Welcome to the March edition of our tax newsletter, bringing you news on global and regional tax developments. 

International updates

Negotiating positions of EU Council and European Parliament, proposal for “public” Country-by-Country reporting

The EU Council and Parliament approved mandates for negotiating positions in anticipation of the start of interinstitutional negotiations (so-called “trilogue”) on the public country-by-country reporting proposal. Negotiations are expected to begin shortly and aim to reach an agreement on the directive at a second reading before the end of the Portuguese Presidency on 30 June 2021.

While the initiative had been in deadlock, due to disagreements on its legal basis, a breakthrough was achieved in February 2021 as a result of certain countries changing their previous position and agreeing to support the proposal.

Read a March 2021 report on the subject prepared by KPMG’s EU Tax Centre here.

OECD - Toolkit on tax treaty negotiations, for use by developing countries

The Organisation for Economic Cooperation and Development (OECD) announced that the Platform for Collaboration on Tax (a joint initiative of the IMF, OECD, UN and World Bank) released the final version of a “toolkit” that is intended to serve as guidance for developing countries on tax treaty negotiations.

According to the OECD release, the toolkit is an effort to provide capacity-building support to developing countries on tax treaty negotiations. The toolkit describes the steps involved in tax treaty negotiations, such as:

  • How to decide whether a comprehensive tax treaty is necessary
  • How to prepare for and conduct negotiations
  • What follow-up measures to take after negotiations

For more details, see the full KPMG tax flash here.

As CEOs recognize complex tax challenges as a top risk to growth, KPMG’s David Linke offers insights for global tax leaders

With the launch of the KPMG 2021 CEO Outlook Pulse survey this week, KPMG’s Global Head of Tax and Legal Services, David Linke, published a blog and an article, offering insight to Global Tax Leaders.

CEO respondents to the KPMG 2021 CEO Outlook Pulse Survey cited tax risk as a top concern when it comes to potential barriers to growth, moving up to number two in the list of concerns identified by CEOs surveyed. David explains why this is and outlines three key things tax leaders can do to help mitigate risks and put their CEOs’ minds at ease.

Read his blog or his full article on the topic here.

GCC updates

The United Arab Emirates (UAE)

UAE Federal Supreme Court issues landmark tax judgment

The UAE's Federal Supreme Court has issued a landmark tax judgment dismissing an appeal by the Federal Tax Authority (the Authority) against taxes and administrative fines and penalties imposed on a Dubai-based beverage distributor. The fines and penalties were related to excise taxes.

The Court ordered the Authority to repay the full amount of the penalties to the company. This is believed to be the first time the Court has issued a judgment in favor of a taxpayer and removed all taxes and administrative penalties levied by the Authority.

The Court said that the administrative penalties were incorrectly imposed, and that the argument was invalid, because the Authority imposed them on the incorrect premise that the company had collected funds as tax and had not reported or voluntarily declared the tax. 

Kingdom of Saudi Arabia (KSA)

Integrated Logistics Bonded Zone (ILBZ)

Saudi Arabia has issued the main regulations, including tax regulations and employment regulations, for its first special economic zone, the Integrated Logistic Bonded Zone (ILBZ),  announced in October 2018.

The ILBZ is located near the King Khalid International Airport in Riyadh and will provide direct and indirect tax benefits and exemptions to local companies and foreign investors. The tax benefits and exemptions are applicable from the date the established entity obtains its trading license to carry out activities in the ILBZ until the earliest of the following:

  • Fifty years from the day the license is obtained; or
  • The established entity ceases its activity in ILBZ.

The tax benefits and exemptions that are available to established entities include:

  • Income tax at a zero percent (0%) rate for income derived from the prescribed activities;
  • Customs duty suspension for goods imported into or transported within the ILBZ; and
  • No VAT on supplies or transactions occurring with respect to goods in the ILBZ. 

E-invoicing resolution open for consultation

Saudi Arabia will implement e-invoicing on 4 December 2021. As part of this process, the General Authority of Zakat and Tax (GAZT) has published a draft resolution of the controls, requirements, technical specifications and procedural rules for implementing the provisions of the e-invoicing regulation. This document will be open for public consultation until 17 April 2021. GAZT is encouraging interested parties and taxpayers to share their feedback before the deadline.

For more details, see the full KPMG tax flash here.

Deferment of customs duties and import taxes on goods imported into Saudi Arabia

In support of investment in the postal services sector in Saudi Arabia, the Communications and Information Technology Commission (CITC), the General Authority of Zakat and Tax (GAZT), and the General Customs Authority (GCA) launched an initiative to defer the payment of customs duties and taxes on goods imported into Saudi Arabia.

The initiative took effect from 15 March 2021 and allows the postponement of import taxes for a period of up to 21 days following the date of the clearance of the goods for home consumption in the Saudi Market.

For more details, see the full KPMG tax flash here

Requirement to obtain a national certificate of conformity for electro-technical equipment in Saudi Arabia

The Saudi Organization for Standardization, Metrology and Quality (SASO) released a statement on 10 March 2021 announcing that, commencing 1 July 2021, suppliers and manufacturers will be required to obtain a national certificate of conformity (IECEE) for electro-technical equipment and components in order that the products can enter and be traded in the Kingdom.

For more details, see the full KPMG tax flash here

VAT Guidelines for e-commerce

In an effort to boost VAT compliance in the Kingdom, the General Authority of Zakat and Tax (GAZT) released guidelines, on 2 March 2021, for VAT registration and payment for online store owners engaged in e-commerce activities.

The guidelines state that it is mandatory for online store owners to register for VAT if their annual turnover exceeds SAR 375,000, while registration is optional if yearly sales fall between SAR 187,500 and SAR 375,000. Online stores are defined as any digital platform that is used for e-commerce activities, which includes activities on Instagram, WhatsApp, Facebook, and LinkedIn, among others.

For more details, see the full KPMG tax flash here

Rectifying the status of Anti-Concealment Law violators

The regulations for rectifying the status of Anti-Concealment Law (the Law) violators, which followed the August 2020 release of the Law, aim to provide Saudis and non-Saudis who practice economic activities in the Kingdom with the opportunity to rectify their status by 23 August 2021. If they do so before the deadline, they shall be exempt from the penalties stipulated in the Law, penalties resulting from the crime and proceeds thereof, and from paying income tax retroactively.

For more details, see the full KPMG tax flash here

Bahrain

Deadline to file economic substance (ES) return for Bahrain entities is 31 March 2021

The Ministry of Industry, Commerce and Tourism (MoICT) and the Central Bank of Bahrain (CBB) issued a Directive OG/499/2018 (CBB Directive) on 22 November 2018 and a Ministerial Decision no. 106 (MO 106) on 27 December 2018 (collectively ‘Economic Substance Rules’ or ‘ESR’) imposing substance requirements for Bahraini entities undertaking geographically mobile activities in, from, or through Bahrain.

For more details, see the full KPMG tax flash here (PDF 163 KB)

Qatar

Detailed guidelines on transfer pricing reporting and documentation issued in Qatar

Qatar transfer pricing (TP) documentation requirements were introduced under the Executive Regulations (ER) to the New Income Tax Law No.24 of 2018, which were issued in December 2019. The General Tax Authority (GTA) has now issued additional TP guidelines for documentation and compliance in Qatar, which was approved by way of the President’s Decision No. 4 of 2020.

According to the detailed guidelines and based on the submission modules being developed on the Dhareeba system, three TP documents need to be maintained and submitted by the taxpayer. It is further clarified that the Master File and Local File submission will be applicable for the tax year starting on or after 1 January 2020.

For more details, see the full KPMG tax flash here

Oman

Oman announces an economic stimulus plan

His Majesty Sultan Haitham bin Tarek, presiding over a meeting of the Council of Ministers on 9 March 2021, announced an economic stimulus plan (ESP) to support the Sultanate’s efforts to counter Covid-19’s effects on the economy.

The ESP is aimed at supporting efforts for Oman’s economic recovery. The ESP falls within the framework of Oman’s Fiscal Sustainability Plan (2020-2024), also known as the medium-term fiscal plan (MTFP).

The ESP is based on the following five key pillars:

  • Incentives relating to taxes and fees
  • Incentives for improving the investment and business environment
  • Incentives to support small and medium enterprises (SMEs)
  • Incentives for the labor market and employment
  • Banking incentives

This news alert primarily focuses on the incentives pertaining to taxes and fees only. For more details, see the full KPMG tax flash here