July 2021 Tax Newsletter

UAE

UAE issues administrative penalties for UBO non-compliance

Ministerial Decision No.53 of 2021 was published on the UAE's official gazette issue of 15 June 2021.

The Decision contains a comprehensive list of administrative penalties related to violations of Ministerial Decision No.58, which include financial penalties ranging from AED 1,000 to AED 100,000.

Additionally, some administrative penalties entail the suspension of the legal person’s trade license for periods ranging from 1 month to 12. Other penalties also extend to the suspension of the authority of the natural person (manager/board member) responsible for the violation.

UAE signed DTT with Israel

The UAE and Israel have signed a Double Taxation Treaty (DTT) on 31 May 2021. Treaty still needs to be ratified by the parties and is expected to enter into force on 1 January 2022. The new DTT is based on the Organization for Economic Co-operation and Development (OECD) Model Tax Convention and is aimed at the development of economic cooperation between the countries.

How to amend incorrect payment of VAT: Clarified by FTA

According to the FTA, if a taxpayer has incorrectly transferred tax which is due to the FTA against a TRN that is not their own, the Authorised Signatory of the taxpayer making the incorrect payment should send a letter to the FTA that must contain the following information:

Explanation of the scenario (on the company letterhead) and a pledge to not repeat the error again. In the letter the tax payer can also request an exemption from administrative fines.
The correct TRN to be paid and also the incorrect TRN that has received the amount.
The amount paid, the tax period, date of payment, copy of transfer or account statement.
A ‘No Objection Certificate’ from the Authorized signatory of the taxpayer that has received the payment (on the company letterhead). The NOC must clearly mention (1) the amount received, (2) the wrong TRN, and (3) the correct TRN to which the amount should be transferred by the FTA.

All of the above documents must be sent to payment.transfer@tax.gov.ae.

KSA

End of the VAT rate transitional provisions in KSA

KSA announced that it would increase the standard VAT rate from 5% to 15% effective from 1 July 2020. However, for contracts prior to 11 May 2020, the 5% would still apply until the end of the contract, the contract renewal date or on 30 June 2021 - whichever occurred first. These transitional provisions were optional to the taxpayer.

Reverse Charge Mechanism in KSA

The Zakat, Tax and Customs Authority of KSA has recently published the guideline elaborates the application of the RCM and specifically addresses the following:

Cases where the RCM is applied.
Tax due date.
Reporting the tax calculated in accordance with RCM.
Input tax deduction.

The guide specifically discusses the criteria to assess the residency of the supplier and reassures that the RCM is to be applied even when the goods and services are provided by an entity resident in any GCC state. Additionally, the guide confirms that VAT must be declared and paid by the supplier/recipient during the tax period in which the supply takes place. This is subject to the exception for accounting on cash basis.

VAT on Insurance Services: New VAT Guide

In its new Guide, KSA confirms a widely adopted position that commissions given to brokers for (re)insurance contracts are subject to VAT. These therefore constitute a cost for the insurance companies which provide exempt insurances, such as life insurance. The guide does not address further whether this commission should be inclusive or exclusive of VAT. Presumably, this is left up to the contractual arrangements between parties.

Oman

VAT Return Guide

The guide includes information on the following aspects:

Preparing a VAT return.
Filling a VAT return.
VAT return payment or refund.
Deferring payment of VAT on imports.
Correction of VAT returns.

Additionally, the guide lists the specific details of the tax return template in Oman by listing the sections, boxes and descriptions of each value. Further requirements relating to record keeping are also enlisted therein. As for the corrections of VAT returns, the OTA will accept a revised return within 30 days of the error or omission being discovered.

Finally, the guide clarifies the violations with respect to VAT returns in Oman, which include the failure to submit VAT returns and submitting incorrect data. A monetary penalty and/or imprisonment is applicable to such violations.