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

International updates

OECD: Comments on regulated financial services exclusion under Amount A of Pillar One

The Organisation for Economic Cooperation and Development (OECD) on 25 May released comments received on the regulated financial services exclusion under Amount A of Pillar One.

In response to the OECD request for comments, KPMG tax professionals submitted a memo with comments on the regulated financial services exclusion under Amount A of Pillar One.

Read the KPMG comments here

GCC updates

The United Arab Emirates (UAE)

The effect of penalty regime’s wording change

Nearly a year ago, the UAE Cabinet issued an updated Cabinet Decision No. 49 on amending some provisions of Cabinet Decision No. 40 of 2017 on the Administrative Penalties for Violation of Tax Laws in the UAE (“Cabinet Decision on Penalties”) in April 2021. The amendments mentioned therein have taken effect from 28th June 2021.

While the general perception was that the penalty regime update pertained to the relaxation of penalties, the change of definitions has actually led to a very different outcome.

Read the full Tax Flash here

Consultation on Corporate Tax by the UAE Ministry of Finance

On April 28th, the UAE Ministry of Finance (‘MoF’) released a consultation paper to provide insight on the potential Corporate Tax (‘CT’). As it has been clarified by the MoF, the information provided on the public consultation document should not be considered as final, however, it supports UAE’s commitment to transparency and recognizes the importance of input from respective stakeholders.

UAE businesses could provide their comments on this consultation until 20th May 2022.

Read the full public consultation document here

Oman

Oman Tax Authority (“OTA”) publishes the Financial Services Sector Value Added Tax (VAT) Guide

The OTA has issued the VAT Guide on Financial Services Sector. The Guide aims to explain the VAT treatment of transactions in this sector.  Among others, the Guide clarifies the following:

  • Scope of financial services
  • VAT treatment of different nature of financial services
  • VAT treatment of various Islamic financial services
  • VAT treatment of insurance services
  • Input tax apportionment methodology on account of exempt financial services

OTA publishes the Capital Assets VAT Guide

The OTA has issued the VAT Guide on Capital Assets in Arabic which provide guidelines on the following:

  • Scope of capital assets
  • Recovery of VAT incurred on procurement of capital asset
  • VAT treatment on sale or disposal of capital asset
  • Adjustment of input VAT claimed on sale or change in use of capital asset

OTA published the list of reportable jurisdictions for Common Reporting Standard (CRS)

Last month, the OTA published the list of reportable jurisdictions for the purposes of the automatic exchange of financial accounts information for tax purposes (CRS). Such information is required to be reported for the year 2021 on or before 31 May 2022 for the reportable jurisdictions (as mentioned in the list). To access the list, click here.

Tax Card due for renewal for Oman taxpayers

Tax Card provisions were made effective from 1 July 2020 by the OTA (read our tax flash here). Taxpayers are required to mention the valid tax card number on all correspondences, invoices, memorandum or such other documents. Failure to comply with relevant provisions on tax card carries a maximum penalty of
RO 5,000.

The Tax Card is valid for a period of 2 years. The current rules require the taxpayers to file an application of renewal at least a month before the date of expiry. Given the taxpayers obtained the tax card in July 2020, it is due for renewal in July 2022. The taxpayers are accordingly advised to file an application of renewal with the OTA during June 2022.

OTA publishes the guidelines on the Country by Country (CbC) Reporting

The OTA has published guidelines on the CbC Reporting late last month. It contains general as well as specific guidance on preparation of the CbC report and its filing on the OTA portal. One of the key takeaways from the guide is the treatment of currency fluctuation.

The detailed guidelines can be accessed here.

Oman’s Double Taxation Avoidance Agreements (“DTAAs”) related updates

  • The Pakistan government recently published the synthesized text of the Oman - Pakistan DTAA displaying the modifications made to such DTAA by the Multilateral Instrument. From Oman’s perspective, the revised text of Oman – Pakistan DTAA is applicable from 1 January 2022 (for withholding taxes) and 1 October 2021 (for other taxes).
  • As per the press release of 11 May 2022 published by the government of Oman, Oman and Russia will sign a tax treaty shortly. This was announced following a visit of Russian delegates in Oman.

Interestingly, Oman-Russia tax treaty was signed on 26 November 2001 which was ratified by Oman on 3 March 2002. However, the same has not yet entered into force.

Bahrain

Economic substance return deadlines extended for certain entities  

Ministry of Industry, Commerce and Tourism (MoICT) extended Economic Substance (ES) return deadlines for entities who did not have their Financial Statements FY2021 audited by 31 March 2022. Such entities should submit their ES returns by mid-August 2022. It is expected that entities who have submitted their ES returns based on unaudited financial statements may be required to resubmit their ES return based on their audited financial statements.

Read the tax newsletter prepared by the KPMG member firm in Bahrain