Executive Regulations have been amended
The UAE Cabinet has issued a Cabinet Decision (No. 46 of 2020) on 4 June 2020 to amend the Clause (2) of Article 31 of the Cabinet Decision No. 52 of 2017 - The Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax.
The original text of Clause (2) of Article 31
“For the purpose of paragraph (a) of Clause (1) of this Article, a Person shall be considered as being “outside the State” if they only have a short-term presence in the State of less than a month, OR the only presence they have in the State is not effectively connected with the supply”.
is amended to
“For the purpose of paragraph (a) of Clause 1 of this Article, a Person shall be considered as being “outside the State” if they only have a short-term presence in the State of less than a month AND the presence is not effectively connected with the supply”.
After combining the two conditions (a short-term presence in the State less than one month and the presence is not effectively connected with the supply), the scope of zero-rating export of services is narrowed. Therefore, zero-rating the export of services shall not be applied in the case where the non-resident recipient:
• stays in the UAE for a month or more; or
• stays in the UAE for less than a month but his presence in the UAE is effectively connected with the supply.
VAT Oil and Gas Guide
The National Bureau for Revenue has published a VAT Guide for businesses operating in the oil and gas sector. This document provides guidance and further clarification on the zero-rating provisions relating to oil and gas.
The guide also addresses the VAT treatment of issues in the oil and gas sector such as
granting exploration and exploitation rights, supply of staff, contractual arrangements, and the VAT implications of petrol station operating models.
VAT Retail and Wholesale Guide
The guide provides details on determining the consideration for a supply for VAT purposes, the treatment of vouchers and coupons, loyalty programs, supplies from vending machines, and the VAT treatment of concessions. The guide provides details on what third party evidence is required from taxpayers to evidence lost, stolen or damaged stock and also sets out new guidance on an advance notification procedure to avoid an input tax clawback for obsolete stock.
FAQs and a notification form for obsolete stock
The NBR has also issued further details on the VAT treatment of obsolete stock in the technical FAQ on their website. The FAQ section of the NBR’s website has been updated to include information on the obsolete stock and the form to be used when notifying the NBR of the intention to dispose of such stock.
New payment method for VAT
The NBR has launched a new payment method, in addition to the existing methods, which will now enable taxpayers to make VAT payments through the National e-Government Portal using debit and credit cards.
Increase in VAT rate to 15% effective July 1, 2020
The Minister of Finance of the KSA has announced several measures to counter the financial and economic impact of COVID-19 on the government budget. Such measures inter alia include an increase in the VAT rate to 15% applicable from July 1, 2020, onwards.
The Guide on the transitional measures
GAZT has issued a guide on the transitional measures that would need to be considered for supplies that are made during the transitional period.The necessary legislative changes and
details of the VAT rate increase have yet to be announced, the guide sets out a transitional period for the VAT rate increase from 11 May 2020 and 30 June 2021. In determining the VAT rate that would apply on supplies made during the transitional period, taxpayers would need to consider a number of factors including the date when contracts have been signed, whether a customer is entitled to full input tax recovery and if a tax invoice has been issued prior to 1 July 2020.
Amended Implementing Regulations
In line with the directions of the Royal Order Number A/638, the GAZT through its decision number 2-3-20 dated 9 June 2020, published in the Official Gazette having reference number 4836 dated 19 June 2020, has approved amendments in various Articles to the Implementing Regulations (‘the Regulations’). The major amendment/addition in the Regulations inter alia include amendments in the provisions of Article 79 to incorporate the transitional provisions for the VAT rate increase, amendments/clarifications in the provisions of Article 15 (nominal supplies) and amendments/additions in various provision to incorporate the VAT treatment on supply of real estate by individuals.
The new VAT registration process for individuals supplying real estate
Further to the amendment of the KSA VAT implementing regulations in relation to special provision for the VAT registration of individuals supplying real estate without a commercial license, GAZT has launched the registration process on its website.
Transitional Provisions Guidelines of VAT Rate Increase to 15%
GAZT has issued an English translated version of the guide explaining the transitional measures of the VAT rate increase. Special attention is given to the tax invoices.
Detailed Guide on the VAT rate increase
GAZT issued a detailed guide on the VAT rate increase which provides further clarification along with examples to the taxpayers to enable them applying the correct treatment for the VAT rate increase.
Application of VAT to Provision of Collateral (Liens and Mortgages)
The circular clarified the instances wherein the transfer of ownership of the property shall be considered as ‘out of scope’ for VAT purposes or taxable as per the relevant provisions of the VAT law and Implementing Regulations.