October Tax Newsletter

UAE

innoVATive tax refund system for tourists

The Federal Tax Authority ("FTA") of the United Arab Emirates ("UAE") announces a facility, known as the ‘innoVATive’ system, to enable tourists to claim VAT refunds of their purchases made in the UAE, without the requirement to carry paper receipts at the point of departure from the UAE.

Previously, tourists were required to carry all the physical receipts to claim the refund, making it a lengthy and cumbersome process at the point of departure from the UAE.

The digital approach to VAT refunds for tourists involves integrating retail merchants with the governmental systems. Additionally, tourists can scan their passports to access their receipts and choose their preferred refund method. There are also self-service kiosks at airports, hotels, shopping malls and the departure gates of the country.

KSA

New guide on the Electronic Contracts

The Kingdom of Saudi Arabia’s ("KSA") Zakat, Tax and Customs Authority ("ZATCA") issued the VAT Guidelines for Electronic Contracts.

The main takeaways from these Guidelines are:

Nature of electronic contracts (e-Contracts) and their legal recognition in comparison to paper contracts;
Situations where suppliers are required to mandatorily register, and where they may optionally register;
Considerations for claiming input tax deductions on account of taxable transactions executed by way of e-Contracts.

The Guidelines also provide certain scenarios involving online portals, manufacturers’ websites, agents, and app stores. The 4 scenarios for which the Guidelines clarify the VAT treatment on transactions executed between the various parties by way of e-Contracts are:

SCENARIO 1 – The customer visiting the manufacturer’s website and purchasing the goods directly from the website;
SCENARIO 2 – The online portal acting as an intermediary to introduce buyers and sellers, which explains the platform liability;
SCENARIO 3 – A supplier providing consultancy services by way of an e-Contract;
SCENARIO 4 – A customer purchasing online content through an app store.

Zero-rated military goods

The Kingdom of Saudi Arabia’s ("KSA") Zakat, Tax and Customs Authority ("ZATCA") issues a public consultation, seeking to apply VAT at a zero rate on locally manufactured military goods supplied by designated taxpayers who are licensed by the General Authority of Military Industries ("GAMI") to the armed forces and internal security forces.

One of the requirements to obtain this benefit is that the goods ought to be supplied by the same supplier manufacturing the goods locally within KSA.