Tax in the GCC in 2020

The new year beginning is a time for businesses to close their books of accounts for the last financial year ending December 31. Large companies will be looking forward to forming their Tax Strategies and compliance policies in light of the past and the expected changes to the Tax regimes in different jurisdictions. Here’s a brief update on what has been happening across the region:

UAE

By mid of 2019, the UAE Ministry of Finance has said that there are no tax policy changes to be expected for five years starting from the implementation of VAT in 2018, thereby quashing the rumours of the introduction of income tax/wealth tax in the UAE in the near future.

The Federal Tax Authority (FTA) has released an updated Input Tax Apportionment: Special Methods guide (VATGIT1). The guide covers general input tax apportionment rules and explains various special methods (e.g. headcount, floorspace, transactional, etc.), as well as how to apply for approval to use a special method. The updates include a list of common errors and a change to the time-period for calculations.

Economic Substance regulations and Country by Country Reporting is expected to be the next big thing in the UAE in 2020.

Oman

Contrary to expectations, local media reports that Oman will not be implementing VAT this year.

KSA

KSA brought some critical legislative changes in transfer pricing and Zakat in 2019, and it will be interesting to lookat the enforcement of these changes in 2020. “GAZT” is organizing 3 Workshops to introduce the Procedures of the Amended Zakat Regulation for Commercial Enterprises. The two workshops were in Riyadh and Jeddah on the 26th and 31st of December 2019 respectively, and the third is in the Eastern Province on January 9, 2020.

VAT payers in KSA should determine whether an annual adjustment for input tax deduction is required to be made in the December 2019 VAT return (due by the end of January 2020).

Bahrain

Bahrain is all set to be in the league of countries that rolled out full-fledged VAT, by the end of 1st week of January. Few latest developments include,

• a public clarification for financial institutions. This clarification applies from 1 January 2019, but there is no requirement to amend previous VAT returns - can make amendments in the end of year adjustment calculation.
• updated Education Booklet to clarify the applicability of zero-rating

Qatar

The Executive Regulations by Ministerial Decision no. 39 of 2019 to the Income Tax Law in December 2019, applicable with immediate effect annulling the earlier Executive Regulations.

With almost all GCC countries have signed up to the Multilateral Instrument (MLI), except for Bahrain, the main changes we will see will be in the way that some of the double tax treaties are applied.

2020 appears to be the year of lots of tax audits. In the UAE,the focus will be on VAT, whereas one can expect inspections focused on Transfer Pricing in KSA and Qatar.

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