undertaken unstructured continuous professional development, which must be provided to the Authority upon request.

From its side, the Authority will provide guidance on the types of programmes that may be considered structured or unstructured continuous professional development, as well as a list of accredited courses that fall under structured continuous professional development and accredited course providers who can offer such courses.

Further information can be found through the following link.

The Sultanate of Oman (Oman)

Tax Exemptions

Regulating the governance of tax exemptions and launch of a new service on the e-portal of the OTA

On 9 November 2023, His Majesty Haitham bin Tariq issued Royal Decree No. 80/2023 to regulate the tax exemption and clearly delineate the responsibilities for granting such exemptions. 

The responsibility for overseeing tax exemptions has been shifted from the Head of the Tax Authority to the Minister of Finance in all instances specified in laws and royal decrees, encompassing:

• The Financial Law issued by Royal Decree No. 98/47

• Income Tax Law issued by Royal Decree No. 28/2009

• The Excise Tax Law issued by Royal Decree No. 23/2019

• Value Added Tax Law issued by Royal Decree No. 121/2020

• Tax Authority System and Approval of its Regulatory Structure issued by Royal Decree No. 42/2020

The responsibility for customs duties exemption in Oman remains with the Royal Oman Police, as it was not initially under the jurisdiction of the Tax Authority. 

Due to the aforementioned changes, there is an expectation for substantial revisions to Oman's legislation and regulations.

Recent addition to the OTA E-portal services

For the purpose of saving time and managing the tax matters more efficiently, the Oman Tax Authority (OTA) has released an announcement regarding the introduction of a new service on the e-portal allowing for the booking of appointments with OTA representatives.

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

VAT Executive Regulation

Amendment to Oman VAT Executive Regulation

The OTA has amended the VAT Executive Regulation to allow refunds of VAT in certain additional instances. These amendments are summarised below.

• Refund of VAT paid by charitable organisations on its procurements:
  Charitable organizations in Oman can apply for a VAT refund on goods and services related to their activities. The refund process, initiated through a quarterly application to the OTA, requires supporting documents, including tax invoices and proof of deduction from the organization's bank account, for amounts exceeding OMR 15.

• Refund of VAT paid on import from a non-taxable person in excess of the tax actually due on the import:
  Taxable individuals in Oman can apply for a VAT refund on imports from non-taxable entities, provided the refund exceeds OMR 15. The application, submitted quarterly to the OTA, requires evidence of Customs declaration amendment and recovery of overpaid Customs Duty. This is particularly helpful in cases of unclear or incorrectly applied values.

• Refund of VAT paid on imported goods upon re-export:
  A taxable person can apply for a refund in a case where VAT has been paid on import of goods and subsequently are re-exported in accordance with the conditions and controls stipulated in the Common Customs Law, in which case the customs duty is refunded if collected. The taxable person can file a quarterly refund application to the OTA in the specified form, provided that the amount of VAT refund exceeds OMR 15. The refund application should also include the evidence of tax payment and a statement of re-export and customs duty recovery, if collected.

Further details of the amendment of the VAT Executive Regulation are available in PwC’s news alert that can be accessed via this link.

The takeaway

Taxpayers are now, more than ever, required to keep up with the pace of indirect tax changes in the region and stay ahead of the curve. 

For a deeper discussion on various aspects listed in the publication that are applicable to your businesses, please get in touch.