VAT complaints reducing, says UAE's economy minister.

Sultan bin Saeed Al Mansouri says calls from consumers have decreased from 3,261 to 493 daily since Jan 1 launch

Consumer concerns about the impact of value added tax (VAT) in the UAE are reducing, according to Sultan bin Saeed Al Mansouri, the country's Minister of Economy.

At a meeting of the Higher Committee of Consumer Protection, the minister revealed that the number of calls from consumers have decreased from 3,261 on the launch day of VAT (January 1) to 493 two weeks later.

"The committee received growing calls from the consumers during the first days of the VAT application. People had some concerns, but their worries have ebbed with the passage of time," he said in comments published by state news agency WAM on Saturday.

Khalid Ali Al Bustani, director general of the Federal Tax Authority (FTA), added that the complaints received by the committee address three main issues - price hikes, tax registration numbers and erroneous calculation of VAT on some commodities.

"Traders and departments against whom the complaints were filed have been notified and were given a grace period to rectify their strategies as per the tax rules and condition," Al Bustani said.

"The committee is in constant follow-up of the market to prevent any violations and in case of any non-abidance, all legal measures have been taken against the violators," Mohammed Ahmed bin Abdul Aziz Al Shehhi, Undersecretary forEconomic Affairs in the Ministry of Economy, added.

The launch of VAT on January 1 comes as Gulf countries, including the UAE, are looking to reduce their dependence on revenues from oil that are declining in value and generate a higher proportion of revenue internally in order to maintain current levels of economic growth.

Representatives of the six member states of the Gulf Cooperation Council (GCC) signed the VATFramework Treaty early last year, confirming the introduction of a formal VAT system in all the member states although only the UAE and Saudi Arabia launched this year.

The rate is initially set at 5 percent, and similar to most VAT systems there are a range of exemptions. Certain foods and services, including education and healthcare, will be exempt. According to IMF estimates, even this modest rate is expected to realise VAT revenues of up to 1.6 percent of GDP in the GCC countries.

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More than 3,500 complaints on first day of VAT, says Economy Minister

Most complaints concerned price hikes, registration numbers and miscalculations

There were 3,621 complaints to the Higher Committee of Consumer Protection on the first day of VAT implementation, according to the Ministry of Economy.

Two weeks later, daily complaints remained in the hundreds.

To address this, the committee is working to prevent any unjustifiable price hikes, said Sultan Al Mansoori, the Minister of Economy.

"The committee received growing calls from the consumers during the first days of the VAT application,” said Mr Al Mansoori at a recent Dubai meeting of the committee, according to state news agency Wam.

“People had some concerns but their worries have ebbed with the passage of time and by the end of the first fortnight of the application, the calls received by the committee declined from 3261 on the first day of the application to 493 on January 15.”

Most complaints concerned price hikes, tax registration numbers and erroneous calculations, said Khalid Ali Al Bustani, the director general of Federal Tax Authority.

"Traders and departments against whom the complaints were filed have been notified and were given a grace period to rectify their strategies as per the tax rules and condition," said Mr Al Bustani, who attended the meeting.

Mohammed Al Shehhi, the undersecretary for economic affairs in the Ministry of Economy, said, "The committee is in constant follow-up of the market to prevent any violations and in case of any non-abidance, all legal measures have been taken against the offenders.”

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VAT in UAE: New online calculator to check authenticity of tax invoice

FTA introduces online VAT calculator, TRN verification service.

The Federal TaxAuthority (FTA) on Tuesday launched a Tax Registration Number (TRN) verification service on its website, where consumers can check the authenticity of tax invoices and ensure that the merchants and service providers issuing them are registered with the FTA.

The Authority also debuted the VAT Calculator, which allows consumers and service recipients to instantly calculate the Value Added Tax (VAT) due on their purchases of goods or services. This, in turn, makes it possible for the public to remain aware of their rights and ensures full transparency.

Sarah Al-Habshi, director of Tax Compliance and Enforcement at the Federal Tax Authority, said that the new services were part of the Authority's efforts to protect consumers and prevent any attempts at price manipulation as the UAE taxsystem goes into effect. These services support and facilitate the Authority's efforts to monitor markets in collaboration with relevant authorities and stakeholders.

The TRN Verification service is fast, accurate and seamless, Al-Habshi explained, adding that consumers can enter the TRN found on their invoices on the "TRN Verification" section of the "Getting Help" tab on the FTA website, then, if the number is correct, the website will display the company's name in English and Arabic. If the company is not registered in the tax system, the number entered will not yield results.

Al-Habshi went on to note that the VAT Calculator is designed to be easy to use, and will be available on the FTA website, under the "Getting Help" tab. Once accessed, the page displays a box where the price excluding VAT can be entered, upon which the calculator will display the total tax amount and the total price including VAT.

Users can alternatively enter the full price (including VAT), where the calculator would display the original pre-tax price, as well as the tax amount.

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UAE’s car dealers walk the talk with their VAT offers

Indications are these promotions did manage to pull in enough buyers into showrooms

Dubai: Potential buyers are willing to head back into UAE car showrooms … provided the dealership is willing to go the extra mile on takingcare of the VAT costs. That seems to be the prevailing sentiment and dealerships willing to take this up are faster off the track in their 2018 sales push.

Traffic to the showrooms has inched up slightly after a drastic decline in the first few days of 2018. Dealership sources say it is taking longer to close a deal, and buyers are having a lot of think about the options they want in the car and what that could mean to the final price. But the key for dealerships is that potential buyers are making the trip to showrooms. By the looks of it, many are turning up and that the first quarter will not be a complete write-off for the auto retail industry.

“The general observation is that all customers walked in with an understanding that we will bear the VAT as a default,” said Rimoun Hanouch, Group General Manager at Liberty Automobiles Co. and the biggest Cadillac dealer in the region. “This behaviour is probably driven by recent aggressive dealership offers.” (For the wealthy, the additional VAT costs still seem a minor detail, given that Liberty’s most in-demand model in the first two weeks of 2018 was the Cadillac Escalade, which starts north of Dh302,000.) “We believe — as do most of our colleagues in the automotive industry — that the first quarter with VAT will be decisive,” said Hanouch. “It was how we planned for 2018 … I won’t call it a difficult situation for the market, it’s only a slowdown.

“But with any campaign, there’s only up to a point that dealerships can go. We will keep on being flexible with end-of-year promotions, but beyond that it becomes tough. The industry is operating on fairly thin margins.”

For the moment, dealerships across the board have gone out of their way to limit — or even remove in full — the VAT component on a new car purchase in the first weeks of the year. Al-Futtaim Motors has said it is maintaining 2017 price levels on Toyota models for a certain period. Arabian Automobiles Co., the local dealer for Nissan, has offers where a buyer makes the 5 per centVAT payment, but gets free fuel for a year.

Al Ghandi Auto, the Chevrolet and GMC dealer in Dubai and northern emirates, is running the “5 on Us” campaign, which absorbs the 5 per cent VAT, then pads that up with a four-year roadside assistance, three-year warranty and a two-year/40,000 kilometre service contract. Plus a one-year free insurance on select models. Al Tayer Motors is offering a chance to win back the price of a car — of up to Dh150,000 — through a raffle draw on select Ford models.

Meanwhile, some dealership sources say they will do “whatever it takes” to convince people not to put off their next purchase. They say that the VAT element is a one-off event and that requires changes to strategy on when and how long to run promotions. Many of the 2018 models have already arrived at showrooms and more will do so in the weeks ahead.

Dealerships will then have to find ways to sustain their promotional pitch even after the DSF campaigns end. They will also need to keep in mind that all of their imports done after on or after January 1 will bear VAT-related costs. How to manage these costs without upsetting the equation with potential buyers will decide how the market runs from February onwards. In many ways, starting February will be the real crunch period for dealerships.

Hanouch, for one, is an optimist. “I think 2018 it will eventually be a flat year for car sales in the UAE,” he added. “The market was down by less than 15 per cent in 2017, and could have ended up with approximately 320,000 new cars sold.

“It helped that the last couple of months of 2017 performed better (because of pre-VAT buying and for premium cars, demand was a bit more. For the whole of 2017, premium would have been down by about 10 per cent for a final total of 60,000 units. And Cadillac has been growing despite the decline in the premium segment, that’s how we gained in marketshare.”

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UAE to levy five per cent VAT on e-shopping

Online shopping will not be exempted from the Value Added Tax (VAT) levy which took effect on January 1 in the United Arab Emirates, Ittihad reported.

The UAE Federal Tax Authority (FTA) announced that five per cent would be levied on e-shopping transactions, on equal footing with goods bought through conventional purchases at trading outlets across the country.

According to FTA procedures, the 5pc levy would be paid in the UAE on receiving the parcel purchased online.

The 5pc VAT levy would also apply to all electronic websites whose overall online imports exceed the compulsory cap of AED375,000 over the past 12 months or over the coming 30 days.

The regulations are in line with the Federal Law Decree 8 of 2017 on the Value Added Tax and its executive bylaw.

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Three weeks into VAT, families stop impulsive buying

Indulgent shopping and luxury items no longer a priority with residents

Abu Dhabi: Families in Abu Dhabi say they have stopped impulsivebuying and reduced spending on luxury items to manage their budget after the implementation of the five per cent VAT (Value Added Tax) from January 1.

Three weeks after the roll-out of VAT, Gulf News spoke with a number of families about their shopping habits and budget management.

Vimi Sreejish, who was shopping at LuLu Hypermarket in Madinat Zayed Shopping Centre, said: “Every week, we used to buy groceries worth approximately Dh300 but after VAT we have cut it down to Dh200 a week.”

  We will be cutting down on expenses by maintaining old cars, avoiding luxury goods and buying only foodstuffs that will be consumed — nothing gets wasted now.”

 - Ishaq Hassan Mazem | Comorian expat

She added: “Earlier, we did not pay too much attention to the price tag of each and every product but now we look at every price and do a comparison with other brands. Settling for the cheapest brand is now a workable solution as I cannot cut down on my purchasing too much — I have a family to support.”

Mother of one Sreejish, who is from Kerala, India, said: “In fact, VAT is charged on all commodities and services, so if we don’t manage it from all fronts, living will be difficult here.”

In late 2017, when excise duty was levied on carbonated and energy drinks, Sreejish stopped bingeing on them and opted for juices and lemonades.

The UAE imposed 50 per cent excise duty on carbonated beverages and 100 per cent excise duty on tobacco and energy drinks last October.

Deck Hernandez, 49, from the Philippines, who was shopping at Abu Dhabi Cooperative Society, said: “Earlier, it used to be impulsive buying but, now, we think about whether we really need to buy something or not. This has led to a visible difference in my budget.”

Hernandez, who has two children, said: “My weekly budget for groceries is Dh300, which I have cut down to Dh200-250.”

He added that there are three basic needs of a person: food, shelter and clothing. “But I always give priority to food and shelter — no more attention to clothing. Even luxury items, electronics and shoes are out of my list,” Hernandez, who is a senior lab analyst, said.

Ishaq Hassan Mazem, 42, from the Comoros Islands, who was shopping at Carrefour, said: “We will be cutting down on expenses by maintaining old cars, avoiding luxury goods and buying only foodstuff that will be consumed — nothing gets wasted now.”

Mazem added that the habit of buying a new car every five or six years will now have to be reviewed. Another area where residents can adjust their budget is cutting on weekly dining out, he said. “In a week, we dine out twice but we will make it once a week,” added Mazen, who has four children.

His monthly spend on groceries and clothing is around Dh8,000 and “with five per cent VAT, I have to pay Dh400 more. I can’t cut down on it as I have to feed my family and fulfil their requirements”.

Moroccan expat Rashid Al Arabi, 34, also cut down on his weekly shopping to adjust his budget.

“We stopped buying unnecessarily and excessive food items. We are now more focused on the things that we need,” he said.

Al Arabi recently purchased groceries worth Dh500 but his pre-VAT shopping used to be more than that amount

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VAT in UAE: Tax authority defers date to file returns

This will ease reporting and compliance pressure on companies, especially SMEs.

The Federal Tax Authority (FTA) has relaxed the timeline for filing the first value-added tax (VAT) returns, easing reporting and compliance pressure on companies, especially SMEs.

"Earlier today, we have seen some relaxation by the FTA with respect to the VAT return period. The FTA has provided the first VAT return period from January 1 to May 31 and subsequently on a quarterly basis. This means the first return will need to be filed on or before June 28 and later returns from June 1 to August 31, September 1 to November 30, December 1 to February 28-29," said Anurag Chaturvedi, senior director, Crowe Horwath.

He said all businesses must log onto the FTA's website and check the tax period under their profile. "Some businesses have been given one month and others have been given five months," Chaturvedi said.

Pratik Shah, partner, WTS Dhruva Consultants, said in order to ensure ease of business under VAT, the FTA has relaxed the timeline for filing the first VAT return which would enable many businesses to gear up for the time loss. Businesses can strive to be fully compliant in terms of reporting VAT obligations to authorities.

Earlier, the first tax return filing for companies with more than Dh150 million turnover was one month. For others, it was quarterly. Now, firms can file their first tax returns after four or five months in June as per the new timelines appearing on the FTA's dashboard after log-in by a member company. Such an extension in filing returns shall help firms to better comply, Shah said.

Most of the micro, small and medium enterprises have been granted five months, four months and so on as their filing period for the first return, Shah added.

"This will enable various entities to cope up with VAT implementation requirements and ensure they do not fall on the wrong side of the legal provisions," Shah observed.

Along with Saudi Arabia, the UAE levied five per cent VAT on goods and services as part of a GCC agreement.

"Now, businesses need to acknowledge that VAT is a business change and not just an accounting change and accordingly utilise this time bonus to streamline all business functions as per the provisions of VAT to ensure business runs in line with policies," he added.

He said the teething issues post January 1, 2018, on day-to-day compliance are slowly settling down.

Chaturvedi believes this relaxation is meant for clubs, charities and associations to make their first return filing easier. "This relaxation benefits taxpayers and allows them more time to administer the business and structure processes to comply with regulations," he added.

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Are university students struggling with VAT in the UAE?

If the institution is funded more than 50% by the government, it will not be taxed

Parents in the UAE were relieved that the Value Added Tax (VAT) will not be implemented on school tuition, though, higher education institutions were not spared from the tax.

Starting January 1, a five per cent VAT became applicable on allprivate-funded higher education institutions in the UAE, meaning university students must pay tax on their fees. If the institution is funded more than 50 per cent by the government, it will not be taxed.

What kind of an impact can a five per cent tax - which is considered the lowest worldwide - have on families and independent students that survive from salary to salary and are on a very tight monthly or yearly budget?

For a Nigerian student in Dubai, Honour Chokote, 21, the tax is set to have a "drastic impact" on her family's financial situation. Chokote's family will be using her siblings' fees that they have been saving up to cover the tax on her fees. Her parents, who live in Nigeria, pay Dh48,000 annually for her university fees - which means a new total of Dh50,400, including tax (Dh2,400).

Even though that amount may not seem much for many, for Chokote's parents, Dh2,400 is money they could use for her siblings' fees. Chokote's brother has taken off a semester from his university because of their financial struggles.

"My parents pay Dh118,600 for tuition, visa costs and my accommodation and I'm not adding other expenses. The tax is having a drastic impact financially because money that was set aside for my siblings will be cut to pay my fees," she told.

"I feel like if there is one thing tax should not apply to, it is education because when you think about how much you spend on education and how much you could save without it, you tend to opt for alternatives."

Shabnam Bashiri, an Iranian student in Dubai, will be taking up a part-time job to help her parents pay off the additional costs of her fees that is being put on by the tax. Bashiri received a partial scholarship for her media communication studies, however, tax is still applicable on the annual Dh38,000 her parents pay on her tuition. "The tuition fee is around Dh50,000 annually, but with scholarship I pay around Dh38,000.

"The new tuition VAT inclusive has increased to Dh43,000 for my major, which will definitely make it a struggle, even with a scholarship. As college students, we're always trying to save as much as possible. I'll definitely have to get more part-time jobs to help my parents with the tuition," she said.

"My university gave us the option to pay for spring semester only before January 1 in order to get a five per cent discount, which I know a lot of people did. But the rest of the year will be tax inclusive, so we'll have to figure it out as we go.

"I hope universities will take into consideration that with everything being taxed now, it would really help if they provided more scholarships to students, or increased the discounts in the scholarships."

Parents find 'minimal' effect on family budget

The higher education private sector will remain attractive to families despite the five per cent value added tax on tuition fees, a VAT expert has said.

The five per cent VAT is one of the "lowest" worldwide. She believes there will be only a "minimal" impact on family budgets because of the tax.

"The impact of VAT in the private sector of higher education is still unknown as of today," she said. "We have to keep in mind that it is a very low rate compared to other countries such as United Kingdom, which apply a rate at 20 per cent.

"We expect minimal impact on the family budget. The private higher educational sector will be still attractive for the families at this low rate.

"VAT has been implemented to raise an additional source of revenue for the GCC (Gulf Cooperation Council) and it is expected to generate approximately Dh12 billion for the first year of application in the UAE and thereafter, shall generate more revenues.

"The introduction of the VAT in the UAE has been motivated by the government to diversify the income source and dependence of the revenues from the oil and other hydrocarbons as well as to maintain and provide the high-quality public services.

"After the first year of implementation, the expert shall probably be able to identify the real impact of the VAT in each sector and specifically in the private higher education sector."

Besides tax on university fees, VAT is also applicable to uniforms and books in private schools across UAE. Families are still seeking guidance when it comes to learning where and how the VAT will be applied in the education sector.

As of today, it is still unclear which rate shall apply on specific supply of goods and services. Families are seeking more guidance on how VAT will be applicable in the education sector.

Basically, zero per cent VAT is applicable to the private andpublic-school education sector and related goods and services provided by education sector.

The same rate at zero per cent is also applicable for highereducation provided by institutions owned or funded by the government, as well as the related goods and services provided by these institutions.

However, for the education provided by the private higher educational institutions and related goods and services, a VAT rate at 5 per cent shall be applicable.

Further, the five percent VAT will also be applicable on items like school uniforms, stationary items, electronic equipment, renting school grounds for events, after-school activities for extra fee and school trips for recreation or not within curriculum."

Overall liability of VAT does not seem to be on the  higher side

The chilly wind is on the blow but VAT has made it warmer and is currently the hottest topic and is definitely the "talk of the town" right now. This is the second week since VAT has been implemented in UAE and people somehow have adjusted themselves in 2018. Let us take a look at VAT impact on higher education.

The UAE residents came up with a bit of surprise reaction since education could have been exempted in their point of view. However, there is a slight increase in the overheads of almost all higher education institutions, a part of which the UAE government is also absorbing, and for which applying VAT was inevitable to keep up the quality standards.

Although, the overall encumbrance does not seem to be on a higher side to tax payers, people are having a mixed reaction on the same. The VAT may not be the only reason to switch between different institutions providing higher education within the UAE since the standard rate is applicable to all of them. However, there is a possibility that some institutions may absorb a portion of the VAT and will be successful in getting better student strength.

There is equal risk associated with the quality of education. Higher education is a sensitive stage in overall academic and professional development of any student since it is the first step into a professional career. Hence, the risk and return analysis will be an area of concern. We cannot overlook higher education students who are already employed or having businesses. For them, VAT will not be a teasing factor since the increased percentage is within well manageable limit of five per cent.

How can middle income families be affected by this move? In the UAE, most of the middle income families prefer to send their young ones either to their home country or abroad for higher education. This can be one of the smart move from the UAE authorities to not to impose tax to basic education which will give breathing space to such families. A major concern for this group was VAT imposition on the grade school. However, only a slight increase in transportation, stationery and uniform cost due to VAT will be tightening up their budget to some extent. Since VAT is imposed on most of the goods and services, psychologically people will start making adjustments.

How will VAT affect education?

The tax is just a five per cent raise from a zero per cent, but it piles up towards the end. Already with the prices of university and school materials being really expensive, the tax is just making it much worse for families. They are being obligated to put in more money for stuff that they have no choice but to buy. Families are being held back from other leisure activities and emergencies that they have saved for.

Daniel Mendonca, university student

Of course, tax on higher education will be a burden for parents' shoulders. Though, it will help for the growth of the UAE as a nation. But there are worries about the quality and acceptability of the higher education programmes provided by institutions in the UAE in other countries and variety of courses available.

Bindu Satyan, parent

Higher education needs to deliver the quality of education always, which should not be compromised. VAT is essential and will not give any impact on that segment.

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VAT could hit UAE property market in 2018

Significant new supply in Dubai could also dampen the market in the run up to 2020, according to JLL

The UAE property market faces a potential reduction in activity and performance at the start of the year due to uncertainties surrounding a recently introduced 5 per cent value added tax and new supply, according to consultancy JLL.

In an end of year report, the company said the real estate sector continued to adjust to lower growth being the new normal as economic activity slowed from a historic average of 4.1 per cent to 1.7 per cent in 2017.

Despite the weaker market conditions, the last year still saw significant sales activity in the commercial and residential sectors with four major official and assets with a combined value of more than $340m sold last year to institutional investors.

Residential activity was also supported by a surge in off plan sales thanks to attractive prices and payment plans offered by developers.

There were 25,600 off plan sales in Dubai alone last year, the highest level seen since 2008, according to the company.

“The UAE real estate industry is entering into a transitional phase, with VAT now in effect and key stakeholders seeking to decipher its immediate and longer term impact,” said Craig Plumb, head of research at JLL MENA.

“Although VAT does not apply to residential rents and sales of new residential property, other real estate sectors could be negatively impacted by increased costs and cash flow challenges.”

The company said there was an increased level of new units due to enter the Dubai market in 2018 and 2019, which could result in an oversupply situation, while activity remained more constrained in Abu Dhabi.

Dubai

In the Dubai residential market, JLL said there were signs of confidence returning but the number of new launches was significantly below activity levels seen in 2006-2007 and sales volumes were below levels seen in 2013/2014.

Sales and rents declined over the year but slowed in the fourth quarter to an average decline of 1.6 per cent. However, new supply is expectedto see prices and occupancy levels continue adjusting downwards.

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VAT in UAE: How non-registered firms can import goods

They are required to follow standard customs procedures and pay VAT using a variety of methods

The Federal Tax Authority (FTA) has clarified import procedures for non-registered businesses adopting the e-Dirham system for payments and e-Guarantee to provide guarantees to ease processes for non-registered importers.

Non-registered businesses wishing to import are required to follow standard customs procedures and pay VAT in one of the following methods: By completing a declaration (Form VAT301 - Import Declaration Form for VATPayment) and paying via e-Dirham (with an e-Dirham or other credit card) via the eServices portal on the FTA website; via a clearing company approved by the FTA at the port of entry; via a freight forwarder approved by the FTA; or via the courier company that delivers the goods to the said importer, the tax authority said in a statement on Saturday.

When importing for re-export, transit or temporary admission, non-registered businesses are required to follow standard customs procedures, in addition to providing a guarantee for the tax due on the imported goods in question, which can be done by: Entering the previously obtained e-Guarantee reference number on the e-Services portal; via a clearing company approved by the FTA at the port of entry; or via a freight forwarder approved by the FTA, said the statement.

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VAT in UAE: Bookkeeping crucial for firms today

Proper bookkeeping was alien to this part of the world due to the non-existence of a tax regime

The five per cent value-added tax introduced by the UAE is one of the best parts of the GCC VAT regime, said Pritam Mathur, associate director, VAT Advisory, Morrison MJS.

He noted that VAT is prevalent in more than 160 countries but the GCC VAT regime has one of the lowest rates in the world.

Mathur was speaking at the 'VAT Clinic' in Ras Al Khaimah organised by Khaleej Times and ICAI (Dubai chapter) with the support of Qadi Accountants.

L.K. Verma, president, IBPC - Ras Al Khaimah, said VAT starts with the financial reporting system of companies. He said proper bookkeeping was alien to this part of the world due to the non-existence of a tax regime. But this trend has changed now and businesses have to maintain records properly.

Bhavin Raithatha, manager, system, internal audit and risk, Mayur Batra Group, answered queries of ICAI members from the Northern Emirates about implementation of VAT, both from supplier and buyer perspectives.

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