Welcome to the September edition of our tax newsletter, bringing you news on 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 update on global tax developments in response to Covid-19 may be found here.

Updated UAE Economic Substance Regulations

The UAE has amended the existing Economic Substance Regulations (ESR). The revised set of regulations was issued by way of Cabinet Resolution No. 57 of 2020, dated 10 August 2020, followed by the release of Ministerial Decision No. 100 of 2020, dated 19 August 2020 serving as supplementary guidance with an updated Relevant Activities Guide attached as appendix. The frequently asked questions (FAQs) on the Ministry of Finance (MoF) website have also been updated to factor in the provisions, as per the new regulations.

The new regulations are meant to be enforced retrospectively on all licensees in the UAE from 1 January 2019 onwards. In view of this, licensees will be required to re-assess their current ESR classifications and align them in light of the amended regulations.

The amended regulations direct all licensees carrying out a relevant activity to re-file notifications that were filed for FY 2019 (original due date 30 June 2020) through the MoF’s dedicated portal once it goes live. The ESR reports must also be uploaded onto the same portal within 12 months, following the end of the licensee’s financial year end (first reports due by 31 December 2020 for the financial year ending 31 December 2019).

For more details on the amended regulations, see the full KPMG Tax Flash here.

E-Commerce VAT Guide

The UAE Federal Tax Authority (FTA) has recently published an E-Commerce VAT Guide on the VAT treatment of e-commerce sales of goods, the provision of electronic services and the VAT position of agents. The guide explains the place of supply rules and the VAT collection principles regarding the goods sold from, in, or to the UAE.

For more details, see the full KPMG Tax Flash here.

UAE Country-by-Country (CbC) reporting resolution

The UAE MoF issued Cabinet Resolution No. 44 of 2020 (Resolution 44/2020), concerning the organization of CbC reports submitted by multinational enterprises (MNEs), which overrides Resolution 32/2019. Under Resolution 44/2020, the reporting entity definition has been amended to specify that the ultimate parent entity (UPE) of an MNE group, tax resident in the UAE, is the only entity of the MNE group required to comply with CbC reporting obligations.

For more details, see the full KPMG Tax Flash here.

The impact of KSA VAT increase on UAE suppliers

The recent VAT rate increase in the KSA may have a significant effect on the supply chains of manufacturers and retailers based in the UAE, with a business footprint in the KSA. This development could mean that businesses will have to rethink their current UAE-KSA distribution arrangements.

For more details, see the full KPMG Tax Flash here. 

GAZT issues draft regulations for electronic invoicing

The General Authority of Zakat and Tax (GAZT) has recently issued the draft regulations for electronic invoicing (e-invoicing) on its website. The move to e-invoicing is intended to improve the efficiency of the filing process for taxpayers. The aim of the Authority is also to increase compliance with tax laws and regulations and to improve the Kingdom’s alignment with, and adherence to, international standards.

The GAZT has called for comments and suggestions on the draft regulations to be sent by taxpayers and tax experts before 17 October 2020. Submissions can be sent directly to GAZT here.  

Draft Oman VAT law update

In a meeting on 1 September 2020, the Shura Council agreed to the recommendations of the Joint Committee of the State and Shura Councils on the draft Oman VAT law, and returned the draft law to the State Council. On 3 September 2020, the State Council approved the draft VAT law and submitted it to His Majesty Sultan Haitham bin Tariq, along with the recommendations of the State and Shura Councils.

VAT could be implemented in Oman in early 2021, given urgent request to the Councils to approve or modify the draft law and expected increases in fiscal deficit. Although there have been news reports of the Council recommending that VAT implementation be delayed until 2022, the Head of the State Council’s Economic Committee has clarified that the final decision on the timing of implementation will be made by His Majesty the Sultan.

Oman appoints a new Minister of Finance and Head of Tax Authority

His Majesty Sultan Haitham bin Tariq has recently issued Royal Decree 111/2020 on the formation of the Council of Ministers. H.E. Sultan Al-Habsi was appointed as the Minister of Finance. Previously, he was the Head of the Tax Authority. By Royal Decree, H.E. Saud al-Shukaili was appointed as the Head of the Tax Authority. He previously held the position of Deputy Head of the Tax Authority. 

The NBR releases VAT refund application form for non-resident businesses

Subject to meeting the conditions in Article 90 of the Bahrain VAT Executive Regulations, non-resident businesses which are not registered for VAT in Bahrain may claim a VAT refund. Applications with all supporting documents should be submitted within three months from the end of the year in which VAT was due (for example, by 31 March 2021 for the year ending 31 December 2020).

Click here to read more. Please find the application form here.