Welcome to our May Tax Newsletter and Ramadan Kareem.
The ratification process for the KSA-UAE DTT is now complete. The DTT will come into effect on 1 January 2020.
2) UAE–Iraq DTT
On 13 April 2019, the Iraqi parliament approved the Iraq-United Arab Emirates Income and Capital Tax Treaty (2017). The treaty was ratified by the UAE in 2018; therefore it is expected to enter into force, shortly.
3) UAE VAT refund for foreign business visitors
The Federal Tax Authority (FTA) released a detailed guide on operationalizing the business visitor scheme. Foreign businesses can now claim refunds for VAT incurred on goods and services used in the UAE, subject to fulfillment of specified conditions. The guide provides a list of countries with whom reciprocal arrangements are approved by the Ministry of Finance (MoF).
4) KPMG Lower Gulf is now a UAE FTA registered tax agency
KPMG Lower Gulf is a registered tax agency with the FTA and hence may represent clients before the FTA during audit and inspection. Apart from representation, the firm can manage tax correspondence, obtain clarifications, file reconsiderations to decisions issued by the FTA and file VAT returns on behalf of clients.
5) WHT clarification for interest payments prior to 11 February 2019
Under Omani tax laws, interest paid to foreign persons was made subject to a 10% WHT effective 27 February 2017. However, in the absence of detailed executive regulations (ERs) at that point in time, some taxpayers had applied for WHT clarification on interest payments. In response thereto, the Omani tax authorities instructed the respective applicants to delay payment of WHT on interest payments until ERs had been issued. Thereafter, Ministerial Decision 14/2019 was issued amending the ERs to clarify applicability of WHT on various payments.
The amended ERs are applicable from 11 February 2019. Amongst others, the amended ERs exempted specified interest payments by banks and government. However, the treatment of WHT on interest payments held for the prior period i.e. between 27 February 2017 till 10 February 2019 (due to the specific clarification) remained unclear. Hence, it is advisable to seek a formal clarification.
Recently, in the case of certain taxpayers other than banks, the Omani tax authorities have clarified that WHT on interest payments remains applicable from 27 February 2017. Therefore, WHT held back because of the earlier specific letter issued will now have to be remitted to the Government. KPMG Oman assisted in seeking such clarification.
6) Bahrain: beneficial ownership and “economic substance”
Bahrain introduced a number of provisions in December 2018. These provisions allow the determination of the beneficial owner of Bahraini resident companies and ensure that companies operating in Bahrain have sufficient economic substance therein. A Ministerial Decision was issued in December 2018 (generally effective 1 January 2019) to delineate the obligations of companies operating in Bahrain in certain activities related to the maintenance of an adequate level of economic substance in Bahrain. These activities include distribution and service centers, head office activities, holding companies’ activities, Intellectual Property related activities, freight and leasing.
The General Tax Authority (GTA) issued Circular No.14 for the year 2019 clarifying some transitional provisions for application of the new Income Tax Law No. 24 of 2018.
8) Kuwait: expat tax possible
The financial and economic affairs committee of the parliament approved a proposal to impose tax on expatriates' remittances. The proposed draft provides for tax rates ranging from 1% to 5% of the amount remitted, as follows:
up to KWD 99: 1%
between KWD 100 and KWD 200: 2%
between KWD 300 and KWD 499: 3%
KWD 500 and above: 5%
On 25 April 2019, the Organization for Economic Co-operation and Development (OECD) released the full version of the OECD Model Tax Convention on Income and on Capital (2017) (the OECD Model), , incorporating significant changes developed under the OECD/G20 project to address base erosion and profit shifting (BEPS). The full version includes articles, commentaries, non-member economies' positions, the recommendation of the OECD Council, historical notes and background reports. For further information and details on the 2017 OECD Model, the full version can be found here.
Addressing the Tax Challenges of the Digitalised Economy was approved by the Inclusive Framework on 23 January 2019, and has the consensus of a broad cross-section of developed and developing economies.
KPMG LLP (US) has released two videos which provide insight on key questions about the proposals described in the Public Consultation Document and which are being explored by the Inclusive Framework.
The Ministry of Finance, in a letter dated 23 April 2019 to the Lower House, announced plans to revise and renew the policy for issuing tax rulings of an “international nature.” Under this revised policy, there would be stricter requirements for international tax rulings. The revised practice is effective 1 July 2019.
The purpose of the revision would be to introduce more transparent ruling practice and enhance the quality of tax rulings for taxpayers with “real activities.” The proposed adjustments to the ruling practice would relate to the content, transparency and process for all international tax rulings.
A detailed analysis can be found here.
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