Kingdom of Saudi Arabia

New Circular Issued on Nominal Supplies – 22 June 2023 (view here)

Based on the interpretation outlined in the Circular (section 4.2), it appears that the General Authority of Zakat and Tax (ZATCA) may be diverting from its current narrow view that all supplies for no consideration is deemed to be nominal supplies and therefore subject to VAT (e.g., free credit card services to premier customers or buy one get one free advertisements).

The view provided in Section 4.2 of the Circular appears to be in-line with the alternative view that the "free services" are ancillary to the dominant supply. In this Circular, the ZATCA comments that where the taxable person has an existing relationship with a customer who purchases goods or services for consideration, and the services are provided without additional consideration but are linked to the consideration payable or paid in exchange for other goods and services provided in the context of the existing contract or commercial relationship, this indicates that the taxable person has not made an independent nominal supply.

The ZATCA announced 7^th wave of E-invoicing

The ZATCA announced the 7^th wave for the E-invoicing integration (Phase II) with the ZATCA's systems. Taxpayers who has taxable supplies in 2021/2022 above SAR 50 million should initiate the integration with the ZATCA from 1 February 2024 and complete the full integration before 30 May 2024.

The ZATCA announced all tax rulings will be binding – 9 July 2023

As published in our separate alert, on 9 July 2023, the ZATCA formally announced its commitment that all tax rulings will be binding advice (view here). It is intended that the binding advice will set out the ZATCA's opinion about the way in which a relevant tax provision applies to the taxpayer in relation to a specific circumstance. Therefore, it effectively offers a level of certainty and protection accorded by a ruling to the taxpayer.

United Arab Emirates

Tax Procedures Executive Regulations

The Executive Regulations on Tax Procedures Law has been updated to reflect the key changes already amended in the Tax Procedures Law, the most notable being:

1. If a Taxpayer becomes aware of an error or omission in the Tax Return submitted to the Authority resulting in a nil impact on the net VAT liability amount due, the Taxpayer is still required to submit a voluntary disclosure to the Authority.
2. Tax Agents now can either communicate orally and in writing to the Authority in English or Arabic. This provides an opportunity for English only tax professionals to become a Tax Agent, subject to meeting the necessary pre-requisites outlined in the Executive Regulations.

New Guidance Documents Issued

The Federal Tax Authority (FTA) has released updates to a few guides on their platform. The most notable change being the move towards requiring all submissions and requests to be done online via the Emaratax portal.

1. Input Tax Apportionment Guide – 16 June 2023 (view here)

Where the FTA has approved the use of a special input tax apportionment method, the approved method may be used from the first tax period following the date of approval, or any other date as decided by the FTA.

This change suggests that special method applications may be retrospective in nature and it may be worthwhile for taxpayers to incorporate a request of this nature as part of their application, where beneficial.

2. Private Clarifications – 31 May 2023 (view here)

• From 1 June 2023, fees are payable in respect of private clarifications:
  1. If the private clarification relates to only one tax, the fee is AED 1,500 per application.
  2. If the private clarification relates to more than one tax, the fee is AED 2,250 per application.
• Please note that to qualify for the AED 2,250 fee per application, the questions have to be related to the same transaction and parties, otherwise separate applications have to be submitted.
• The fees can only be paid via the Emaratax portal using a valid card
• Please note that these fees are generally non-refundable
• The FTA may refund, at its discretion, the Clarification fee received for a private clarification request if the FTA does not issue the private clarification required

Attaching a fee cost to the clarification submission is an attempt to ensure that taxpayers only submit clarifications for unique scenarios not addressed in the legislation or any issued guidance.

3. VAT Administrative Exceptions Guide – 16 June 2023 (view here)

MoF announced E-billing system to be introduced in the UAE (view here)

On 11 July 2023, the Ministry of Finance of the UAE announced five major strategic transformational projects for the future. One of the announced projects is to establish the foundation of an advanced electronic invoicing system, known as the "e-billing system," that will operate at the country level and help automate tax return filing. The project includes different phases and targets that are set to be completed by July 2025.

To speak with us in relation to any of the proposed changes to KSA VAT, or any tax matters or issues more generally, please contact one of the team above above.