Tax exemption is a departure from the general tax system and is one of the types of tax incentives designed within a country’s fiscal policy framework. It involves the state waiving its right to impose and collect taxes on income subject to taxation based on social and economic considerations.

In response to the series of global economic events, starting with the repercussions of the COVID-19 pandemic, followed by the economic challenges posed by the Russian-Ukrainian conflicts, disruptions in supply chains, increased shipping costs, and rising inflation rates, the country has witnessed unprecedented developments aimed at enhancing the governance of the tax system.

Law No. 3 of 2022 was issued, amending certain provisions of Value Added Tax Law No. 67 of 2016. Under this law, goods or services exported by projects in economic zones, cities, free zones, and specialized economic zones outside the country are subject to a zero-rated tax. The same applies to goods or services imported for the authorized activity within these areas, with the exception of passenger cars.

Additionally, e-commerce transactions are now subject to taxation through a simplified registration and collection system, replacing the previous system that required the appointment of a legal representative. The law also introduces an electronic invoice and receipt system to monitor commercial transactions between suppliers and consumers in real-time through digital formats at all points of sale and purchase.

Furthermore, there is an increase in instances where tax refunds are allowed. This includes the refund of taxes for goods and services subject to tax tables or exempted from them and exported abroad. It also covers the tax previously paid or charged on goods and services that are either exported in their original condition or incorporated into other goods or services, up to the amount of the tax credit.

The law also allows for the refund of taxes that were obtained inadvertently and the tax credit that has remained unused for more than six consecutive tax periods. Moreover, it includes provisions for the refund of taxes paid on buses and passenger cars designated for activities licensed by the establishment and the tax borne by non-resident individuals registered under the simplified supplier registration system for the purpose of conducting business within the country.

Finally, the proposed law introduces new facilitations and tax incentives for taxpayers across various laws. It addresses the reduction of (65%) of the delay penalty and the value-added tax for various laws, including Customs Law No. 66 of 1963, Stamp Tax Law No. 111 of 1980, Resource Development Fee Law No. 147 of 1984, General Sales Tax Law No. 11 of 1991, Income Tax Law No. 91 of 2005, Building Tax Law No. 196 of 2008, Value Added Tax Law No. 67 of 2016, and Customs Law No. 207 of 2020. This reduction is contingent upon taxpayers settling (35%) of the outstanding amount within a period that starts from the effective date of this law until 1-3-2023.

Furthermore, if a taxpayer settles the entire tax or fee amount before the effective date of this law, they are entitled to a reduction of (65%) on the delay penalty and additional tax, with the condition that they pay the remaining (35%) starting from the effective date of this law until 1-3-2023.

To conclude, this article aims to emphasize the state’s endeavors in enhancing the tax system, fostering economic growth, incentivizing investment, enhancing tax adherence, and optimizing tax collection efficiency.

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