The Federal Tax Authority of the UAE (herein the FTA) has published its new Public Clarification on “VAT-free” special offers VATP020 in which it reconfirms some widely applicable principles.
This Public Clarification clarifies the VAT treatment of promotions where the seller absorbs VAT on promotional goods. For purposes of this clarification, the term “promotional goods” refers to goods which are sold as part of a special promotion.
The FTA summarises that VAT registered businesses should not advertise taxable goods or services as free of VAT or sell such goods or services without accounting for 5% VAT, except where the supply qualifies for zero-rating.
the Federal Tax Authority (‘FTA’)has published its new public clarification regarding the VAT registration of «Sole Establishment».
According to the Clarification, a sole establishment (also referred to as sole proprietorship or المؤسسة الفردية ) is a legal form of business which is 100% owned by a natural person. A sole establishment does not have a legal personality that is independent of its owner and is accordingly considered to be the same person as its owner.
The FTA notes that a legal person (e.g a company) cannot own a sole establishment.
The Clarification (VATP021) states that the a natural person owning a number of sole establishments needs to obtain only one VAT registration for all its sole establishments and does not require separate VAT registrations for such establishments.
The FTA will review, in certain cases, the VAT registrations by taxable persons in respect of sole establishments and will inform them of the corrective steps to be taken, if any.
It is important to note that the taxable supplies by a natural person, as well as his sole establishment, must be considered collectively in order to determine the VAT registration obligations. If a registrant disregarded any of his sole establishments or his own taxable supplies for VAT purposes (for example, on the basis that the sole establishment or his taxable supplies did not reach the VAT registration threshold on a stand-alone basis), the registrant is required to inform the FTA of any undeclared output tax by submitting a voluntary disclosure if required.
For any VAT registrations received in the past, no action is required to amend the VAT registrations until specifically directed by the FTA.
Cabinet Resolution No. (58) on on the Regulation of the Procedures of the Real Beneficiary
The Resolution aims to introduce the requirement for a beneficial ownership register in the UAE mainland and unify the minimum disclosure requirements for corporate entities incorporated in the UAE mainland and in the non-financial free zones.
All companies in the UAE (both mainland and free zone companies (with the exception of companies incorporated in the financial free zones ADGM and DIFC) and companies owned by the Federal/Local Governments, must now keep at their office premises:
a. a shareholder register;
b. a register of beneficial owners; and
c. a register of nominee directors.
Companies must file such information relating to the shareholders and beneficial owners with the relevant registrar and licensing authorities responsible for supervising the register of trade names for the various types of establishments registered in the UAE (the Registrar) by 27 October 2020.
Companies must notify the Registrar of any change/amendment to the information provided within 15 days of such change/amendment.
Companies are required to designate an individual who the Registrar may contact in relation to any disclosure.
Each company must take reasonable steps to ensure transparency, to obtain accurate information regarding the beneficial ownership, and to update the information on the registers on an ongoing basis.
Companies which are listed in well regulated stock exchanges or companies which are owned by these listed companies may rely on the disclosures made to the relevant stock exchange rather than making independent inquiries as to the beneficial ownership.
Important UAE Federal Supreme Court Adjudication
The case involving the calculation method of the late payment penalties on voluntary disclosures has been adjudicated by the Federal Supreme Court of the UAE (herein the Court).
The Court has taken an opposite position to that of the tax dispute resolution committees, and the Federal Primary and Federal Appeals Courts on this matter.
On 14 October 2020, the Court ruled that late payment penalties are still applicable, even when a voluntary disclosure is submitted.
According to the decision "necessary to impose a late fine for delay in payment" in such a case. The Court rules that the voluntary disclosure constitutes an amendment of the original return.
Based on this reasoning, the Court ordered that late payment penalties should apply retrospective to the voluntary disclosure, calculated as of the date of the original tax return.
Taxpayer discovers a mistake in a tax return from March 2019 and files a voluntary disclosure an April 2020. According to the Court’s judgement, the late payment penalties up to 300% would be calculated as of March 2019, not April 2020.
It is important to note that Courts in the UAE do not set precedent.
Updated ESR filing requirements and deadlines
The Ministry of Finance of the United Arab Emirates (herein the MOF) has published its notice regarding ESR filing requirements and deadlines.
In accordance with Article 6.7 of Ministerial Decision 100 all Notifications and Economic Substance Reports must moving forward only be submitted electronically on the Ministry of Finance Portal. Licensees and/or Exempted Licensees can commence filing on the Ministry of Finance portal once it goes live, which is scheduled for the first week of December 2020.
All notifications must be submitted within six months from the end of the Financial Year. Licensees that already submitted a Notification directly to their Regulatory Authorities are required to re-submit this Notification on the Ministry of Finance Portal once available. The filing deadline for notifications that are due before the Ministry of Finance Portal is available will be extended to 31 December 2020.
The filing deadline for Economic Substance Reports for a Financial Year commencing on or after 1 January 2019 and ending on or before 31 December 2019 shall be 31 December 2020. This deadline also applies to Licensees and Exempted Licensees (where applicable) that have a short Financial Year ending on or before 31 December 2019
Licensees and/or Exempted Licensees that fail to submit/resubmit their Notification along with the required supporting documents by 31 December 2020 will be issued a penalty of AED 20,000 under Article 13 of Decision 57 for failure to provide a Notification.
Licensees and/or Exempted Licensees (where applicable) that fail to submit their Economic Substance Report within the aforementioned period shall be subject to a penalty of AED 50,000 under Article 14 of Decision 57 for failure to provide an Economic Substance Report.
VAT Guide will be happy to help you while the submission of the ESR notifications and ESR reports.
Economic substance report template
Economic substance notification template
New Excise Tax guides
Federal Tax Authority of the UAE has published three new guides on Excise Tax.
On September 2020 Federal Tax Authority of the UAE (the FTA) has published three guides regarding Excise Tax.
The first one is Excise Tax User Guide (Registration, Amendments And De-registration).
This guide is prepared to help you navigate through the FTA website and successfully complete your Excise Tax registration form as well as to guide you on the amendment and de-registration processes. It is designed to help you:
• create an e-Services account with the FTA (you will need to do this before you can register for Excise Tax);
• provide accurate answers to the questions on your Excise Tax registration and amendments forms as well as the de-registration application by explaining what information you are required to provide; and
• understand the icons and symbols you might see as you complete the registration form.
You should find that setting up an e-Services account is similar to setting up the other online accounts that you hold. The Excise Tax registration form is also designed to be straightforward and wherever possible it will auto-complete information for you.
The second document is a user guide for Excise Tax Clearing Companies on Imports, Release and Consumption.
This guide will help you navigate the e-Services portal from a systems perspective, and is designed to be read in conjunction with the Excise Tax Clearing Company User Guide | Registration & Amendments. This guide is intended to help you to:
- suspend Excise Tax upon import;
- release suspended Excise Tax for goods that have been exported; and
- declare consumed goods.
- This guide will also help you understand
- the icons and symbols used in the forms
- the Excise Tax Suspension compliance obligations that an Excise Tax Clearing Company has to comply with; and
- the various declaration forms that need to be filed by an Excise Tax Clearing Company
- in the UAE.
Finally, the third guide Excise Tax Clearing Company User Guide on Registration & Amendments.
This guide is prepared to help you navigate through the Federal Tax Authority (FTA) website and successfully complete your Excise Tax Clearing Company registration form as well as to guide you on the amendment process. It is designed to help you:
• provide accurate answers to the questions on your Excise Tax Clearing Company registration and amendment forms by explaining what information you are required to provide; and
• understand the icons and symbols you might see as you complete the registration or amendment forms.
NB! Before you can use this guide, you should be registered as a Clearing Company (TINCO).
A new version of e-Dirhams system has been added as one of the official payment channels provided by the FTA. Taxpayers may process tax payments via the new e-Dirham cards as of 1 November 2020, and payments will not be accepted through existing e-Dirham cards effective that same date.
The Sultanate of Oman
5% VAT to come into force on April, 2021
On Monday 12 October 2020, His Majesty, the Sultan of Oman, Sultan Haitham bin Tariq bin Taimur, issued Royal Decree No.121/2020 in relation to the implementation of VAT in Oman.
Following the introduction of VAT in the KSA, the UAE and Bahrain, Oman will be the fourth GCC country to implement VAT in the region.
The VAT Law will set out the general principles for the application of VAT in Oman in line with the Unified GCC Agreement for Value Added Tax (VAT). The VAT Law is expected to be published in the Official Gazette on 18 October 2020 with an effective date for the introduction of VAT in April 2021.
Businesses with activities in Oman will need to consider the implications of the introduction of VAT on their transactions and ensure that they are ready to comply with the new VAT requirements by April 2021.
The National Bureau for Revenue in Bahrain released a Profit Margin Scheme application form to be filled by taxpayers seeking to apply the profit margin mechanism on the value of certain taxable goods in accordance with Article 27 of the Bahrain VAT Law and Article 31 of its Executive Regulations.
The NBR confirms through the published form that the goods qualifying for the profit margin scheme include used moveable goods for further use in their current state or after repair and works of art, artifacts or other items of scientific, historical or archaeological interest which have been previously subject to VAT. The NBR also confirms that precious metals, precious stones, pearls or watches do not qualify for the application of the profit margin scheme.
GAZT clarifies that supply of services by a taxable person to a non-resident is subject to zero rate unless any of the cases mentioned in the second paragraph of Article 33 of the Regulations are applied.
The Circular also details the exceptions/ instances with examples wherein the services would be subject to VAT at the standard rate.
The General Secretariat of Tax Committees (‘GSTC’) issued a guide on the rules and procedures of Tax Violations and Disputes Resolution Committees “TVDRC” and the Appellate Committee of Tax Violations and Dispute Resolution “ACTVDR” (Collectively “Appeal Committees”).
The guide provides a step-by-step process of submitting the appeal and its requirements via GSTC portal as well as timelines related to each phase.