GCC Indirect Tax Digest

UAE developments        
 

FTA publishes Decision No. 1 of 2024 regarding Professional Standards for Tax Agents          

The FTA has published Decision No. 1 of 2024, which introduces application of black points to tax Agents for violating professional standards. The violations include those related to confidentiality, integrity, objectivity, professional behaviour, and professional competence. The consequences for such violations depend on the accumulation of black points, ranging from notification to deregistration from the tax register. The legislation is effective from 1 Jul 2024.

The complete legislation can be accessed here.

FTA publishes updated Public Clarification VATP037 on Director Services

The FTA has published updated VAT public clarification VATP037 related to performing the function of Director on a Board of Directors by a natural person. This clarification will replace the previous version VATP031.

As of January 1, 2023, performing the function of a Director on a Board of Directors by a natural person, whether compensated monetarily or in kind, for any government or private sector entity, is not considered a supply of services for VAT purposes. This Public Clarification provides guidance on how to apply the new provision and determine the resulting VAT obligations prior and post the date of 1 January 2023 on concerned natural persons.

The differences between VATP031 and VATP037 are minimal and include the following changes: 

• The Board of Directors section on Page 3 specifies that “For clarity, this exclusion extends to services performed as a member of a committee derived from the same Board on which the Director serves.”
• The Capacity as Director section on Page 4 now includes the following sentence: “For example, free-lance services rendered by a third-party natural person who is not a Director during the meetings of a Board of Directors, or any committee derived therefrom are considered to be supplies of services for VAT purposes and will be taxable subject to meeting other conditions.”  

The changes address an area which the FTA deemed required further clarification, that is, the board activities that are intended to be included within the scope of the amendment effective from 1 January 2023.

 The complete clarification can be accessed here.

Reminder: VAT refund for foreign businesses in the UAE        

A reminder that the reclaim window for qualifying non-United Arab Emirates (UAE) established businesses to submit a refund claim for VAT in the United Arab Emirates (UAE) under the Business Visitor Refund scheme opened as of 1 March 2024 for the calendar year 2023.        

During the period of 1 March 2024 until 31 August 2024, the FTA will accept refund applications for the UAE VAT refund for the Foreign Business scheme. Non-UAE resident businesses should start to consider whether they have incurred VAT in the UAE and qualify for a refund. The documentation and evidentiary requirements for such a claim are stringent; therefore early action is recommended.  

Deloitte can help        

Deloitte has a team of VAT specialists in the UAE who can assist you through the process of applying for a refund. We can also review your supply chain structure with a view to minimize the cost of irrecoverable UAE VAT being incurred in future. This may be beneficial for business established in countries that are currently not recognized as eligible, but also to support effective cash flow management for businesses who are eligible to submit claims.        

For more information about the business visitor refund scheme please contact any of the individuals listed below or reach out to your designated Deloitte representative.

Dubai Customs issued a notice regarding amendments to the unified customs tariff table of GCC States

Dubai Customs has recently released Customs Notice No. 1 of 2024. This notice marks the approval of the 2024 amendments to the unified customs tariff table of GCC States. The update also aligns with the 2022 edition, including its subsequent revisions.

The revisions have been consented to at the GCC level, suggesting that other GCC customs authorities might announce their updated tariffs shortly as well.

 It's important to note that these adjustments to the unified customs tariff table took effect in the UAE starting from 1st January 2024.

For a detailed notice, please check the full Notice.

Dubai Customs Notice No. (03/2024) on enforcement of industrial waste management policy

Dubai Customs has recently disseminated Customs Notice No. (03/2024), enlightening local entities about the implementation of policies regarding industrial waste management. According to this Notice, all organizations that export industrial waste, regardless of being situated in the UAE mainland or free zones, are liable to export duties.

The schedule of these export fees varies in correspondence with the specific type of waste being exported, as stipulated in the appended table found in the Notice. For instance, a charge of AED 400 per ton is levied on steel scrap with the HS code 720450, while the export of Pneumatic tire waste coded as 40040000 incurs a reduced fee of AED 100 per ton.

In order to facilitate these payments, exporters must access the Ministry of Economy's online service portal and input relevant product data accordingly.

In addition to this, the Notice provides customs clearance guidelines that all exporting entities must adhere to. These include:

• Ensuring the accuracy of industrial waste export fees in relation to the quantity being exported.
• Preventing the co-mingling of different waste types within a single container or shipment.
• Providing the accurate HS code and descriptions of the products up for export.
• Presenting evidence of export fee payment throughout the Customs declaration procedure.

Acting retrospectively, this Notice was disseminated on the 13th February 2024, but was already in effect from the 29th January 2024, as delineated in Article 5.

For detailed information about the affected products, their HS codes, and the applicable export fees, please check the full Notice.

The entry into force of the UAE and Cambodia Comprehensive Economic Partnership Agreement (CEPA)

The United Arab Emirates (UAE) and the Kingdom of Cambodia (Cambodia) CEPA, which was signed on 8th June 2023, has officially entered into force on 31st  of January 2024. Thus, to enforce CEPA within the Emirate of Dubai, Dubai Customs issued Customs Notice No. (02/2024).

CEPA aims to strengthen the economic relationships and increase bilateral trade between UAE and Cambodia by establishing a free trade area, cutting tariffs on over 90% of the tariff lines, eliminating trade barriers, and providing a favorable climate for trade.

As a comprehensive agreement, CEPA addresses trade in goods, services, digital trade, investment promotion, and protection of intellectual property rights.

For more information about CEPA, please check the Full Agreement.

The signature of the UAE-Colombia Comprehensive Economic Partnership Agreement (CEPA)

On 19th April 2024 The UAE Minister of State for Foreign Trade, Dr. Thani bin Ahmed Al Zeyoudi, recently signed the UAE-Colombia Comprehensive Economic Partnership Agreement (CEPA) with his Colombian counterpart.

The recently signed CEPA is in line with the UAE's vision and foreign trade agenda, aiming to enhance bilateral trade relations between the UAE and Colombia by reducing or eliminating imposed customs duties and removing trade barriers. This agreement provides an environment conducive to business activities in both countries.

The specific date of entry into force of the UAE-Colombia CEPA has not yet been determined. However, UAE CEPA agreements in general are comprehensive and cover various aspects such as the exchange of goods, services, digital commerce, the promotion of investments, and the protection of intellectual property rights.

Currently, the UAE has several in-force CEPAs, including those with India, Indonesia, Turkey, and Cambodia.

Customs Policy No (57/2024) On conditions and regulations for the implementation of the Comprehensive Economic Partnership Agreement (CEPA) between the United Arab Emirates and the Republic of India

Customs Policy No. 54/2022 and Customs Policy No. 56/2023 have been issued in relation to the Comprehensive Economic Partnership Agreement (CEPA) between the UAE and India. As per the decision, customs tariffs on goods imported from India to the UAE will be applied based on different categories listed in Annex (B/2) of the Agreement for the years 2024-2025.

• Category A products will have continued elimination of customs duties;
• Category C products will be levied a 2% duty;
• Category E products will be levied a 3.5% duty;
• Category TR products will be subject to duty in accordance with Annex (B/2), and;
• Products in Category F will remain subject to applicable customs tariffs. 

The policy will be effective from May 1st, 2024, and all relevant customs units are required to implement its provisions within their jurisdiction.
For further information on UAE Customs-related updates, please contact Shaimaa Husseiny or your usual Deloitte contact. 

KSA developments

ZATCA announces criteria for selecting taxpayers in the Twelfth Wave of e-invoicing        

The Zakat, Tax, and Customs Authority (ZATCA) in the Kingdom of Saudi Arabia (KSA) has announced  the selection criteria for resident taxpayers participating in the upcoming twelfth wave of the e-invoicing integration phase. 

Key considerations:

• Resident taxpayers with taxable revenue exceeding SAR 10 million (c. $2.6m) as reported in the Value Added Tax (VAT) returns for the calendar years 2022 or 2023 are required to integrate their e-invoicing systems with ZATCA for clearance and/or reporting of e-invoices.
• Integration for the eleventh wave of resident taxpayers is scheduled to go live on the ZATCA Fatoora Portal starting from 1 December 2024. This provides these taxpayers with at least six months to ensure compliance with the integration phase requirements.

Based on past experience, we expect ZATCA to formally notify the selected taxpayers about the twelfth wave timeline. Taxpayers who were not included in previous waves should therefore plan ahead. Timely integration with ZATCA requires substantial IT and human resources, making proactive preparation crucial for a smooth compliance process.

Reminder: Deadline for the KSA Tax Amnesty is approaching 

The current KSA Tax Amnesty period, ending on 30 June 2024, provides taxpayers with an opportunity to address VAT issues with reduced penalties. This amnesty facilitates the correction of under-declared VAT or excess recoveries and the completion of overdue VAT registration obligations. To utilize these provisions, all due VAT payments must be made by the specified deadline. With the deadline approaching, timely action is recommended to benefit from this opportunity.

For further information on the Tax Amnesty, please contact any of the individuals listed below or contact your usual Deloitte contact.

ZATCA, in collaboration with the Saudi Red Sea Authority, issues a procedural guide for the temporary entry of maritime tourism vessels

In February 2024, the Saudi Zakat, Tax, and Customs Authority (ZATCA), in collaboration with the Saudi Red Sea Authority, will issue a procedural guide for the temporary entry of maritime tourism vessels. 

The guide aims to simplify customs procedures for coastal tourism activities, and it covers topics such as the application process, duration, requirements, restrictions, and obligations for temporary vessel entry. The guide will be particularly helpful for investors, tourists, and maritime operators using foreign or visiting yachts within geographical areas approved by the Saudi Red Sea Authority.
For detailed information, please click here.

Expanding the scope of industrial duty exemption started on April 1st, 2024

The Ministry of Industry and Mineral Resources has recently declared its intent to extend the range of industrial duty exemptions in Saudi Arabia. This move involves broadening the categories of goods and sectors entitled to these exemptions, a strategic step aimed at fostering industrial growth and diversity.

Expansion plans typically involve granting exemptions to an increased variety of machinery, equipment, raw materials, and components utilized in manufacturing processes. This also includes offering incentives to emerging industries, which align with the nation's economic aspirations.

Given Saudi Arabia's perspective, the enlargement of industrial customs exemption scope holds significant value. Not only does it promote the country’s investment appeal in sectors beyond conventional industries such as petrochemicals, it also encourages diversification and diminishes the country's dependence on oil-derived revenue.

Furthermore, it fosters technological evolution and innovation by enhancing the availability of advanced machinery and equipment to industrial establishments. It also cultivates job creation by facilitating the growth of burgeoning industries and SMEs, thus aligning with Saudi Arabia's agenda of expanding employment avenues for the country's populace.

The exemption expansion also aims to attract domestic and foreign investment in priority sectors such as renewable energy, biotechnology, advanced manufacturing, and information technology, contributing to the country's Vision 2030 objectives.

In conclusion, Saudi Arabia's initiative of amplifying the scope of industrial customs exemption represents a strategic objective towards boosting its industrial competitiveness, diversifying the economy, and achieving sustainable growth. It epitomizes proactive efforts to leverage the country's resources and potential to foster a dynamic and resilient economy.

For detailed information, please click here.     

Economic Cities and Special Zones Authority announced four new Special Economic Zones in Saudi Arabia 

In April 13, 2024 the Saudi Arabian government has taken action to diversify its economy by establishing Economic Cities and Special Economic Zones that offer lucrative investment opportunities to national and international investors. The newly established economic zones are as follows:

1. King Abdullah Economic City (KAEC) SEZ,
2. Jazan SEZ,
3. Ras Al Khair SEZ, and
4. Cloud Computing SEZ located in King Abdulaziz City for Science and Technology (KACST). 

Further information regarding the new Special Economic Zones can be found here.

Oman developments

3-Year Milestone of VAT in Oman

Value Added Tax (‘VAT’) completed 3 years of implementation since it was introduced in Oman on 16 April 2021. Over the past three years, VAT has become an integral part of business operations in Oman, bringing about significant changes in the tax landscape. We commend your efforts in adapting to these changes and maintaining compliance with VAT legislation during this period.

Considering the recent amendments to the VAT Executive Regulations (‘Regulations’), various guidelines issued by the Tax Authority and completion of 3 years, it is essential to ensure ongoing compliance with the latest regulatory requirements. In this regard, we would like to highlight and refresh some key action points for your consideration:

1- Recovery of input VAT

• As per VAT legislation, input VAT could be recovered where expenses are incurred towards taxable supplies, subject to fulfilment of other conditions.
• Such recovery of input VAT could be postponed to subsequent tax periods; however, input VAT cannot be recovered after 3 years from the end of the tax period during which the right to recover input VAT was created.
• Accordingly, it is important to review the procurement register to ensure input VAT are recovered appropriately and in timely manner, to avoid any VAT cost to business.

2. Revision of VAT returns

• In case taxable person identifies an error or omission in their submitted VAT return, a revised VAT return should be filed within 30 days of discovering the error or omission.
• Such revised return cannot be filed after three years from the original submission date.
• In case Tax Authority has initiated VAT inspection or assessment before such date, revision of VAT return is not allowed. 

3. VAT assessment

• Considering the completion of 3 years of VAT, we are expecting an increase in the VAT assessment by the Tax Authority.
• Based on our experience, VAT assessment notice will be shared through email to the tax representative or uploaded in the ‘Correspondence’ tab on the tax portal. Accordingly, it is important to regularly check emails and notifications on the tax portal.

4. VAT refund

• As per the Oman VAT legislation, in case input VAT is more than output VAT in the VAT return, VAT refund application could be submitted within 5 years from the end of the respective tax period.
• VAT legislation also allows special refund for non-resident businesses, charitable organizations, foreign government diplomats, international organization, among others; subject to fulfilment of certain conditions and procedures prescribed in the Law.
• It is relevant to note that there are specific tax periods and timelines prescribed in the VAT legislation for seeking refund for special cases.

Reminder: VAT refund for non-resident persons not registered for VAT in Oman

The VAT Legislation allows refund of the VAT paid by a person who does not have a place of residence in Oman and not required to register for VAT in Oman.

Such refund application must be submitted within 6 months from the end of the 6-month tax periods, subject to fulfilment of all conditions. 

Please find below tax period and deadline for filing of refund by non-resident person:

Since we are approaching the end of the timeline for filing of refund application for the tax period 01st July to 31st December 2023 on 30th June 2024, we would suggest to apply for such refund at the earliest. 

For any further information on the above, please contact Jay Duseja or your usual Deloitte contact.

The Director General of Customs has officially commenced the process of linking containers.

Based on the efforts made by the Directorate General of Customs and its partners, air, and seaport operators, to facilitate the process of releasing shipments and ensure the smooth flow of movement to and from customs ports. ‎ The Directorate General of Customs is pleased to announce to the trade community that the linking process for containers introduced between the Customs Bayan system and the container terminal operator at Sohar Port will be activated on Thursday, January 18, 2024. 

Therefore, to ensure the smooth movement of exported containers and to avoid any obstacles, please ensure that:

1. Accuracy and validity of data entered into the Bayan system for exported containers. 
2. Selecting the correct port operator in the Bayan system for data issued through Sohar Port.
3. It is necessary to declare the correct net weight in the Bayan system. 
4. Ensure that the issued declaration procedures are completed, and the issued containers are released in the Bayan system before the shipments arrive at the container terminal.

For additional details, please click here.

The Director General of Oman Customs has announced the suspension of manual manifest submission

As of Sunday, March 3, 2024, Oman has recently launched an electronic link and integration service between the Bayan customs system and the systems of port and airport operators. This initiative aims to streamline processes and enhance efficiency in customs operations. Below are the available log in methods: 

• Login with Smart Card/USB Token;
• Login with Mobile Number (PKI enabled SIM);
• Login with Smart Card/USB Token/Mobile PK;

For additional details, please click here.