KPMG Tax Newsletter - June

Welcome to the June edition of our tax newsletter, bringing you news about global and regional tax developments. 

KPMG reports on tax developments in response to the coronavirus.

1.      Read updates from KPMG’s Global Tax and Legal Covid-19 hub here.

2.     Find an overview of jurisdictional tax measures and government relief measures, as reported by KPMG member firms, in response to Covid-19 here.

3.      KPMG's daily updates on global tax developments in response to Covid-19 may be found here.

1)     UAE economic substance requirements

The United Arab Emirates (UAE) has introduced Economic Substance Regulations (ESR) applicable as of 1 January 2019. On 15 April 2020 the Ministry of Finance issued the Relevant Activity Guide (RAG).

Please find a detailed review of the new guidance, along with some its possible application in the UAE, here.

KPMG has developed a five-minute ESR survey tool. Based on information submitted, it will provide a preliminary assessment on the likely application of ESR to your business and determine whether there is a need for formal assessment. Click here to begin.

2)     UAE Economic Substance Regulations – MOF issues Covid-19 related relaxations

On 28 May, the UAE Ministry of Finance (MoF) issued a Covid-19 Industry Advisory Notification (IAN). The IAN provides relaxation of certain measures related to meeting requirements prescribed under the UAE Economic Substance Regulations (ESR) for the period affected by Covid-19. The measures are in line with those implemented recently by offshore jurisdictions such as Jersey, BVI, Guernsey, Bermuda and others, which introduced the ESR.

Please refer KPMG’s tax alert for a discussion of the key highlights from the IAN, to be considered by UAE-based businesses for the financial year 2020.

3)     UAE and Dubai International Financial Centre (DIFC) – FATCA and CRS updates for filing due by 30 June 2020

The Dubai International Financial Centre (DIFC) and the UAE Ministry of Finance (MoF) notified financial institutions that between 1 June and 30 June 2020, the DIFC and the MoF portal are open for Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) reporting for the reportable year 2019.

Please find more details here.

1)     Deadline to file final tax return on or before 30 June 2020 approaching soon

The due date to file the final return of income (FRI) for the tax year ending 2019 is 30 June 2020. The relevant taxpayers are required to file the FRI electronically, along with audited financial statements with the Oman tax authority (OTA) on or before 30 June 2020.

The OTA previously allowed deferral of provisional tax return (PRI) filing and related payment of taxes for the same tax year, which were due by 31 March 2020, for a period of up to three months. This was done for taxpayers who were adversely affected by the Covid-19 pandemic and as a result of the precautionary measures imposed by the government in Oman.

Currently, no such deferral has been announced for the FRIs due on 30 June 2020 for the tax year ending 31 December 2019. This would mean that in addition to all such cases for which the PRI extension was availed earlier by the taxpayers, the FRI for the same tax year will become due for filing by 30 June 2020. Any failure or delay in filing the tax returns could attract a maximum penalty of OMR 2,000 in accordance with provisions of the Oman tax law.

2)     Oman Tax Authority makes tax card provisions effective from 1 July 2020

The tax card, as a concept, was introduced in February 2017. The purpose is to mention the tax card number on all correspondence, invoices and contracts entered into by the taxpayer. Further, the ministries, government bodies, other units of state-owned apparatus and companies owned by the government (to the extent of at least 40%) are required to obtain a copy of the tax card before dealing with any taxpayer. Failure to comply with the relevant provisions carries a maximum fine of OMR 5,000.

Subsequently, in February 2019, rules related to tax cards were introduced, such as relevant form to apply tax card, its validity, renewal process, etc. through amendments made in the executive regulations to Oman tax law. The tax card provisions have now been made effective from 1 July 2020. A nominal fee of OMR 10 has been prescribed for issuing the tax card.

Our detailed news on this development can be read here.

3)     Oman ratifies double tax treaty with the Slovak Republic

Oman ratified a double tax treaty (DTT) with the Slovak Republic on 8 June 2020 by way of Royal Decree No. 63/2020. The treaty was signed on 25 March 2018, with the objective of avoiding double taxation and preventing income tax evasion. The tax treaty shall be entered into force in accordance with Article 29 of the DTT.

Source: Report from IBFD Tax Treaties Unit

4)     Establishment of Oman Investment Authority (OIA)

Royal Decree no. 61/2020 (RD) was issued on 4 June 2020 establishing OIA as a result of which all sovereign government funds, including State’s General Reserve Fund, the Oman Investment Fund and the Directorate General of Investments at the Ministry of Finance (MOF), stands transferred to the OIA.

The RD empowers transfer of ownership of all government companies and investments to OIA with the exception of Petroleum Development Oman, government contributions to international establishments and other companies to be specified in a Royal Order.

OIA will enjoy financial and administrative autonomy and will work under the purview of the Council of Ministers, as per the RD.

5)     Oman extends reporting deadline under Common Reporting Standard (CRS)

The Capital Markets Authority (CMA) of Oman, based on its discussion with the Oman Tax Authority, has recently extended the final report submission deadline under CRS to 31 July 2020 (from 31 May 2020). This has been done to provide more time to banks and relevant financial institutions (specified institutions) due to the exceptional circumstances caused by Covid-19.

As a brief background, the specified institutions in Oman were mandated by the Central Bank of Oman vide circular, dated 15 May 2019, to ensure the collection of CRS-related information for new account holders effective from 1 July 2019. This requirement was further endorsed through a circular from the CMA dated 28 May 2019. It was followed by a workshop conducted in Oman on 12 June 2019 by the Global Forum on Transparency and Exchange of Information for Tax Purposes educating specified institutions on CRS and its implementation.

Oman is expected to soon release local legislation allowing specified institutions to undertake the CRS compliance.

1)     KSA increases VAT rate to 15% from 1 July 2020

The KSA VAT rate will increase from 5% to 15% with effect from 1 July 2020. This increase is a response to the unprecedented economic fallout from the impact of the Covid-19 pandemic.

Please find additional information here.

2)     Increase in customs duties in KSA from 10 June 2020

On 27 May 2020, the General Authority of Saudi Customs (Saudi Customs) announced a list of commodities for which the customs duties may be raised, starting from 10 June 2020. The potential rate increase ranges from 0.5% to 15%. A full list of new duty rates can be found on the Saudi Customs website.

Please refer to KPMG’s tax alert for more details.

3)     KSA Transfer Pricing Guidelines (Second Edition)

In February 2019, the General Authority of Zakat and Tax (GAZT) in the Kingdom of Saudi Arabia formally released the final Transfer Pricing Bylaws (TP Bylaws). The GAZT also subsequently issued the First Edition of the Transfer Pricing Guidelines (TP Guidelines) in March 2019. On 1 June 2020, the GAZT has issued the Second Edition of the TP Guidelines.

Please find additional information here.

4)     VAT refund for Saudi non-residents requires action by 30 June 2020

Non-resident businesses conducting economic activities outside of the Kingdom of Saudi Arabia may be eligible for a refund of the VAT incurred in KSA.

Please find details here.

1)      Extension of the deadline for reporting of Financial Account Information

Qatar Central Bank (QCB) issued letter No. 1507/2020, dated 22 April 2020, addressed to all banks operating in the State of Qatar in reference to the letter of General Tax Authority dated 20 April 2020. As per the letter, the deadline for reporting the Financial Account Information under Common Reporting Standard has been extended to 31 August 2020, due to the spread of Covid-19.

Please find more details here.

2)     Extension of the deadline for reporting information on US Reportable Accounts for the year 2019  

Based on the circulated information from the General Tax Authority (the GTA) in the State of Qatar, the deadline for financial institutions (FIs) to report information on US Reportable Accounts for the calendar year 2019 is extended to 30 November 2020. [VWHK1]

Please find additional information here.

3)     Late payment rate decreased

The QFC Tax Director, through a public notice, has set a rate of late payment charge (referred to in

Article 143 of the QFC Tax Regulations), as follows:

Please click here for more details.