News Update

Saudi Arabia to review VAT increase after the pandemic ends

Date: 22 Nov, 2020

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External URL: https://www.khaleejtimes.com/coronavirus-pandemic/coronavirus-saudi-arabia-to-review-vat-increase-after-covid-19-crisis-ends

Riyadh- November 22, 2020:

Saudi Arabia will review its VAT increase after the coronavirus pandemic ends, the Kingdom’s acting media minister said.

Saudi Arabia tripled value-added tax to 15% in July to offset the impact of lower oil revenue on state finances.The decision was a painful one and has undoubtedly caused concern for every individual and family.

“This decision is like any other decision, it can be revised God willing when this crisis is over,” Majid bin Abdullah al-Qasabi told reporters at a news conference, referring to the global pandemic.

FTA conducts a second virtual workshop for tax agents on tax treatment of e-commerce

Date: 15 Nov, 2020

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External URL: https://www.tax.gov.ae/press-releases/workshop-for-tax-agents-e-commerce

Abu Dhabi- November 11, 2020:

The Federal Tax Authority(FTA) confirmed that several general Value Added Tax (VAT) rules apply to e-commerce transactions, in addition to a number of special VAT rules specifically applied to e-commerce transactions. E-commerce refers to the supplies of goods and services on digital platforms, via computers or mobile phones purchased from websites or electronic applications.

The workshop saw the participation of 225 accredited tax agents and a number of FTA officials. The FTA gave a presentation on how to apply VAT on the supplies of goods and services made within the e-commerce framework and how to calculate VAT on these supplies. The FTA also presented an overview of e-commerce, the principles of VAT on the supply of goods via e-commerce and the supply of electronic services, and the effects of VAT on electronic markets using practical examples. The presentation indicated that all goods and services purchased through online shopping sites are generally subject to 5% VAT if the place of supply is in the UAE. The tax is also applied to most of the goods that are sold inside the UAE; subject to some exceptions per the VAT legislation (such as medicines sold on websites). Additionally, the import of goods is subject to VAT.

His Excellency Khaled Ali Al Bustani, Director General of the FTA, stressed that the number of FTA accredited tax agents is increasing steadily, in line with the continuous growth of taxable persons within the tax system. H.E. Al Bustani said: “The number of accredited tax agents increased in the first 10 months of 2020 by more than 10% to 515, compared to 468 in the same period last year. This increase provides more opportunities for taxpayers wishing to deal with the FTA through tax agents by offering them an extensive, constantly-updated list of approved agents on the FTA’s website.”

UAE has no plan to hike VAT

Date: 12 Nov, 2020

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External URL: https://www.khaleejtimes.com/business/local/uae-has-no-plan-to-hike-vat

Dubai- November 12, 2020:

The UAE’s Ministry of Finance said it raised Dh11.6 billion in value-added tax (VAT) revenues in the first eight months of 2020 and the government has no plans to raise VAT to more than five per cent.

The UAE and Saudi Arabia levied five per cent VAT from January 1, 2018 and later Bahrain also introduced it. Saudi Arabia, the region’s largest economy, hiked the VAT to 15 per cent from July 1, 2020. Oman is set to become fourth country in the GCC to impose VAT from April next year.

Saeed Rashid Al Yateem, assistant under-secretary of resource and budget at Ministry of Finiance, affirmed that there are no plans or decisions at the moment to raise VAT to more than five per cent in the UAE.

FTA to issue tax residency certificates

Date: 08 Nov, 2020

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External URL: https://www.khaleejtimes.com/business/local/fta-to-issue-tax-residency-and-commercial-activities-certificates

Dubai- November 8, 2020:

Tax residency and commercial activities certificates will now be issued through the Federal Tax Authority of the UAE, the FTA said.

Applications for the certificates can be made through the FTA’s e-services portal from November 14, the authority added.

Tax residency certificates are issued to eligible government entities, companies and individuals looking to benefit from double taxation avoidance agreements signed between the UAE and other countries, while the commercial activities certificate enables applicants to refund VAT paid in advance outside of the UAE.

Income tax to be introduced in Oman: Ministry

Date: 04 Nov, 2020

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External URL: https://www.khaleejtimes.com/business/income-tax-to-be-introduced-in-oman-ministry

Dubai- November 4, 2020:

Oman is said to be weighing up plans to introduce income tax on high earners in 2022 as part of the finance ministry’s 2020-2024 economic scheme, as the Gulf state seeks to restore finances battered by low oil prices.

The plan aims to bring Oman’s fiscal deficit down to 1.7 per cent of gross domestic product by 2024, from a preliminary deficit of 15.8 per cent this year.It also has a target of increasing non-oil revenues to 35 per cent of total government revenue by 2024, from 28 per cent this year.

“The government recognizes the need to strengthen the Sultanate’s revenue-raising framework by decreasing its reliance on hydrocarbon revenues,” it said in its bond prospectus.

“The initiative is under study and all aspects of its application are being considered. It is expected to apply the tax in 2022,” the 2020-2024 medium term economic balance document said.

FTA Board of Directors review Authority’s performance indicators in the meeting

Date: 31 Oct, 2020

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External URL: https://tax.gov.ae/press-releases/Board-of-Directors-hold-13th-meeting

Dubai- October 31, 2020:

The FTA Board of Directors, chaired by H.H. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance, and Chairman of the Authority’s Board of Directors, approved a number of executive decisions related to the Authority’s operational activities and organisational and administrative policies during its 13th meeting.

The Authority’s financial statements for the period covering the first quarter ending on 31st March, and the period ending on June 30th, 2020, were approved. This was in accordance with the international accounting standards related to reviewing the quarterly financial statements.

During the virtual meeting, the Board reviewed indicators of FTA’s performance adopted by the Authority in all areas relevant to its activities during the first nine months of 2020, including registration systems, filing returns, tax refunds for groups legally qualified to recover, such as UAE nationals’ homebuilders refund, tax refunds for tourists and for foreign business visitors.

H.H. Sheikh Hamdan bin Rashid confirmed that the reports reviewed during the meeting showed that the Authority continues to maintain its distinguished performance across all activities, while continuing its development plans to upgrade its services in accordance with the best standards to achieve customer happiness.

The is also a 210% growth in tax amounts refunded to UAE Nationals during 2020 for the construction of their new homes to a value of 270 million AED.

Voluntary disclosures by UAE businesses on VAT or excise tax will face heavy penalties

Date: 20 Oct, 2020

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External URL: https://gulfnews.com/business/banking/voluntary-disclosures-by-uae-businesses-on-vat-or-excise-tax-will-now-face-heavy-penalties-1.1603193572243

Dubai- October 20, 2020:

There is a major development in the UAE tax litigation landscape.

In a very significant twist, the voluntary disclosures made by UAE based businesses on their actual VAT obligations will now be charged with late payment penalties (up to 300% of the tax due). Late payment penalties would apply from the due date of the tax return and not from the date of the voluntary disclosure.

This is according to a ruling by the UAE Federal Supreme Court judgment on an appeal filed by the UAE Federal Tax Authority.

Tax payment through the new version of the eDirham card

Date: 19 Oct, 2020

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External URL: https://tax.gov.ae/en/press-releases/The-Federal-Tax-Authority-introduces-new-version-of-the-eDirhams

Abu Dhabi- October 19, 2020:

The new generation of the eDirham cards have been included as one of the official payment channels provided by the authority. Tax payments can be processed via the new eDirham cards as of Sunday 1st November, 2020, as payments will not be accepted through the existing eDirham cards with effect from the same date.

In order to ensure a smooth transition to the new generation of the eDirham, the authority calls on VAT registrants to prepare to make the switch to the new version. This comes to replace the old version of the eDirham, which will be suspended and will not be available to use for the Authority’s transactions as from the beginning of November 2020.

The FTA stresses that the new version of the eDirham will provide users with a more diverse set of options that are both easier to use and adhere to the highest standards of safety and excellence.

Oman to implement 5% VAT in six months

Date: 13 Oct, 2020

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External URL: https://www.thenational.ae/business/oman-to-start-levying-a-5-vat-in-six-months-as-it-looks-to-boost-revenues-1.1092493

Oman- October 13, 2020: Oman has issued a decree to start levying a 5 per cent value-added tax (VAT) in six months’ time to offset a slump in oil prices and an economic downturn exacerbated by coronavirus.

The tax will be on most goods and services, though with some exceptions. Essential food items, medical care, education and financial services will be exempt from the planned levy, according to a royal decree detailing the tax.

Saudi Arabia, the UAE and Bahrain have already introduced the tax, with Riyadh tripling it this year. Oman, Kuwait and Qatar have not yet introduced the tax.

Oman removed from the EU Blacklist

Date: 06 Oct, 2020

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External URL: https://home.kpmg/om/en/home/insights/2020/09/tax-flash-oman-no-longer-on-the-european-union-blacklist.html

Oman- October 6, 2020: Oman was eliminated from the EU list of non-cooperative jurisdictions for tax purposes (the “EU Blacklist”). Oman was previously included on the EU Blacklist on 12 March 2019 for not making sufficient progress in implementing information exchange protocols.

Oman has been removed from the EU blacklist as per the Council of the EU press release dated 6th October 2020. Oman is, therefore, no longer regarded as a non-cooperative tax jurisdiction by the EU Council.

This development comes after recent steps taken by Oman to improve its tax framework and implement exchange of information protocols.

Saudi Arabia: Real Estate Transaction Tax - A new tax introduced

Date: 02 Oct, 2020

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External URL: https://gulfnews.com/world/gulf/saudi/saudi-arabia-exempts-property-deals-from-15-vat-new-tax-set-at-5-1.1601599182457

Riyadh- October 2, 2020: Saudi Arabia will exempt real estate transactions from a 15 per cent VAT (value-added tax) and instead impose a new 5 per cent tax on property deals. The Saudi finance minister affirmed that the order aimed to support Saudi citizens who want to buy homes.

The country is facing a deep recession, with the economy shrinking by 7 per cent in the second quarter and unemployment hitting a record high of 15.4 per cent. The government had in July tripled VAT to 15 per cent to boost non-oil revenues, but the move set off limited domestic demand.

The official announcement can be accessed through the following link:

https://www.uqn.gov.sa

Higher educational institutions can claim VAT refund

Date: 14 Sep, 2020

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External URL: https://gulfnews.com/business/higher-educational-instiutions-can-claim-vat-refund-1.73822828

Abu Dhabi- September 13, 2020: The Federal Tax Authority (FTA), has confirmed that higher educational institutions making only zero-rated and/or standard-rated supplies may recover input tax in full, except where recovery is specifically blocked.

Blocked input tax includes value-added tax (VAT) incurred on certain entertainment services, and motor vehicles that have been purchased, leased, or rented and made available for personal use, the FTA said on Sunday.

The Authority noted that higher education institutions providing exempt supplies are eligible to recover only a portion of the input tax incurred.

The FTA’s Basic Tax Information Bulletin focuses on the tax treatment for the higher education sector in respect of universities and higher education institutions recognised by the competent federal or local government entity regulating the higher education sector where the course is delivered.

Oman’s ruler expected to approve VAT to boost economy

Date: 03 Sep, 2020

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External URL: https://www.bloomberg.com/news/articles/2020-09-03/oman-sultan-to-rule-on-vat-after-legislature-suggests-2022-start?srnd=economics-vp

03 Sept, 2020– Oman’s legislature is proposing to implement a value-added tax after January 2022 as falling oil revenue pressures its finances, following similar moves by Gulf Arab neighbours.

A joint committee of the State Council and Shura Council suggested the time frame and sent a draft law for approval to Sultan Haitham Bin Tariq Al Said. He took power in January vowing to take steps to bolster the near $80 billion economy that his predecessor had sidestepped.

Oman would become the fourth of the Gulf Cooperation Council’s six states to collect VAT, a move agreed by the bloc years ago. The UAE imposed a 5 per cent VAT in 2018 on most goods and services.

Zero VAT for face masks and sanitisers

Date: 02 Sep, 2020

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External URL: https://www.khaleejtimes.com/coronavirus-pandemic/fighting-coronavirus-zero-rated-vat-for-face-masks-sanitisers-in-uae-

Dubai- September 2, 2020: Medical equipment like disposable suits, hand sanitisers, face masks, respirators for air purification and gloves will be subject to zero-rated value-added tax (VAT) in the UAE. A resolution stipulating this was adopted by the UAE Cabinet  to mitigate the repercussions of Covid-19 and support the healthcare sector in the country.

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, chaired the meeting at Qasr Al Watan in Abu Dhabi. He hosted virtually a number of teaching staff and students from different schools in the UAE.

He stressed that education has always been a top priority. “The country exerts unwavering efforts to develop the educational system despite all circumstances,” he said.

 

UAE Federal Tax Authority launches smart app to detect uncertified tobacco products

Date: 25 Aug, 2020

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External URL: https://tax.gov.ae/en/press-releases/UAE-Federal-Tax-Authority-launches-smart-app

Abu Dhabi-August 25, 2020:  Tax evasion and trade in inferior products and counterfeit goods are among the main challenges facing tax authorities around the world. As part of its on-going efforts to protect consumers from commercial fraud and combat tax evasion with various mechanisms and utilizing the latest technologies, the Federal Tax Authority (FTA) has launched a smart application that can be applied to check on the legality of trademarked tobacco products.

The app enables consumers to scan the stamps placed on the tobacco packages to verify  that it is an Authority accredited digital tax stamp, ensure that these products meet the standard specifications, are not smuggled, and have been subjected to tax. Should the consumer discover that the stamps are not accredited, they can file a report to the FTA directly from the smart application. The Authority will then cooperate with the relevant authorities to take legal actions against violators.

The Authority said in a press release issued today that the application has been instigated under the banner, “Monitor yourself, fight fraud”, adding that users can install the app, known as ‘FTA DTS’, on their smart phones via the Apple Store and Google Play.

Commenting on the initiative, His Excellency Khalid Ali Al Bustani, Director-General of the Federal Tax Authority, said: “The ‘FTA DTS’ smart application is one of the effective tools that support the ‘Marking Tobacco and Tobacco Products Scheme’, which came into effect at the beginning of 2019 to combat tax evasion, protect public health and reduce the risks to consumers from the inferior products entering local markets.”

 

Dubai Refreshment wins court case over tax issue

Date: 18 Aug, 2020

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External URL: https://www.pressreader.com/uae/khaleej-times/20200818/282127818841828

DUBAI- August 18, 2020: Dubai Refreshment Co (DRC)., the distributor of PepsiCo products, has said the First Instance Federal Court of Abu Dhabi has ruled in its favor related to the tax assessment and penalties case applied by the Federal Tax Authority. In a statement on Monday, it said the court rejected the case and obliged the plaintiff to pay the expenses and waive the fees.

It said the court canceled the objected decision and ruled again to cancel all administrative penalties. All other requests were rejected by the court who obliged the authority to pay the fees and expenses, DRC said in a statement posted on Dubai Financial Market, where it is listed.

Earlier, the Tax Dispute Settlement Committee in Dubai had also ruled in favor of the company.

Earlier, the FTA had contended the DRC owed it Dh20.8 million on the stock of drinks held by the company in 2017, prior to the introduction of VAT, which came into effect from January 1, 2018. The Committee had ruled that the company owed only Dh8.8 million in taxes to the Authority.

Dubai Refreshment posted Dh18.65 million net profit for the first half of 2020 as compared to Dh30.88 million for the same period last year, a loss of 39.6 percent. While the second-quarter profit shrank 83 percent from Dh18.68 million to Dh3.13 million due to the impact of coronavirus.

During the annual general meeting held on March 23, 2020, DRC shareholders approved and paid a cash dividend of Dh0.70 per share, totaling Dh63 million.

VAT applicable for e-commerce sales, says FTA.

Date: 12 Aug, 2020

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External URL: https://www.tax.gov.ae/en/press-releases/Federal-Tax-Authority-issues-guide-for-the-e-commerce-sector

Abu Dhabi, UAE, 12 Aug, 2020: The Federal Tax Authority (FTA) has clarified that Value Added Tax (VAT) is applied on e-commerce services (also known as “electronic commerce”, sometimes referred to as the “digital economy”) upon their actual use or enjoyment in the UAE. Note that although many of the general rules of VAT apply to e-commerce, there are a number of special rules that apply specifically to e-commerce transactions.

This guide issued by the FTA clarifies how the VAT Law applies to the supply of goods and services provided through electronic means, such as the internet or similar electronic networks. The guide incudes guidance on the application of VAT on goods and services supplied within the scope of e-commerce, and the imposition and accounting for VAT on those supplies.

The guide outlines the tax treatment of the supply of electronic services, such as services that are provided directly over the internet, an electronic network, or an electronic market, including the supply of domain names, web-hosting and remote maintenance of programs and equipment, software (including the updating thereof), images, text and information provided electronically such as pictures, screen savers, electronic books, documents and other digitized files, music, movies and games on demand, and online magazines.

Other services identified under the banner of ‘electronic services supplies’ include the supply of advertising space on a website and the rights associated with that advertisement, and Political, cultural, artistic, sports, scientific, educational or entertainment broadcasts, including broadcasts of events, live streaming via the internet, the supply of distance learning services, and services of any equivalent type that have a similar purpose and mission.

The FTA Director-General, His Excellency Khalid Ali Al Bustani, noted: “Tax legislation in the UAE is characterized by transparency and accuracy, and takes into account the strengthening of the nation’s leadership position as a central economic and commercial center, not only regionally but also at a global level. In light of the increasing importance of the e-commerce sector, clear mechanisms for procedures have been identified. Value Added Tax, as it relates to the supply of goods and services through electronic means, contributes to supporting the activities of this vital sector, which depends on a locally developed digital and technological infrastructure.”

His Excellency added: “The Federal Tax Authority is keen to apply the best international standards in all its activities and the services it provides to its customers, and to contribute to preserving the advanced competitive position of the country across all sectors, with the means to encourage creativity and innovation.”

His Excellency Khalid Al-Bustani asserted that the FTA is making continuous efforts to contribute to supporting the national economy in general, and the digital economy. His Excellency mentioned, in particular, that the e-commerce sector is witnessing rapid growth, as the UAE is one of the fastest growing e-commerce markets in the region, enhanced by the availability of an advanced digital infrastructure, and a growth-friendly legislative environment.

The FTA indicated that all goods and services purchased through online shopping sites are subject to 5% VAT if the place of supply is in the UAE, like any other purchases made by traditional means, as per the special provisions governing the tax treatment of supplies.

The guide, which has been published on the FTA’s website, www.tax.gov.ae, makes the point that in traditional trade transactions, goods and services are usually supplied from a physical location such as a store or representative office, with the supplier or recipient present at the same site. For e-commerce, however, it generally refers to the supply of goods and services that take place on the internet or similar electronic networks, where goods and services are obtained or supplied through electronic means such as computers or mobile phones via websites or electronic applications (apps).

The guide also provides guidance on the VAT treatment of goods purchased through electronic platforms and services supplied through electronic means, indicating that taxable persons should charge VAT to customers when supplying taxable goods or services (generally, at the standards rate of 5%, or where the VAT Law permits, at a rate of 0%). If the supplies are exempt from tax, these supplies are not treated as a taxable supplies and therefore no VAT needs to be charged on these supplies.

The FTA clarifies in its guide that different conditions and requirements may apply to mandatory or voluntary registration, depending on whether a person has a place of residence in the UAE. A person has a place of residence within in the UAE for the purposes of VAT registration if he has a place of establishment in the UAE.

The guide also deals with the legal requirements for compulsory and voluntary registration, noting that a non-resident may not register voluntarily for VAT on the basis of his ‘taxable expenses. Furthermore, the guide sets out the criteria for determining the place of supply (whether it is inside or outside the UAE), the VAT treatment for supplies of goods through online platforms where the suppliers are UAE residents who are subject to tax, and for suppliers who are not resident in the UAE.

The guide also provides more information on the procedures for recovering input tax on e-commerce transactions and the application of the ‘reverse-charge mechanism’ which could apply on e-commerce transactions. The revers-charge mechanism aims to reduce the burden of compliance and the administrative burden related to collecting VAT from non-resident suppliers. It levels the playing field between the supply of services or goods from a supplier outside the UAE and by a local supplier. This ensures that local UAE suppliers in the country are not prejudices as a result of consumers purchasing online from foreign suppliers.

All other aspects related to the tax treatment of supplies made through agents and the requirements for tax invoices in e-commerce transactions are detailed in the guide, which is available on the FTA’s website, www.tax.gov.ae.

FTA continues to accomplish achievements, says Hamdan bin Rashid

Date: 21 Jul, 2020

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External URL: https://tax.gov.ae/press-releases/Federal-Tax-Authority-FTA-Board-of-Directors-holds-first

Abu Dhabi – July 2, 2020:

H.H. Sheikh Hamdan bin Rashid Al Maktoum chairs first FTA Board of Directors meeting since Cabinet reconstitution

The FTA Board of Directors, chaired by His Highness Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance and Chairman of the FTA Board of Directors, has held its first meeting since the UAE Cabinet of Ministers approved the decision to reconstitute the FTA’s Board of Directors.

During the virtual meeting held on Monday morning, His Excellency Obaid Humaid Al Tayer, Minister of State for Financial Affairs, was elected as Vice Chairman of the FTA’s Board of Directors.

  • The FTA continues to accomplish positive results and achievements, reflecting the strength of the national economy despite challenges faced by the global economy due to the effects of combating the spread of COVID-19.
  • The FTA supports taxpayers in fulfilling their obligations by efficiently providing services remotely.
  • AED 206 million in tax refunds for 3,124 for UAE Citizens building new residences -a growth of 136.7% over a period of 6 months.
  • An increase of VAT registrants to 335,530 and Excise Tax registrations to 1,159.