GCC Indirect Tax Digest
August 31, 2021
KSA developments
ZATCA publishes New National Rules of Origin
The Kingdom of Saudi Arabia (KSA) Zakat, Tax and Customs Authority (ZATCA) has published a detailed New National Rules of Origin guideline in Arabic.
The new set of National Rules of Origin entered into force on the 2nd of July, 2021 and is expected to be applicable until the entry into force of the GCC Unified Rules of Origin.
The guideline provides a detailed overview of the rules and the conditions that must be met in order for goods to qualify for GCC preferential treatment, including customs duty exemption.
The issuance of the National Rules of Origin by KSA represents a major development in the context of the functioning of the GCC Customs Union. It is critical for importers in KSA and manufacturers/exporters in the rest of the GCC countries to carefully assess their manufacturing activities and associated supply chains against the conditions established.
Conditions for verification of proof of origin
- The importer is obligated to provide a cash or a bank guarantee, covering the value of customs duties and other taxes related to the goods, for which preferential treatment has been requested.
- The bank guarantee must be issued by a bank subject to the supervision of the Central Bank in Saudi Arabia.
- The importer has the right, within a period of 90 days from the date of release of the goods, to apply for a refund for the value of the cash guarantee, or to release the submitted bank guarantee, by applying in the refund request page on the authority’s website, provided that the application should include:
- Certificate of Origin.
- Related invoices for the goods.
- Attested Localization Percentage Certificate (issued from the competent authority in the country of origin).
- A report from a certified public accountant licensed in the country of origin (having a branch in the Kingdom registered and licensed by the Saudi Organization for Auditors and Accountants) showing the percentage of value added according to the national rules of origin.
- The Authority has the right to request any additional documents. The Authority along with other relevant Authorities in the KSA have the right to verify the validity of all documents, by visiting establishments producing goods and products in the GCC countries or seeking the assistance of a third party for verification.
- The importer has the right to object to the authority’s decision issued in accordance with the GCC Unified Customs Law.
We expect that these assessments will lead to cases where the Rules of Origin may not be met, and consequently the goods shipped to KSA may be subject to customs duty (up to 25% for certain products). In view of this, businesses need to evaluate potential changes in their activities to accommodate the new rules and continue to access KSA on duty free basis.
ZATCA publishes VAT guideline on e-commerce
ZATCA has published a Value Added Tax (VAT) guideline on electronic commerce (e-commerce). The guideline is currently available in Arabic.
The guideline is intended to provide clarity to businesses involved with e-commerce in KSA on the VAT rules applicable to their transactions. This includes determining the VAT treatment, place of supply, and responsibility to account for VAT on e-commerce sales made to customers in KSA.
Businesses involved with e-commerce in KSA should familiarize themselves with the guideline to determine if they are correctly accounting for VAT on their transactions.
ZATCA publishes English version of VAT guideline on Government Bodies
ZATCA has published the English version of its Value Added Tax (VAT) guideline on Government Bodies. The guideline was previously published in Arabic.
The guideline is intended to provide Government Bodies with clarifications with respect to the interpretation of Economic Activity for VAT purposes, in addition to the VAT treatment of transactions between persons and such bodies.
In addition, the guideline provides information on the VAT treatment of activities undertaken by these bodies, especially those activities that are subject to VAT, and those that are outside the scope of VAT.
UAE developments
Dubai Customs introduces comprehensive guide on its customs services during EXPO2020 Dubai
Dubai Customs launched a comprehensive guide for all the services and facilities it provides to enable traders and businesses, which selected Dubai as their preferred investment destination, increase their trade and boost their revenues. The guide will be introduced to the participants and exhibitors of EXPO2020 Dubai.
Dubai Customs has launched and developed an exclusive smart customs channel for EXPO 2020 to help clear shipments in record time, with the Dubai Customs teams working around the clock aided by advanced customs systems including the smart risk engine, pre-arrival online clearance of goods, the B2G channel, the Virtual corridor, AEO program, smart post-clearance audit, iDeclare, among other initiatives.
Dubai Customs publishes a notice on movement of e-commerce goods between companies
Dubai Customs released Customs Notice no. 13/2021 related to the import of goods between companies via e-commerce channels. This notice applies to commercial companies, including free zone companies and customs warehouses, and will enter into force on 14th November 2021.
Free zones and customs warehouses involved in e-commerce activities may take advantage of registering with the Dubai Customs customer registration system and avail the benefits stipulated in the aforementioned Customs Notice.
Specifics
- Companies wishing to enroll in e-commerce activity must register with Dubai Customs customer registration system without the need to add the activity to their trade license.
- Logistics companies may clear goods on behalf of companies registered under the Dubai Customs customer registration system.
- The import/export of goods for e-commerce purposes must be done by processing the Customs Declaration through Dubai Trade portal in accordance with regular procedures.
- Customs Declarations with value of goods not exceeding AED 30,000 will be exempted from relevant customs service charges.
- Companies are required to obtain necessary approvals from competent authorities for importing restricted goods or goods subject to special procedures.
- Electronic documents and invoices are accepted for customs clearance and the records for the same must be retained for submitting to Dubai Customs upon request.
Deloitte “GCC Indirect Tax” mobile app
New Deloitte “GCC Indirect Tax” bilingual mobile app provides specialized guidance to professionals
The VAT landscape continues to evolve across the Gulf Cooperation Council (GCC). The Sultanate of Oman has recently introduced VAT which came into effect on 16 April 2021. Four out of the six GCC countries have implemented VAT within the first four years since the initial commitment was made between the Gulf Member States signing the GCC VAT Framework Agreement.
To address the growing GCC market need for guidance on Indirect Tax, Deloitte has launched an app entitled “GCC Indirect Tax”, a next generation version of the “VAT in the GCC guide” mobile app. In addition to the wealth of material in the current app, the new version provides the app user with a knowledge base of material, and constant updates of essential Indirect Tax information. It presents a wide range of topics including VAT, Customs and Global Trade, Excise Tax and Tax Technology.
“VAT implementation is only one aspect of the wider Indirect Tax environment in the GCC. Over the past 12 months we have seen the expansion of Excise Tax in the UAE and KSA on additional products, the introduction of a new Real Estate Transaction Tax (RETT) in KSA, the publication of the Excise Tax Executive Regulations in Oman, which was the forerunner to the current VAT implementation, as well as a significant increase in tax authority audit activity and publication of additional guidelines and other pieces of industry and issue-specific guidance” said Mark Junkin, Deloitte Middle East Indirect Tax Leader.
“These trends tell us that effective Indirect Tax management requires businesses to be proactive, rather than reactive to tax changes. There are several things that can be done to ensure that your organization is ready to adapt nimbly to a region where the broad framework of taxation is evolving at a rapid pace. One way to support you in that journey is to ensure you are armed with the latest updates from tax authorities across the region, and that you know who the experts are that can guide you in the next phase of your ta
journey in the GCC region,” concluded Junkin.
The “GCC Indirect Tax" mobile app is easily accessible anywhere using a mobile device where the user will receive instant and live push notifications of any Indirect Tax developments happening throughout the region. The app is available for download in both English and Arabic and will enable users to get in touch with Deloitte’s Indirect Tax experts and gain access to alerts and authorities updates, thought leaderships, events and webinars.
The app is available for download free of charge on the following links:
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.
