Many businesses in the KSA have experienced significant penalties for non-compliance with the tax regulations since the implementation of VAT and excise tax, together with the increase of tax audits over the last two years. The penalties have been so significant that some taxpayers have already objected GAZT decisions to the Tax Disputes Settlement Committee.
While the tax amnesty is aimed at supporting businesses which are suffering financially as a result of the Covid-19 pandemic and the associated economic crisis, it also effectively creates a small window of opportunity to any business wishing to perform a 'tax health check' on its finances and to declare any errors while the opportunity exists to eliminate the often quite significant financial penalties for doing so.
The deadlines for the period filing of VAT returns, together with the payment of associated VAT liabilities, have been delayed for a period of three months. This deferral arrangement will work differently depending on whether the taxpayer or tax group files on a monthly or quarterly VAT period basis.
For monthly filers:
The deferred deadlines will result in March 2020 and June 2020 VAT returns both being due for filing and VAT liability paid on 31 July; April 2020 and July 2020 on 31 August; and May 2020 and August 2020 on 30 September. This will need to be carefully planned internally from a procedures and controls perspective, to ensure that all administrative tasks needed to complete these 'double filings' in an accurate and timely manner are in place; as well as ensuring that the necessary funds are in place to make double payments if required.
For quarterly filers:
Currently, there is no indication that the April - June 2020 quarterly VAT return filing and payment deadline will be extended from 31 July.
For quarterly VAT filers, the practical impact of this deferment regime is that the VAT returns and associated VAT liability payments for Q1 and Q2 2020 will all become due on 31 July. Businesses should similarly ensure that they are ready for this 'double filing' in terms of administrative processes and cash availability.
Given that the filing deadlines of the above returns will be deferred, import VAT will also be deferred for businesses which account for import VAT due on imported goods for business purposes by means of a reverse-charge on their periodic VAT return. The input VAT should be reported on the return that it would normally have been reported on in accordance with the date of import, and filed subject to the new filing deadlines outlined above.
Note that the GAZT guidance indicates that the general facility available in the KSA of being able to defer VAT on imports until the point of filing the periodic VAT return will be removed with effect from 1 July 2020. All taxpayers, whether directly themselves or through an import agent, will therefore be required to settle all import VAT due with the KSA customs authorities at the point of import.
Businesses which import large volumes or large value items into the KSA may wish to consider the cash flow impact of this for their business and to put in place practical in-house procedures to ensure that the removal of this VAT facility does not delay the release of goods by the customs authorities and impact the actual flow of goods for their business.
Corporate income tax and zakat
Any taxpayer obliged to file a KSA corporate income tax or zakat return with a normal filing and payment deadline before 30 June 2020 will have the deadline extended by three months. For example, the deadline for returns due by 30 April 2020 has been extended to 31 July 2020; for returns due by 15 May 2020 to 15 August 2020; and by 20 June 2020 to 20 September 2020.
The deadline for submitting the bi-monthly excise tax return, together with making any associated payment, for the March-April 2020 period has been deferred until 15 August 2020.
As there is no change in filing deadlines for the May-June 2020 return and the July-August 2020 return this means that, practically speaking, taxpayers will need to file excise tax returns monthly during July, August and September, as follows:
- May-June 2020 excise tax return – due 15 July (original deadline);
- March-April 2020 excise tax return – due 15 August (deferred deadline); and
- July-August 2020 excise tax return – due 15 September (original deadline).
Businesses should again implement these new filing and payment deadlines into internal processes and procedures now, so that no penalties are triggered for non-compliance.
The deadlines for declaring and paying excise tax on imports by an excise tax registered business through temporary approval/declarations have been extended as follows:
- March imports – declaration and payment before the end of June;
- April imports – declaration and payment before the end of July;
- May imports - declaration and payment before the end of August; and
- June imports – declaration and payment before the end of September.
As with the VAT facility for the deferment of import VAT until the filing of the periodic VAT return, this excise tax deferment regime will be removed for all taxpayers from 1 July and all taxpayers therefore obliged to pay excise tax on import to the customs authority at the point of import. Businesses need to assess the impact of this for them and ensure that they can comply on a timely basis, so as to avoid any supply chain delays as a result of tax clearing on import.
Withholding tax deadlines for filing returns, together with making associated payments, have also been deferred by three months, as follows:
|March 2020 WHT return
|April 2020 WHT return
|May 2020 WHT return
Again, these deferred deadlines will result in 'double filings' for businesses in the relevant months, which will need to be planned for administratively and financially in advance to avoid non-compliance and penalties.
Service suspension and funds seizure
Procedures relating to suspension of government services and seizure of funds will not be enforced, and suspensions currently in place will be revoked, until 30 June 2020. This will allow taxpayers to continue their business activities.
Tax reliefs in Qatar
The tax reliefs introduced in Qatar to date have been reasonably limited. There is some similarity to those implemented in the UAE and KSA, in terms of the suspension of penalties and the extension of filing deadlines.
Qatar state's General Tax Authority
The General Tax Authority (GTA) has extended the filing deadline for 2019 corporate income tax returns by three months, until 30 June 2020.
Qatar Financial Centre
The Qatar Financial Centre (QFC) free zone has reduced the rate of the late payment tax charge from 5% to 0% for the period 1 March to 31 August 2020. This represents a real tax compliance cost reduction for affected businesses.
Qatar customs duty
The Qatar General Authority of Customs (GAC) has exempted 905 basic food items and medical supplies for personal and household hygiene from customs duties for a six month period.
The main food items to which the exemption applies include meat, fish, dairy, cheese, legumes, oils, pastries and juices, among others. Medical supplies that are exempted from customs duties include face masks, sterilisers, soap products, detergents, sterilisation wipes and personal and household hygiene items for personal use.
Tax reliefs in Oman
The Sultan of Oman Tax Authority has announced a number of similar penalty suspensions and timeline deferments to support taxpayers.
Corporate income tax
Again, a three month corporate income tax deadline deferment is available to all affected taxpayers. Therefore, for example, the deadline for the filing of preliminary returns for a financial year end of 31 December 2019 has been extended from 31 March 2020 to 30 June 2020.
Additional measures in support of corporate income tax payers include:
- all taxpayers can apply to pay tax liabilities in instalments;
- exemptions from all penalties for deferred filing deadlines, instalment payments etc.;
- tax deductions for any contributions made to charities in support of Covid-19 relief efforts as part of FY 2020 tax returns; and
- extension of timeline for filing objections against tax decisions and additional time to submit supporting documentation for ongoing objection proceedings.
The Directorate General of Customs in Oman has implemented minor procedural reliefs:
- documents accompanying the goods will be considered original documents without the need to collect a guarantee; and
- customs authorities will accept product authentication labels, including country of origin, even where the certificate of origin cannot be submitted.
Tax reliefs in Kuwait and Bahrain
We are not aware of any specific tax reliefs that have been implemented in response to Covid-19 in Bahrain or Kuwait to date.