Welcome to the December edition of our tax newsletter, bringing you news on global and regional tax developments.
EU: “Public” country-by-country reporting directive published in EU Official Journal
The European Parliament on 11 November 2021, formally adopted a directive for “public” country-by-country (CbC) reporting.
Going forward, text of the Directive (EU) 2021/2101 has been published in the EU.
The Directive entered into force on 21 December 2021.
Please read detailed tax flash
OECD: Pillar Two model rules for domestic implementation of 15% global minimum tax
On 20 December 2021, the OECD released the Final Pillar 2 or Global Minimum Tax rules. Pillar 2 forms part of the OECD’s two-pillar solution to address tax challenges arising from the digitalization of the economy, which is currently endorsed by 137 countries (including the United Arab Emirates, Jordan, Egypt, Saudi Arabia, Oman, Qatar and Bahrain). The final rules consist of 10 chapters and are intended to be incorporated into domestic legislation or supported by all 137 signatories to the proposals, by early 2023. The introduction of these rules would most likely significantly increase the effective tax rate of GCC businesses, especially for businesses operating in jurisdictions with no or low statutory tax rates, or businesses benefitting from various preferential taxation regimes.
For more details please read tax flash and a KPMG report provides a policy perspective on the Pillar Two agreement
The United Arab Emirates (UAE)
New FTA’s Public Clarification VATP028
On 6 December 2021, the FTA released a Public Clarification that impacts most taxpayers. The FTA takes the position that recovery of input tax on mobile phone expenses is only possible when a strict business use policy is in place and the taxpayer conducts an active enforcement of such policy.
Further, the FTA states that it is not possible to change the policy retrospectively. Therefore, it is likely that the Public Clarification will have an impact on input VAT previously recovered in relation to mobile phone expenses, and any invalid VAT claims would need to be corrected.
Henceforth, taxpayers should evaluate whether a strict policy should be introduced or if the entire amount of input VAT incurred on mobile phones, airtime and data packages available for employees should be borne as a business cost.
Read our tax flash for detailed review
KPMG: Detailed analysis of the Global Minimum Tax (GloBE) rules
This analysis prepared by KPMG team is focused on a global view, with analysis and commentary on each chapter of the released Final Pillar 2. In addition, Page 11 outlines the top 10 actions for CFOs and Heads of Tax to consider. These actions are particularly important for groups with operations in the Middle East given the number of companies in the region that continue to enjoy low or nil effective tax rates.
The full analysis is available here
Oman issues decision on determination of license fee for excise warehouses
The Oman Tax Authority (“OTA”) issued Ministerial Decision 339/2021 (“Decision”) for the determination of license fee on application for a license to operate an excise warehouse.
According to this Decision, the license fee is based on the value of the bank guarantee submitted by the applicant at the time of applying for establishment or renewal of an excise warehouse.
Please read the Tax Flash for more details
VAT rate increase to 10% effective 1 January 2022 with one year transition period
Law no (33) for the year 2021 amending Decree-Law no (48) for the year 2018 Regarding Value Added Tax (VAT Law) to increase the standard VAT rate from 5% to 10% effective 1 January 2022 has been approved.
Law no (33) amends certain provisions of the VAT Law and provides for a transition period of one year ending on 31 December 2022. Suppliers will have to charge 5% VAT on standard rated supplies made during this transition period subject to meeting certain conditions. It appears that the transitional rules are mandatory where the conditions are met and not optional similar to when the Kingdom of Saudi Arabia increased the VAT rate in 2020. The Bahrain National Bureau for Revenue (NBR) has released a VAT Rate Change Transitional Provisions Guide and VAT FAQs on the transitional rules (collectively referred to as Transitional Guidance).
For detailed analysis read Tax alert prepared by KPMG Bahrain member firm.
Customs Affairs sign two agreements for customs services facilitation
The Bahrain Customs Affairs have recently signed the following agreements which are aimed at facilitation of services provided to importers and exporters:
- Agreement with Benefit Company, a key conduit for all e-transactions throughout Bahrain, for providing advanced customs services.
- Agreement with Crimson Logic, a Singapore based government solutions company, for implementation of single window for OFOQ2 trade system. It is relevant to note that Bahrain Customs Affairs has signed nine service agreements with companies to improve their services.
Click here for more details highlighted by the Bahrain member firm.