Home Archives for May 2017

Month: May 2017

Highlights of KSA Draft VAT Law

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General Authority of Zakat and Tax, published yesterday a draft of the proposed VAT Law of the Kingdom of Saudi Arabia.

The draft has 12 Chapters and contains 77 Articles laying the Framework of VAT in KSA. Going through the text of the draft, one doesn’t fail to notice that:

  •   Most Articles refer to Rules and Regulations to be issued.
  •   How exhaustive and thorough is Chapter 11 – Penalties and Fines.

Below, I’m selectively highlighting parts of the draft Law I have found interesting:

  •    VAT Groups: Persons registered as a VAT Group shall be treated as a Single Taxable Person and shall be jointly and severally liable for any Tax Debts. Authority has the discretion to regard two or more Legal Persons as part of a VAT Group or to disregard the existence of such Group in cases of Tax avoidance.
  •    De-registration: De-registration triggers a taxable supply equal to the Fair Market Value of all Goods on hand, including Capital Assets. Obligations and liabilities of the Taxable Person prior to de-registration are not affected by it.
  •    Supply by Agent or Commissionaire: A Taxable Person acting in his own name but on behalf of another Person Supplies Goods or Services, he shall be deemed to have received or supplied those Goods or Services himself. This is going to change the business model of many companies in the GCC.
  •    Place of Supply of Goods and Services: Value of services partially performed in KSA and partially outside KSA, must be split accordingly.
  •    Liability for Tax and collection thereof upon Importation: VAT will be collected by Customs upon Importing the Goods. The Authority has the discretion to allow Tax on Imported Goods to be reported through the Importer’s Tax return. Seems to me that it has not been decided yet.
  •    Tax Calculation: Net Tax Payable will be calculated based on invoices. It leaves open the possibility for cash accounting basis.
  •    Input Tax Deduction: Input Tax deduction is allowed for imports of Goods made for the Taxable Person in another Member State provided the Tax collected by the other Member State into which the importation has taken place has been transferred to the Authority. The word transferred can create big implications. What if the VAT has been paid to the Authority of the other Member State and not transferred yet?
  •    Input Tax Deduction: A Taxable Person shall be entitled to claim an Input tax deduction prior to the Person becoming registered for VAT.
  •    Input Tax Deduction: Ability to deduct not deducted input tax in a subsequent period.
  •    Tax Invoices: Introduction of Tax Invoices, Tax Credit Notes and Tax Debit Notes, format and means of issuing them, e-invoices and self-invoices.
  •    Tax Cooperation: The Authority may cooperate with equivalent authorities in other Member States.
  •    Tax Payment: The Authority can extend the time to pay VAT or pay it in installments.
  •    Financial Security: The Authority may request a financial security from a Taxable Person to secure the payment of Tax.

Publishing the VAT Framework (Unified Agreement) and the draft Law for discussion shows the determination to have VAT in all KSa and subsequently in all GCC countries by January 1st, 2018.

Companies must prepare for the coming VAT application and seek advice from competent Tax Consultants. Gulf Tax, a boutique Tax Advisory firm, provides VAT Implementation & Compliance Services to companies in UAE and the GCC. It has a team of 10 European Tax Experts with more than 10 years of VAT advising experience each, in established Tax Practices in Europe and provides.

Markos Brotzakis is the Founding Partner of Gulf Tax Consultants. Before that he was Founding Partner of MBR Accountants and Tax Consultants, a boutique Tax & Transformation Services firm advising multinationals in Southeast Europe. He started his tax career in 1992, as KPMG’s youngest Tax Specialist.

Gulf Tax VAT Presentation – NAFL – 21 May 2017

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Mr. Brotzakis, CEO of Gulf Tax Consultants, presented to NAFL member companies the latest updates on VAT.

During his speech, he highlighted the impact of VAT to operations and finances to 3/4PL companies operating in the United Arab Emirates and the GCC.

Furthermore, he pointed the need to assess, correctly and timely implement and comply with the upcoming local VAT legislation.  Companies operating having offices (subsidiaries or branches in the GCC) will need to work with regional tax consultants, like Gulf Tax, because each GCC Member Country will have its own local VAT law which although following the Unified VAT Agreement will  still have procedural and reporting differences.

Closing, he stressed the need for training of all people in the company with emphasis on Finance and Operation Departments.  During his speech he quoted:

“No matter if your ERP is VAT compliant and correctly setup. No matter if you have developed best procedures and controls. If your people are not trained you are bound to fail.  You must invest in your people, train them and keep them updated with all new law changes”

VAT Seminar on NAFL – April 18th 2017

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Presenting the impact VAT will have on the Logistics and Freight Forwarding Industry at UAE’s National Association of Freight & Logistics event held at Meydan Hotel on the 18th of April 2017. As a Tax Consultant with 20+ years of experience in the E.U, offered insights on the challenge the industry will have to face. Correct application of VAT rules in international, local and intra-GCC transactions, where the legs of transportation, place of delivery and who is your customer will stress Finance & Billing departments to correctly charge VAT on services offered. The key areas the member firms of the industry will have to focus is update of IT systems with focus on VAT controls, strong KYC (Know-your-customer) and above all extensive & repeated training of their Finance and Billing departments.