KPMG: International Covid-19 tax developments
KPMG reports on tax developments in response to the coronavirus.
GCC specific updates
United Arab Emirates (UAE)
1. Amendment to the zero rating conditions for exported services as per the UAE VAT Executive Regulations
The Federal Tax Authority (FTA) recently published an updated version of the VAT Executive Regulations.
While most of the changes in the VAT Executive Regulations are stylistic, one notable alteration was made under Article 31(2) which qualifies whether a person is considered as “outside the State” for the purpose of zero rating services. This is most applicable to companies with some presence in the UAE. The change suggests that where a person has a connection to the supply and is present in the UAE for any period of time during the supply of the services, zero rating of the services cannot apply.
Please find more details here.
2. Dubai Free Zones Council to unveil unified business portal for investors
The Dubai Free Zones Council plans to launch a single portal for all special investment zones in Dubai as part of plans to speed up the emirate’s economic recovery.
The combined business portal will help investors make informed decisions about choosing the free zone that suits them best.
The council also considered setting up a unified record for free zone licenses, where companies operating within free zones will be allocated a unique code.
Additional information may be found here.
1. Shura Council to decide on draft Oman VAT Law and amendments to the Income Tax Law within one month
According to recent news reports, the Council of Ministers in Oman has referred two laws to the Shura Council. These comprise the draft Oman Value Added Tax (VAT) Law and a draft to amend the existing Oman Income Tax Law (collectively referred to as “the Laws”).
The Laws have been referred to the Shura Council as a matter of urgency. The Shura Council is required to decide on both the Laws, by approval or amendment, within one month from the date of the referral. Once the Shura Council decides on the Laws, they will be referred to the State Council. The State Council is required to decide on them, by approval or amendment, within 15 days from the date of the referral. Once the State Council decides on both the Laws, the Laws will be submitted to His Majesty the Sultan, with the opinion of both the Shura and the State Council.
While VAT will likely be implemented in early 2021, Oman is expected to amend the Income Tax Law to allow, among other things, the Automatic Exchange of Information (AEOI) and Country-by-Country Reporting (CbCR). These are some of the measures the Sultanate has taken over the last few months to action Oman’s commitment to implement the four minimum Base Erosion and Profit Shifting (BEPS) standards of the OECD. Oman is also expected to introduce detailed transfer pricing guidelines and regulations to govern arms’ length pricing of transactions between related parties.
2. Legislative amendments for introduction of excise tax on sweetened beverages in Oman from 1 October 2020 issued
The TA announced the introduction of excise tax on sweetened beverages from 1 October 2020. According to the Decision No. 34/2020, sweetened beverages include:
- Any beverage to which sugar, sugar derivative or other sweetener is added
- Any concentrate, powder, gel, extract or compound to which sugar, sugar derivative or other sweetener is added and that can be converted into a sweetened beverage
The following products as defined in Decision No. 34/2020 are excluded from the scope of sweetened beverages for the purpose of excise tax and therefore not subject to excise tax as sweetened beverages:
- Natural fruit and vegetable juices
- Milk and milk substitutes
- Ready-to-drink beverages containing at least 75 percent milk
- Ready-to-drink beverages containing at least 75 percent milk substitutes
- Artificial baby milk, baby formula or baby food
- Beverages intended for special dietary/nutritional needs
- Beverages intended for medical needs
3. Oman increased excise tax on alcohol from 50% to 100% from 1 July 2020
Oman had introduced excise tax on alcohol and alcohol products, energy drinks, carbonated drinks, pork and pork products, and tobacco and tobacco products with effect from 15 June 2019. The TA implemented a temporary reduction in the rate of excise tax on alcohol and alcohol products to 50%. The Ministerial Decision was, however, not amended to reflect the temporary reduction. The TA has now removed the temporary reduction and reverted to the original rate of excise tax on alcohol and alcohol products, which is 100%. This took effect from 1 July 2020.
4. Tax relief measures announced by the Oman Tax Authority (TA)
Certain tax relief measures were announced by the TA on 8 July 2020, in relation to the due dates for payment of taxes due in the year 2020. This comes in the wake of the Supreme Committee’s decision pertaining to the Covid-19 pandemic, which authorized the TA to implement these measures.
The measures inter-alia include suspension, until 30 September 2020, of all fines and additional tax (1% per month) related to the non-compliance with the due dates for filing tax returns, both provisional and final, along with the annual audited accounts for the year ended 31 December 2019.
Please find more details here.
1. Second extension of deadline for filing income tax return and payment of income tax
The General Tax Authority (GTA) issued Circular No. 7 for the year 2020 following an application made on behalf of the taxpayers. The submission requested a second extension of the deadline to submit tax returns and pay the tax liability for the year ended 31 December 2019 (FY2019).
In response to the request—and considering the impact of Covid-19—the GTA provided an additional extension of two months for filing of FY2019 tax returns. Therefore, the new deadline for taxpayers with financial year ended 31 December 2019 has been extended to 30 August 2020. Further, any income tax liability for these taxpayers shall also be due on or before 30 August 2020.
Please find more details here (PDF 99.1 KB).
2. Mandatory registration in the new tax administration portal - Dhareeba
As per Circular No (3) issued by the General Tax Authority (GTA) on 30 June 2020,
the registration stage for the new tax administration system, Dhareeba, goes live from 1 July 2020. The circular emphasizes the following:
- The GTA will stop receiving applications for registration through the current tax administration system (TAS) effective from 30 June 2020
- All taxpayers, including those currently registered in the TAS, are required to register in the Dhareeba portal according to the procedures and controls in effect
- All registered taxpayers must adjust their status and re-register in Dhareeba within 90 days (no later than 30 September 2020), according to Article (69) of the executive regulations of the Income Tax Law No. (24) for the year 2018
- Taxpayers who register no later than 30 September 2020 in the Dhareeba portal will be exempt from financial penalties resulting from not registering and obtaining the tax card previously
Please find additional information here (88.9 KB).
1. Details about The Kuwait Tax Authority (KTA) Circular No. 4 of 2020 (CR No. 4 of 2020) dated 28 June 2020
The Kuwait Tax Authority (KTA) has issued Circular No. 4 of 2020 (CR No. 4 of 2020) dated 28 June 2020 providing an extension of deadlines with respect to filing returns and settlements for businesses with a fiscal year ending 29 February 2020, 31 March 2020 and 30 April 2020 due to disruption caused by Covid-19.
The Circular covers businesses that are subject to filing obligations under the following laws:
- Kuwait Income Tax Decree No. 3 of 1955 as amended by Law No. 2 of 2008 and its executive regulations (Corporate Income Tax Law)
- Kuwait Income Tax Law No. 23 of 1961 in the designated area (Partitioned Neutral Zone Tax Law)
- Law No. 46 of 2006 and its executive regulations (Zakat Law)
- Law No. 19 of 2000 and its Resolution of the Council of Ministers No. 185 of 2001 (National Labour Support Tax Law)
Please click here for more details.
1. NBR updates VAT Technical FAQs regarding disposal of obsolete stock
The National Bureau of Revenue (NBR) has updated the VAT Technical FAQ section regarding disposal of obsolete stock.
We have summarized the key aspects covered in the updated VAT Technical FAQs:
- Definition of obsolete stock
- Approval from the NBR in order to dispose of obsolete stock
- VAT treatment on disposal of obsolete stock
- Exceptions to notifying NBR
Please find more details here (PDF 275 KB)