On 18 December 2020, the OECD released guidance on the transfer pricing implications of the Covid-19 pandemic (the guidance). The guidance represents the consensus view of the 137 members of the inclusive framework and provides clarifying comments on the practical application of the arm’s length principle regarding four priority issues.

KPMG Lower Gulf has released an alert that focuses on the Middle East market and considers how the guidance may practically affect groups operating in some of the most impacted industries in the region, being retail, manufacturing, construction and the sovereign wealth fund (SWF) sectors.

For more details, see the full KPMG tax flash here.

For a detailed KPMG Global view of the guidance, see the following link.

According to the OECD, since the launch of the base erosion and profit shifting (BEPS) project, 295 tax regimes across 80 jurisdictions have been reviewed. This year’s review revealed that there were significant legislative changes for 44 out of the 49 regimes reviewed:

• Thirty-seven regimes having been redesigned or repealed
• Seven regimes are pending amendment
• Five regimes were found not to currently pose BEPS risks

As a result, the tax regimes of the following 18 jurisdictions are now found to be in line with the BEPS Action 5 minimum standard: Aruba, Belize, Cook Islands, Curaçao, Dominica, Dominican Republic, Georgia, Hong Kong (China), Jamaica, Maldives, Mauritius, Morocco, North Macedonia, Qatar, Saint Kitts and Nevis, San Marino, Switzerland, Tunisia.

For more details, see the OECD publication here. 

New Public Clarification issued by the Federal Tax Authority

Following Cabinet Decision No. 9/12 O, dated 1 September 2020, and Ministerial Decision No. 380 of 2020, issued by the Minister of Health and Prevention on 6 December 2020 (with effect from 1 September 2020), the Federal Tax Authority (FTA) has released a VAT Public Clarification VATP023, “Temporary Zero-rating of Certain Medical Equipment” (Public Clarification).

The document prescribes that the supply or import of certain personal protective equipment made during the period from 1 September 2020 to 28 February 2021, and used for protection from Covid-19, shall be considered as medical equipment subject to VAT at zero-rate (0%).

For more details, see the full KPMG tax flash here.  

31 January 2021 deadline for submitting ESR notifications and reports

On 31 December 2020, the UAE Ministry of Finance (MoF) extended the compliance due dates for all the licensees to submit their economic substance (ES) notifications and reports by one month, i.e. from 31 December 2020 to 31 January 2021.

For more details, see the full KPMG tax flash here. 

Extension of waiver of penalties for tax filing and payment

As part of the effort to mitigate the impact of the Covid-19 pandemic on the economic activities of the Kingdom, the Minister of Finance announced, through Ministerial Resolution no. 2303 (MR) released on 21 January 2021, the extension of the waiver of penalties for all late tax filings and payments until June 2021.

The resolution, which came into effect on the day of its release, outlines new regressive tax penalty waiver rates. Penalties will be waived at different rates based on the timing of payment of the tax liability due to the General Authority of Zakat and Tax (GAZT).

For more details, see the full KPMG tax flash here.

New Exemptions from Real Estate Transaction Tax

The Board of Directors of the General Authority of Zakat and Tax (GAZT) has approved amendments to the Real Estate Transaction Tax (RETT) implementing regulations. The announcement was made through Ministerial Resolution No. 2229, which was published on 22 January 2021 and came into effect on the date of publication. The amendments provide for further exempted transactions from RETT.

For more details, see the full KPMG tax flash here. 

NBR to amend VAT place of supply rules for telecommunication services

The National Bureau for Revenue (NBR) has released VAT Public Clarification VAT/PC/20/3, dated 31 December 2020 (Public Clarification), highlighting the intention to amend the place of supply rules for telecommunication services.

The amendment is intended to be effective from 1 February 2021. As per Article 17 of the VAT Executive Regulations (Regulations), the place of supply of telecommunication services provided to customers not registered for VAT in Bahrain will be the place of use and enjoyment of such services.

For more details, see the full KPMG tax flash here. 

Deadline by the GTA to correct Dhareeba Transitional Issues - 14 January 2021

The General Tax Authority (GTA) sent emails and communications to taxpayers, asking them to review and update their account statements on Dhareeba before 14 January 2021.

In line with the notices, taxpayers were required to provide the GTA with proof of payments for each liability appearing as overdue on the Dhareeba system, but which was already settled by the taxpayer. Taxpayers are also required to ensure that any outstanding penalties or additional taxes which were not settled before are either settled or necessary actions are taken (such as objections or appeals).

For more details, see the full KPMG tax flash here. 

Oman’s Tenth Five-Year Plan and State Budget 2021

The Oman State Budget 2021 is the first budget under the Tenth Five-Year Plan (2021-2025), paving the way for implementing Oman’s Vision 2040 finalized under the leadership of His Majesty Sultan Haitham Bin Tarik. It also incorporates the objectives of the Medium-Term Fiscal Plan (2020-2024), also referred to as the Fiscal Balance Plan, which has been endorsed by His Majesty the Sultan.

The Tenth-Five Year plan, which has the laid the foundation for the 2021 budget, targets a more efficient system of fiscal and financial management, prioritizing fiscal balance, economic diversification and sustainability of national income. Its objectives also include targeted rates of domestic and foreign direct investment (FDI), as well as enabling the private sector to play a greater role in accelerating economic growth and creating more job opportunities.

For more details, see the full KPMG tax flash here.

Due date for filing Country-by-Country (CbC) notification extended

All qualifying tax resident entities in Oman whose reporting fiscal year ends on 31 December were required to file the CbC notification on or before 31 December 2020.

The Tax Authority (TA) announced an extension of the CbC notification due date by four months for entities whose reporting fiscal year ended on 31 December 2020. The CbC notifications under the extended timeframe can now be filed on or before 30 April 2021. As per the TA’s announcement, this extension has been provided considering exceptional circumstances last year triggered by the Covid-19 pandemic and its impact on the business sector.

For more details, see the full KPMG tax flash here.

Oman announces list of business activities prohibited for foreign investment

Oman has released list of business activities which are prohibited for foreign investment vide Ministerial Decision (MD) 209/2020.

As per the MD, only a limited set of activities are included. Most of the prohibited sectors cater to indigenous and small-scale industries, like repair and maintenance of vehicles, transport of goods, wholesale of vegetables and fruits, retail selling of certain products, etc.

Rules in relation to owning of real estate by Real Estate Investment Funds (REIF) announced

The Ministry of Housing issued MD 95/2017 defining the specified real estate which can be owned by REIF and conditions in relation to the same.

These conditions include:

• Restriction on ownership based on the nature of use of the real estate i.e. the real estate shall be the one which is being used for commercial, residential/commercial, industrial or touristic purposes.
• In case of residential complexes, the minimum area shall not be less than ten thousand square meters.
• The REIF shall not be allowed to own bare lands.
• Further, there are area-based conditions, wherein if the REIF owns any real estate in the specified areas then, only Omani citizens can invest in such REIF.

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