KPMG: International Covid-19 tax developments

KPMG reports on tax developments in response to the coronavirus:

•      Read updates from KPMG’s Global Tax and Legal Covid-19 hub here.

•      Find an overview of jurisdictional tax measures and government relief measures, as reported by KPMG member firms, in response to Covid-19 here.

•      KPMG's daily update on global tax developments in response to Covid-19 may be found here.

International updates

Developments Summary–Taxation of the digitalized economy

KPMG’s Developments Summary on the Taxation of the digitalized economy was updated on 19th November 2020 and provides information on direct and indirect taxes in terms of tax measures implemented, proposed, and announced in response to the challenges arising from the digitalized economy. It also covers country-specific details, OECD milestones, and EU milestones.

For more details, see the full KPMG report here.

OECD Forum on Harmful Tax Practices (FHTP) 2020 reviews

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) has approved the outcomes of the 2020 reviews by the OECD Forum on Harmful Tax Practices (FHTP). The analysis includes several GCC countries. In particular, it stated that all 12 no or only nominal tax jurisdictions (including UAE and Bahrain) now have a legal framework, thus their legislative framework is not harmful anymore, for the collection and reporting of the required information on the activities and revenue of entities that are required by economic substance rules.

For more details, see the OECD report here.

GCC Updates

The United Arab Emirates (UAE)

Further developments on 100% foreign ownership in the UAE

Recent publications in UAE media (e.g. in WAM) state that there is new decree, effective from December 2020, passed by President His Highness Sheikh Khalifa bin Zayed Al Nahyan overhauling foreign ownership rules of commercial companies, as part of the government’s ongoing efforts to ensure a conducive legislative environment and to open up the economy to all nationalities. The decree, which introduces significant amendments to the UAE Federal Law No. 2 of 2015 on Commercial Companies, annuls the requirement for commercial companies to have a major Emirati shareholder or agent, allowing full foreign ownership of onshore companies. Under the new amendments, businesses can now be fully established by non-Emiratis of all nationalities. The decree, in addition, supersedes the UAE Federal Law No. 19 of 2018 on Foreign Direct Investment (FDI Law). It also includes certain provisions and regulations related to limited liability and joint stock companies aimed at attracting foreign capital and further boosting the local economy.

For more for more information see the Emirates News Agency's press release and Gulf News' report.

Procedures for declaring goods consumed within free zones in Dubai

Dubai Customs has released Notice No.17/2020 on 22 October 2020, which relates to procedures for declaring goods consumed within free zones. It has entered into force on 25 October 2020. This Notice distinguishes between goods that are consumed in the free zones and those sold to the United Arab Emirates’ local market and it elaborates on how customs duties apply to each.

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

VAT Public Clarification VATP022 “Dubai Owners’ Associations and Management Entities”

The Federal Tax Authority (FTA) has released Public Clarification VATP022 “Dubai Owners’ Associations and Management Entities” to inform Owners’ Associations (OAs) and Management Entities (MEs) in Dubai of their obligations under the UAE VAT legislation as a result of significant changes in Dubai real estate legislation.

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

The Kingdom of Saudi Arabia (KSA)

Deadline of amnesty for tax filing and payment on 31 December 2020

The deadline for the extension of the waiver of penalties for all tax filing and payment is coming up on 31 December 2020. The extension of the waiver of penalties for Zakat, Income Tax, Withholding Tax, VAT, and Excise Tax, ran from 18 March 2020 until 30 June 2020, and had been previously extended until 30 September 2020.

Penalties will be waived for taxpayers who raised objections against GAZT’s assessments on the condition that no final decision had been made by the relevant authority and the taxpayer commits to paying the tax due or agrees an installment plan before 31 December 2020. The announcement is clear that the amnesty does not include the waiver of penalties incurred due to tax evasion.

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

Customs - SABER platform import compliance

New impositions on the entry of certain consumer goods to the KSA market require manufacturers and importers to obtain clearance through the SABER platform. SABER is an electronic platform that allows importers and local manufacturers to obtain the required Certificate of Conformity and Shipment Certificate of Conformity (SCoC) for consumer goods.

SABER aims to curb fraud and to improve the safety level of products entering the KSA market. It relates to all consumer products referred to as “Regulated Products”, such as lube oils, detergents, building materials and construction products, paints, lifts, vehicle spare parts, textiles etc., that are intended to be commercialized in the KSA market, whether imported from abroad or locally produced.

For more details, see the full KPMG trade and customs alert here

Bahrain

Disclosure of Ultimate Beneficial Owners

The Ministry of Industry, Commerce and Tourism (MoICT) recently passed Resolution Number 83 of 2020 regarding the Criteria, Conditions and Rules Governing the Disclosure of Ultimate Beneficial Owners (UBO Resolution). The MoICT has also published guidance and clarifications through FAQs as to the application of the UBO Resolution. We provide an overview of the UBO Resolution and our key observations on what businesses should be doing to comply.

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

Bahrain VAT—reimbursement or disbursement?

As per the Bahrain VAT Executive Regulations, when a taxable person incurs an expense in his name and subsequently recharges the expense to another person, such a recharge will be taxable. However, where the expense is incurred directly in the name of the other person, recovery of such an expense by the taxable person will be outside the scope of VAT. Many businesses incur expenses on behalf of their customers as well as related parties, therefore it is critical to examine the following:

1. Do you know the VAT treatment of billing those costs to your customer/related party?

2. Should the cost be treated as a disbursement (outside the scope of VAT) or a taxable recharge?

3. If it is a taxable recharge what is the applicable VAT rate?

For more details, see the full KPMG tax flash here

Get in Touch

Wadih AbuNasr

Head of Tax, KSA and Levant
E: wabunasr@kpmg.com

Tareq Al Sunaid
Partner, Tax & Zakat Compliance
E: talsunaid@kpmg.com

Nick Soverall

Head of Indirect Tax

E: nsoverall@kpmg.com

Mohamed Araji
Senior Director, FS/ Tax Reimagined
E: maraji@kpmg.com

Peter Bourke
Senior Director, M&A/ Int’l Tax
E: peterbourke@kpmg.com

Mohammad Kamran Sial
Senior Director, Tax & Zakat Compliance
E: ksial@kpmg.com

Mohamed ElSwefy
Senior Director, Family Office and Private Clients
E: melswefy@kpmg.com

Ali Sainudheen
Senior Director, Tax & Zakat Compliance
E: asainudheen@kpmg.com