With the rapid development of foreign trade industry, we do more and more markets. As a potential stock of the Middle East market, especially the United Arab Emirates and Saudi Arabia, e-commerce penetration rate reached an average of 75%, the customer unit price is even higher than the United States and the United Kingdom, the average customer unit price of more than 150 U.S. dollars, coupled with China's commodities by the tycoon welcome, the Middle East market is embedded in the huge business opportunities, many sellers have begun to set up the Middle East.
In all countries, the Middle East's tax requirements and penalties are the most stringent, so sellers and friends are very important to the timely registration of the Middle East VAT, and we may not have thought, if you do not continue to operate this country market / e-commerce platform, that before the registration under the tax code does not deal with the words, the penalties will be quite severe.
Let's take a look at the UAE.
UAE: When to cancel a tax code
According to Section 6 of Act 9 of the Federal Tax Code (latest version November 2021), a tax registrant is required to apply to the IRS for a cancellation of a tax ID number within 20 business days (the time period is important) if it meets the following conditions.
supply has ceased and no taxable supply is expected for the next 12 months;
A local business that has supplied below the VR Threshold (AED 187500) for the past 12 months and is recognized by the Department of Revenue as being in compliance with the ordinance is not expected to exceed the VR Threshold in terms of either supply or taxable expense within the next 30 days.
UAE: Write-off of fines and cancellation of conditions
Taxpayers who fail to submit an application for deregistration to the tax office within 20 working days of the cessation of the sale of the supply of the taxable product, or who fail to submit a final return and pay the tax payable within 28 days of the submission of the application for registration to the tax office in a "pre-approved" status, will incur a Dhs. 1,000 fine, which will roll up to Dhs. 10,000 fine for each month. A fine of Dhs. 10,000 will be incurred.
Therefore, if sellers need to cancel their UAE tax ID, it is best to submit the cancellation within 20 business days of the last sale, and avoid filing a zero return before cancellation.
In actual cases, we have encountered customers who have not been making sales, have made 0 returns in the past, and incurred a Dh10,000 penalty when the write-off was made.
In addition, the following conditions do not allow you to successfully cancel your UAE Tax ID:
1. If you have unpaid taxes or penalties, you need to apply for the cancellation of your tax identification number after you have paid the taxes and administrative penalties;
2. If the final tax return is filed and the tax due is paid within 28 days of "Pre-Approved" by the Inland Revenue Department, an administrative penalty will still be incurred if the tax return is filed after the due date.
3. Sellers of local enterprises in the UAE who have voluntarily registered their tax number (not mandatory registration) and whose tax number has been registered for less than 12 months are not allowed to apply for the cancellation of their tax number. In addition, non-local corporate taxable sellers are not subject to this restriction as they are compulsorily registered.
Also in the Middle East, in contrast, Saudi Arabia's cancellation penalty is relatively more friendly, because Saudi Arabia's fine is not explicitly stipulated in the cancellation of how to fine, in the actual case of cancellation, I have not encountered for the time being.
Saudi Arabia: when to cancel a tax code
According to the latest Saudi VAT regulations (November 2021 version), there are three situations where companies should apply to the Saudi Tax Authority for a tax number cancellation within 30 days:
1. When the company ceases to conduct economic activities, including the situation where the company entity no longer exists, such as when the company is canceled;
2. A non-Saudi local business that ceases to make taxable sales in Saudi Arabia and expects to make no taxable sales for the next 12 months;
3. Local Saudi businesses with annual taxable sales below the annual VAT registration threshold (SAR 375,000) may apply for VAT deregistration.
Saudi Arabia: Write-off of fines and cancellation of conditions
The Saudi tax authorities have not explicitly canceled the penalty provisions for the time being, but there are penalties for late filing and late payment of tax for late filing of returns within the filing period of the tax code in effect.
To find out what the Saudi VAT penalties are, check out our previous article on Saudi VAT penalties:
What is the impact on the company and the legal entity if I don't pay the penalty by not canceling my tax ID?
China has signed bilateral trade agreements with many countries around the world, and although there are not many concrete cases at this stage that affect cross-border e-commerce enterprises and legal persons, there is still the risk of cross-border fines and the international reputation of legal persons/companies.
Overall, the deregistration of a tax code is a rigorous process. The process of deregistration requires constant communication with the IRD, cooperation in providing any information required by the IRD, and timely feedback to the IRD's requests. In practice, deregistration is more complicated than registration.
Nowadays, the VAT market for sellers to provide varying services, sellers in the choice of VAT service providers must keep a sharp eye to find professional services and qualified service providers.
Green Circle Accounting Firm, a leading brand of cross-border e-commerce tax and compliance service provider, has first-hand tax resources in Saudi Arabia, UAE, and Mexico, has specialized VAT registration teams in each country, and is a recommended tax service provider by Amazon SPN and ebay.
The first number and then charge, time, service industry leader, first-hand channel resources, ten years of European certified enterprise qualification, one-to-one consultant communication services and deep industry sedimentation and enterprise relationship network, dedicated to cross-border e-commerce seller services.
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