The UAE issued Cabinet Resolution No.(88) of 2021 concerning the amendment of some provisions of Cabinet Resolution No. (52) of 2017 regarding the UAE VAT Executive Regulations.
The aforementioned changes are made to avoid double taxation on goods supplied from a Designated Zone and to provide registration relief to non-resident suppliers.
The decision amends Article 51 of the VAT Executive Regulations concerning supplies of goods and services to and within Designated Zones.
Specifically, paragraph 5 of Art. 51 stipulates circumstances, in which the supply of goods within the Designated Zone will not be subject to VAT: - If the purpose of the supply was to incorporate the goods into, attach the goods to, or the goods become part of or are used in the production of another good in the same Designated Zone and such good is not consumed; - The goods were delivered to a place outside the State; - The goods were moved from the Designated Zone to a place inside the State.
Updated List of Designated Zones
The updated list of the Designated Zones now includes new DZ - the Dubai Commerce City, which is classified as DZ from 1 January 2021. The Dubai Textile City and the Free Zone Area in Al Quoz have lost their DZ status effectively from 05 April 2021 and 01 July 2021 respectively. Similarly, the RAK Airport Free Zone ceased to be a DZ from 5 July 2019.
ZATCA issued a new VAT Guide related to entertainment activities where it specifically addresses the following: - General and specific place of supply rules; - Attendance and entrance fees; - Recreational, sports, cultural and artistic services; - Hotels, restaurants and catering services; - Input tax deductibility and tax compliance requirements; As per the aforementioned VAT Guide, in principle, all entertainment services provided in KSA are subject to KSA VAT despite the residency status of the supplier and customer. For VAT purposes, temporary import of goods for events can qualify for customs duties suspension. Detailed VAT Guide can be found here
ZATCA initiated tax inspection campaign in KSA. The Authority has executed a campaign in the month of September which consisted of 4,000 inspections.
ZATCA announced that the main violations were: - Charging more then 15% VAT; - Not charging VAT; - No tax identification number on VAT invoices; - Charging VAT by non-registered entities.
Additional searches are expected to be conducted going forward.
As per the VAT Guide there are following SEZs in the Sultanate: - Al-Mazunah Free Zone; - Suhar Free Zone; - Salalah Free Zone; - Special Economic Zone at Duqm.
The VAT Guide stipulates the VAT treatment of supplies of goods and services from/to SEZs and includes some special requirements for the application of the Zero rate for goods/services received by an entity operating in SEZs: - Customer if taxable person; - Customer must be licensed by the authority operating and supervising the SEZ/FZ; - Customer must receive the goods/services for the purposes of the activity within the SEZ/FZ; - Services do not include services stipulated in Art (24) of the Law; - Services not exempt from tax in accordance with the provisions of Art (47) of the Law; - Customer must sign and provide the supplier with a declaration confirming that he is licensed by the supervising authority of the SEZ and that he has received the goods/services for the purposes of his activity within the SEZ.