Zero-rating of export of services (Public Clarification VATP019)
The FTA has published its new Public Clarification regarding zero-rating of export of services in which it explains the application of the conditions prescribed in Article 31(1)(a)(1) of Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments ("Executive Regulation").
Namely, there are two main conditions which must be met as per Article 31(1)(a)(1) Executive Regulations:
- Condition 1: the recipient of the services should not have a place of residence in an Implementing State (i.e. currently, the UAE does not recognize any other state as an "Implementing State" for the purposes of VAT, consequently, the term "Implementing State" should be read as the "UAE")
- Condition 2: the recipient of the services should be outside the UAE at the time the services are performed by the supplier.
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The Sultanate of Oman
VAT Implementation Process
Oman Tax Authority presented the draft VAT law ("as a matter of urgency") to the Economic and Financial Committee of the Shura Council and representatives from the Oman Chamber of Commerce and Industry (OCCI) and Public Authority for Consumer Protection (PACP) on Monday, dated 13 July 2020 for their review and deliberation.
The State Council would look at it in a fast track manner (within 15 days rather than the usual 45 days in a normal scenario).
This accelerated approval process may result in the VAT law being finalised within a few months (tentatively by September/October 2020) with a possible implementation date in early to mid-2021. Although, to date there is no formal announcement on the timelines and the Tax Authority has maintained that it intends to give businesses at least six months to prepare for VAT.
The Excise Tax Executive Regulation
The Executive Regulations to the Excise Tax Law have been issued on 13 July by way of Ministerial Decision (MD 51/2020) in the official gazette of Oman, providing further legislative support on the rules and procedures for Excise Tax. The Executive Regulations are divided into twelve chapters and include details relating to the procedures and conditions around the implementation of excise tax in Oman, such as:
● Procedure for registration and deregistration
● Computation of excise tax
● Provisions and conditions around the operation of an excise tax warehouse
● Tax suspension arrangements and exemption from payment of excise tax
● Conditions for the transfer of goods held under Customs suspension arrangements
● Procedure for filing of excise returns
● Provisions for the payment and refund of excise tax
● Conditions relating to the maintenance of records and accounting books
● Procedure for conducting assessments and appeals
● Levy of administrative penalties and fines
Contracts Reporting Requirements (Arabic Version)
The General Authority of Zakat and Tax (‘GAZT’) has enabled an ‘e-services’ option on their portal for taxpayers allowing them to report contracts entered into between commercial establishments and Government authorities exceeding the threshold value of SAR 100,000. Such contracts need to be reported within three months of the execution date.
In accordance with the guidance issued by GAZT on the contract reporting requirement, although not specifically covered in the VAT law or Implementing Regulations, all entities are now also required to report contracts, exceeding the aforementioned threshold, entered into between commercial establishments and with the Government authorities from a VAT perspective.
The guidance refers to Article 51 of the VAT law enabling GAZT to require taxpayers to submit contract related information. There are no specific penalties prescribed by GAZT, however we are of the view that GAZT may impose general penalties as per Article 45 of the VAT law in case of non-compliance.
Real Estate Supplied by Individuals (Arabic Version)
GAZT issued a guide (available in Arabic) explaining the VAT implications on supply of real estate by individuals. GAZT has clarified that the supply of real estate is a VAT-able transaction in general unless it qualifies for conditional exceptions/ exclusions specified by GAZT. Exclusions mentioned in the guide are:
● Sale of residential property by the owner, spouse or one of the relatives of the second degree
● Transfer under inheritance
● Transfer of ownership to a licensed charitable organisation or to a party of public benefit
● Transfer of ownership in the implementation of a legal notarized testament
● Temporarily transferring ownership of the real estate for finance or credit guarantee purposes
● Any additional exclusion which is at the discretion of GAZT