GCC Indirect Tax Weekly Digest

KSA developments

Tax Amnesty: Health Checks to ensure compliance and minimize risk

With the aim to further mitigate the economic effects of the COVID-19 outbreak, the Zakat, Tax and Customs Authority (ZATCA) has announced the relaunch of the initiative to waive penalties on certain taxes, including Corporate Income Tax, Withholding Tax (WHT), Value Added Tax (VAT), Real Estate Transaction Tax (RETT), and any errors relating to e-invoicing. The period to apply for the relief started on 1 June 2022 and will end on 30 November 2022.

What does this mean for your business?

The penalty Amnesty provides an excellent opportunity for businesses to review their past returns on VAT and other taxes, as well as take corrective action where needed. To ensure compliance and minimize the risk of penalties being imposed by the ZATCA after 30 November 2022, we recommend that businesses start reviewing their VAT returns and other taxes as soon as possible.

Deloitte can help

We have designed an approach and methodology to support businesses in identifying and correcting errors and issues in their past VAT returns and other taxes. If you have not yet considered a review of these taxes, our advice is to carry out this exercise.

The reviews can be carried out individually or as part of a coordinated program across all taxes and some of the key focus areas can include:

• VAT and RETT Health CheckVAT return review, including the impact of the VAT rate increase, transitional provisions, application of zero-rate of VAT, revenue reconciliation and VAT applicability on the accrued revenue, among others.
• IT system review, including transaction mapping and VAT logic.
• Maximize your input VAT credit recovery and managing cash flow.
• Assess the applicability of RETT on the transaction(s) after 4 October 2020, and the possibility to apply for the exemption from RETT.
• Explore an opportunity to apply for a licensed Real Estate Developer refund.
• Review the ongoing cases pending with ZATCA, Internal Settlement Committee (ISC), and/or Saudi General Secretariat of Zakat, Tax, and Customs Committees (GSZTCC).
• Share recommendations on the identified issues, opportunities and to save on penalties.

Corporate Tax and Zakat Health Check

• Review the submitted Tax/Zakat returns along with the financial statements to check if the returns have been filed accurately.
• Review the current Tax/Zakat calculation methodology.
• Identify the expenses and items in the Tax and Zakat calculation which may likely result in additional Tax and Zakat for the company.
• Identify the areas which could result in potential Tax and Zakat savings for the company.
• Review the final assessments issued by ZATCA for prior years.
• Review of the objection appeal memos and appellate decisions relating to the assessed years.
• Prepare a high-level analysis and findings report to advise the exposure of additional taxes and Zakat.
• Provide recommendations on the identified issues and opportunities with the aim to explore the opportunity to apply for the Amnesty and save delay fines and penalties.

WHT Health Check

• Review the annual withholding return, compare the annual WHT returns with the monthly WHT returns.
• Compare the information disclosed in the Tax and Zakat declaration (movement schedules) with the annual WHT form.
• Compare the amounts reported in the annual WHT return with that in VAT returns (for applying reverse charge VAT).
• On a sample basis, review the treaty benefits claimed by the company when filing the monthly WHT returns to determine the strength of the company’s claim.
• Review material contracts to ensure the appropriateness of the WHT rate applied.
• Advise the potential WHT exposure and provide quantification of the applicable delay fines and penalties which may be payable by the company.

E-invoicing Health Check

• Review phase one of the e-invoicing process and highlight the missing data points and system requirements among others.
• Validate the readiness of phase two of e-invoicing and identify the gaps.
• Share recommendations on the issues identified for phase one and the gaps to cover for the phase two implementation.

This is an excellent opportunity to be able to deal with any past errors or difficulties in a practical and effective manner.

Deloitte recently held a webinar on the Tax Amnesty, in both English and Arabic, which can be accessed here.

UAE developments

FTA announces increased frequency of inspection visits

The United Arab Emirates (UAE) Federal Tax Authority (FTA) announced that it has significantly increased the frequency of inspection visits to monitor non-compliance with the tax legislation.

In the first half of 2022, the FTA conducted 9,948 inspection visits across the UAE together with the Ministry of Economy, the Federal Authority for Identity, Citizenship, Customs, and Port Security, and various Economic Development departments across the UAE. The number of visits represents an increase of 104% over the same period in 2021.

The inspections resulted in the seizure and confiscation of approximately 5.5 million units of non-compliant tobacco products, and 1.07 million units of other non-compliant excise goods, with a total tax liability value of the seized goods of AED 130.4 million.

The increased frequency of inspections indicates that as the VAT and Excise Tax systems in the UAE mature, the FTA expects greater compliance from taxpayers and is increasing its focus on inspections and enforcement. As such, businesses should work to ensure that their operations and tax position are in compliance with the UAE tax legislation.

How can you prepare for an FTA inspection?

Deloitte can assist your business with preparing for an FTA inspection by conducting a mock audit to simulate the type of review the FTA may conduct. 

The review would identify points of non-compliance and provide you with recommended actions to bring your business into compliance with the UAE tax legislation prior to an FTA inspection.

Oman developments

OTA launches field visit campaign to “raise awareness” 

The Auditor Service Department of the Oman Tax Authority (OTA) has launched a “field awareness campaign” to highlight the “importance of correct tax compliance and to raise awareness of VAT requirements for taxpayers, including: 

• How to correctly record
• Process of filing VAT returns
• Necessity for timely submission of VAT returns

This initiative is part of a wider action plan of the OTA to ensure taxpayers are aware of VAT requirements, taking these requirements seriously and doing what is expected to be compliant. 

Expect firmer action in future as this (and other) OTA campaign(s) roll out – in the second year of VAT expect more scrutiny, audits, assessments and penalties.

This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.