A Quarterly Newsletter from UAE and Oman

VOL 22 ISSUE 4 October 2019

Tax Update

INTERNATIONAL TAX AND INDIRECT TAX

Key International Tax Updates

A. United Arab Emirates (‘UAE’) introduced new Economic Substance Regulations

To address EU concerns and to implement BEPS related measures, UAE Cabinet issued the Cabinet of Ministers Resolution No. 31 of 2019 (concerning economic substance regulations in the UAE, “the Regulations”) on 30th April 2019 read with Ministerial decision no. 215 for the year 2019, requiring all in-scope UAE entities that carry on prescribed Relevant Activities to have demonstrable economic substance in the UAE with effect from 30th April 2019. The Regulation is discussed in detail under the article ‘Economic Substance Regulations in the UAE’ forming part of this publication.

Source: https://www.mof.gov.ae/en/lawsAndPolitics/CabinetResolutions/Pages/default.aspx

B. UAE introduced Country by Country Reporting (CbCr)

UAE Ministry of Finance (‘MoF’) by way of a Cabinet of Minister’s Resolution No 32 of 2019 (‘the Resolution’) issued a regulation in July 2019 with respect to submission of reports by multi-national companies i.e. country-by- country reporting (CbCr).

As per this Resolution, the reporting entity / constituent entity of the MNE Group in the UAE will be required to submit Notification and / or CbCr report to the MoF within the prescribed timelines. In case of failure to comply with the obligations set out in the Resolution, there could be levy of administrative penalties.

Source: https://www.mof.gov.ae/en/lawsAndPolitics/CabinetResolutions/Pages/default.aspx

Key indirect tax updates – Excise and VAT

A. UAE indirect tax update

The UAE Federal Tax Authority (‘FTA’) has issued several important public clarifications since our last tax update. Some of updates released in the third quarter of 2019 from the FTA are summarised below:

DATE TYPE OF UPDATE PARTICULARS OF UPDATE
September 2019 Cabinet Decision Excise Goods, Excise Tax Rates and the Methods of Calculating the Excise Price
August 2019 Public Clarification Transfer of a Business as a Going Concern
July 2019 Public Clarification VAT Treatment of Options and Option Premiums
July 2019 Public Clarification Importation of goods by agents on behalf of VAT registered persons
July 2019 Public Clarification Disbursements & Reimbursements

B. UAE cabinet expands list of excise taxable products

The UAE Cabinet has adopted a decision to expand the list of excise taxable products to include sweetened beverages, sugary drinks and electronic smoking devices to be effective from December 1, 2019. It has issued Cabinet Decision No. 52 of 2019 on Excise Goods, Excise Tax Rates and the Methods of Calculating the Excise Price.

50% tax will be levied on any product with added sugar or other sweeteners, whether in form of a beverage, liquid, concentrate, powders, extracts or any product that may be converted into a drink. A tax of 100% will be levied on electronic smoking devices, whether they contain nicotine or tobacco or not, as well as the liquids used in electronic smoking devices.

The following table summarizes excise goods list and its tax rate:

EXCISE GOODS TAX RATE
Tobacco and tobacco products 100%
Liquids used in electronic smoking devices and tools 100%
Electronic smoking devices and tools 100%
Carbonated drinks 50%
Energy drinks 100%
Sweetened drinks 50%

In view of above, Companies dealing in above products should immediately evaluate their compliance obligations
under the aforesaid Excise regulations.

Source: https://tax.gov.ae

Contact Us

For further information or advice concerning above tax areas in the UAE, please contact Ms. Sarika Dhameja at sdhameja@pkfuae.com or Mr. Chaitanya Kirtikar at cgk@pkfuae.com or call us on +971 4 3888 900