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

On 14 June 2021, two committees of the European Parliament approved the compromise text on the introduction of EU public country-by-country reporting. This was agreed upon by the Council of the EU and the European Parliament, following the final trilogue meeting on June 1.

The compromise text includes the agreed-upon versions of several elements on which the Council and Parliament negotiation positions diverged prior to the start of the trilogue. Among others, the parties agreed to an amended “safeguard clause”, under which companies might defer the disclosure of commercially sensitive information for a maximum of five years. This represents a reduction from the six-year time frame initially proposed by the Council. It does not include the Parliament’s request that local authorities should pre-approve the deferral and that Member States should transmit the omitted information, confidentially, to the Commission.

Read a June 2021 report prepared by KPMG’s EU Tax Centre here.

A communique was released on 5 June 2021 following meetings of the finance ministers and central bank governors of the G7 countries.

Others participating in the meetings included heads of the International Monetary Fund (IMF), World Bank Group, Organisation for Economic Cooperation and Development (OECD), Eurogroup, and the Financial Stability Board.

The communique (and included in a release from the U.S. Treasury Department) reflects that as part of a “renewed and urgent effort towards deeper multilateral economic cooperation,” agreement was reached to support efforts through the G20/OECD Inclusive Framework. The goal, to address the tax challenges arising from globalization and digitalization of the economy and to adopt a global minimum tax.

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

UAE Amended Commercial Companies Law allowing 100% foreign ownership in UAE mainland companies takes effect

Enhancing its reputation as an investment-friendly jurisdiction, the UAE recently enacted several landmark changes. One of these measures includes significant amendments to the UAE Commercial Companies Law (CCL) i.e. Federal Law No. 2 of 2015 (Erstwhile CCL), via the issuance of Federal Law No. 26 of 2020 (Amended CCL) in September 2020.

The Amended CCL, issued 27 September 2020, abolishes the required minimum UAE ownership percentage (i.e. 51%) in UAE mainland companies, which was previously required in Article 10 of the Erstwhile CCL. This means that mainland UAE companies (existing and new) are now allowed to be 100% foreign-owned, effective 1 June 2021, subject to obtaining specific approval from the relevant authorities in each emirate.

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

FTA Clarification on new Administrative Penalty Resolution

The Cabinet Resolution No. 49 of 2021 was announced on 28 April 2021, revising the administrative penalties imposed for violations of tax laws in the UAE. The Federal Tax Authority (FTA) has released two Public Clarifications providing guidance on how this Cabinet Resolution will be implemented.

TAXP001 – Amendments to the penalties regime: This clarification confirms that the periodic percentage penalty of 4% per month is not applicable when taxpayers submit voluntary disclosures or receive tax assessments from the FTA and pay the related tax debt within 20 business days of the submission of the voluntary disclosure or of the receipt of the tax assessment. 

TAXP002 - Redetermination of Administrative Penalties Levied Prior to the Effective Date of Cabinet Decision No. 49 of 2021: This Public Clarification specifies the following requirements for obtaining a 70% reduction on penalties imposed before the effective date of the new administrative penalties:

• The penalties have been imposed before the effective date of Cabinet Decision No. 49 of 2021 (i.e. before 28 June 2021);
• The taxpayer has not settled all the administrative penalties imposed on it as per Cabinet Decision No. 40 of 2017 in full before 28 June 2021 (i.e. this reduction does not apply to amounts of penalties already paid by the taxpayer);
• The taxpayer settles the following amounts by 31 December 2021: (i) all payable tax (due before or after 28 June 2021), and (ii) at least 30% of the penalties imposed before 28 June 2021.

No specific procedure is provided for this penalty redetermination. The Public Clarification only mentions that where the above conditions are met (including the payment of at least 30% of the penalties imposed before 28 June 2021), the FTA will, at the end of 2021, redetermine the amount of the penalties and the taxpayer will not be required to pay the remaining part (that is, up to 70% of the amount of the penalties that is unpaid on that date).

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

ZATCA releases official e-invoicing guidelines and standards

On 28 May 2021, the Zakat, Tax and Customs Authority (ZATCA) published official guidelines and standards regarding the implementation of e-invoicing in the Kingdom. The most significant announcement is that Phase 2, “Integration”, of the implementation has been postponed and will now occur from 1 July 2022 to 1 January 2023. The deadline for Phase 1, “Generation and Storage”, remains the same on 4 December 2021.

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

Three months extension announced for Covid-19 support initiatives

In a meeting chaired by HRH the Crown Prince and Prime Minister, the Cabinet announced a three-month extension (June 2021 to August 2021) of support initiatives designed to mitigate the impact of Covid-19.

Support initiatives include:

• Support with salaries of insured Bahraini private sector employees for a period of three months, 100% for the first month and 50% for the second and third months.
• Exemption for companies impacted by Covid-19 from paying municipal fees.
• Exemption for tourist establishments and facilities from paying tourism fees.
• Extension of Tamkeen Labor Fund Business Continuity Support program for companies impacted by Covid-19.
• Exemption for tenants of government properties, including government owned companies from the payment of rent.
• Exemption for companies impacted by Covid-19 from paying the commercial registration renewal fees for the year 2021.
• Re-opening of applications to the liquidity fund, with a focus on small and medium-sized companies.

For more details, see the KPMG news flash here. 

Arabic Financial Statements (Updates)

The General Tax Authority (GTA) has reiterated, on 3 June 2021, that Arabic Financial Statements (attached along with the tax return) must be audited and duly signed by both the taxpayer and the auditor. This is as per Law No. 7 of 2019 related to Protection of the Arabic Language. Taxpayers are required to fully comply with this law.

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

Jordan introduces transfer pricing regulations

On 7 June 2021, the Hashemite Kingdom of Jordan published transfer pricing regulations in the official gazette under regulation No. (40) for 2021.

The Transfer Pricing (TP) Regulations require Multinational Enterprises (MNEs) operating in Jordan to transact with cross-border related parties in accordance with arm’s length principles. This means MNEs need to deal with a related party as if they are dealing with unrelated third parties.

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