VAT q&a: My Abu Dhabi start-up now qualifies for VAT. Can we reclaim any tax paid before registration?

The company has crossed the earnings threshold of Dh375,000 and is unclear on what it can claim

We are a UAE startup, whose sales for the first year did not cross the UAE VAT threshold of Dh375,000. However, recently we realised that our sales will exceed the threshold in the next 30 days. Therefore, while we did not charge VAT for the first 10 months, we will now be charging it. We have heard we can reclaim the entire input VAT paid before registration. Is this process acceptable to the Federal Tax Authority? We did not register in the first few months of operation as were unsure we would cross the threshold. HJ Abu Dhabi

Article 56 of the Decree Law allows the recovery of input tax paid on goods, services and imported goods prior to the date of VAT registration, “provided that these goods and services were used to make supplies that give the right to input tax recovery upon tax registration”. Input VAT is the VAT you are charged by your suppliers on goods and services purchased.This means that you can only recover VAT paid before registration if VAT charged on the same goods and services post registration would be recoverable. You should understand the exclusions to input tax recovery contained in the full decree law and executive regulations and apply the same rules that apply to input VAT recovery generally, when determining how much pre registration input VAT can be offset. 

There are four exceptions to this rule listed in the decree law. The first is receipt of goods and services for purposes other than making taxable supplies. The next is for input tax related to capital assets that are already partially depreciated before the date of registration, for example, if you purchase a fixed asset with an expected life of five years and when you register for VAT the asset has only two years of use left, you can only reclaim two fifths of the VAT you originally paid. The third exception is for services received more than five years prior to the date of registration. Note this refers to services only, rather than goods and services. 

Finally you cannot reclaim input tax paid if you have moved goods to another implementing GCC state prior to the registration in that state. This is because if you supply goods to another GCC state then the recovery of input tax is permitted only in that other state. Therefore, to recover input VAT you need to be registered in that other GCC state.

have read about UAE companies receiving invoices without UAE VAT, where such companies need to record the VAT under the reverse charge mechanism. In such cases, this means the FTA will not receive any VAT. Is it logical that some non-resident companies are obliged to register for and charge VAT but others do not? Is there ambiguity in the law here? HJ Abu Dhabi

 

This question highlights why the reverse charge mechanism is a hard concept to grasp and at first does not seem to make sense. The reverse charge mechanism applies if you make input and output VAT adjustments on your VAT return where you have purchased goods or services from an overseas company and have not been charged VAT. 

When considering this, remember the end consumer bears the cost of VAT not the companies involved in the production chain. The companies have to charge VAT, but can also reclaim any VAT they are charged.

If a UAE resident company is purchasing services from another UAE resident company, and both are VAT registered, then the supplier will charge the recipient company VAT and will pay this over to the FTA on their next return. Meanwhile, the recipient company will pay the supplier VAT but will then reclaim this from the FTA on their next return. So from the FTA’s perspective, there is a zero net effect from this transaction, albeit that there are equal and opposite actual cash flows.

If a UAE company buys services from an overseas company that is not registered for UAE VAT, the UAE recipient company must use the reverse charge mechanism when accounting for this VAT. They will record equal and opposite VAT payable and VAT reclaimable on their VAT return. As these amounts net each other off on the same VAT return, there will not be any actual movement of cash, but the zero net effect is the same. So there is no ambiguity in these two scenarios, the net effect for both the FTA and the UAE-registered company is the same.

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Some UAE businesses are paying more VAT than they need to

While companies should not pay VAT unnecessarily, they should also steer clear of tax avoidance schemes

One of the many nice things about being a tax lawyer is that as well as being paid to solve complex problems and argue, you also get to help your clients save money. Sometimes a lot of money.

Tax avoidance, tax planning and tax mitigation are expressions that have acquired a bad reputation (quite often with some justification) but it remains possible in most jurisdictions - and that includes the UAE - to structure commercial arrangements in such a way as to minimise VAT.

As Lord Tomlin famously said in the Duke of Westminster case (1936). “Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax”.

This is an oversimplification of how things work today, but there is a truth at its core.

There are some tax lawyers who still push the boundaries of what is acceptable from a tax point of view. It was recently reported, for instance, that British Olympic Medallist and Tour de France winner Sir Bradley Wiggins had been advised to invest in the Cup Trust scheme, which is one of the most shocking pieces of attempted tax avoidance of recent years. The scheme used a registered charity purportedly to generate huge tax losses but with only a tiny proportion of the tax saved going to charitable causes. There really is little excuse for advisers who advise on these artificial schemes and absolutely none for taxpayers who invest in them.

My advice to any business looking to do anything artificial to avoid UAE VAT, or create a timing advantage, is not to bother. Artificiality sometimes worked when tax and tax avoidance was regarded as fair game (around 1973, if you are wondering), but now courts around the world are taking a far dimmer view of anything that whiffs even slightly of avoidance, and I’ve no reason to think that the tax courts in the UAE will be any different.

For example, I would be highly wary of setting up a “shell” company to create a more favourable VAT result, invoicing the “wrong” party or creating artificial transactions between group companies solely in an attempt to accelerate tax recovery.

One advantage of the UAE having few exemptions compared to other countries is that most businesses should be able to recover VAT in any event, which means that it is the banks and other entities that aren’t making supplies for VAT purposes that will most likely to suffer a cost.

If I were a bank, I would be considering whether I could look at my overall structure and operations with a view to minimising the 5 per cent VAT cost on my supplies. This isn’t simply a matter of documenting a deal differently (if a contract doesn’t reflect reality, it won’t be respected by the Federal Tax Authority or the courts) but there is often some flexibility to set up operations or structure arrangements in a more favourable way.

Jurisprudence from across the world shows that subtle differences in the way in which a contract is drafted can fundamentally affect the VAT treatment. So, for example, in determining whether there is a “single composite supply” of zero-rated services (such as a new villa with a fully-fitted kitchen) or a zero-rated supply of a new villa and a standard-rated supply of a kitchen, the legislation specifically requires one to look at the contract, among other things.

It is important for banks and other entities (or individuals) who cannot recover VAT to consider whether there is a VAT cost in the way they have decided to create legal relations and whether that cost could be mitigated by creating those legal relations slightly different. The same goes for international supplies of goods and services, where there is much potential for irrecoverable VAT in circumstances where – arguably – the position should be cash neutral.

It goes even further. In my 20 years or so of having advised on VAT in the UK, and the last year in the UAE, there have been occasions where – somewhat to my surprise – on reading the legislation and applying it to the facts, VAT has not applied to a transaction where the client had expected it to be.

Obviously with VAT currently standing in the UAE at a rate of 5 per cent, compared to rates of typically around 20 per cent in other countries, many businesses may instinctively feel able to absorb the VAT cost or pass it on to customers, particularly if it arises in respect of an unusual, one-off but relatively small transaction. But why should a developer charge VAT on a kitchen if, as a matter of law, it does not have to? Few UAE businesses can easily knock 5 per cent off their margin and few consumers are happy voluntarily to pay 5 per cent more.

It’s unlikely that the FTA would agree to waive VAT in the event that it unexpectedly or unfairly arose as a matter of law, and nor should they. Conversely, businesses should not feel obliged to charge more VAT than they need to. But that requires a careful appreciation of businesses’ supply chains, careful reading of the law and careful application to the particular contract.

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VAT growing pains remain as some grocery shops round up

Lots of small groceries take advantage of VAT to cheat people. For instance, if the tax pushes up the price of an item by 25 fils, they will make sure to round it up to one dirham.

Don’t be too quick to point the finger at Russia 

As they should. There are valid concerns about the claims being made by UK Prime Minister Theresa May and her Foreign Secretary Boris Johnson.

There is no clear Russian motive for this attack, but there are numerous reasons for the UK to blame it on Russia: to disrupt the Russia World Cup, bolster public support for war, improve Ms May’s ratings, ramp up UK defence spending, further discredit opposition leader Jeremy Corbyn and try to impact Russian elections.

Name withheld by request

Theresa May and her cronies are now judge and jury, with no evidence or motive.

  

Dinesh Karthik has a place in the hearts of all Indians

By hitting a six with the last ball of the last over of the tournament, Karthik bounced himself into the heart of every Indian across the world.

Obesity is a global scourge that needs to be addressed

The European Heart Journal study and the mixed reactions in the profession about what it means to be healthy are fascinating. The fact remains that obese people are more likely to face cardiovascular disease. Obesity is a global challenge; we should all take care of ourselves to avoid it.

ISIL do not represent Islam but use it for their cruel ends

They are not real Muslims, but seek power, oil, territories and domination. Though they use Islam for their political ends, these cruel people do not practice the religion.

Asyah E Meel, Abu Dhabi

Sharjah-Istanbul plane crash victims had much to live for

These girls had so much to look forward to and so much to live for. The poor parents could not say goodbye. May their souls rest in peace.

For More Inforation Please Contact Us HERE. 

 

UAE government clarifies VAT liability on pre-2018 business contracts

Federal Tax Authority says customer liable only if contract said amount was “exclusive of tax”

The UAE’s Federal Tax Authority (FTA) issued a clarification over VAT liability pertaining to contracts issued last year, laying to rest residual questions over whether businesses or consumers are liable in such cases.

“The only case where consumers are directly responsible for paying VAT on received services that are delivered fully or partially after VAT went into effect, is where the contract, issued before 1 January 2018, states that the amount due is exclusive of tax,” the FTA said in a statement to media.

Earlier this year a dispute broke out between health club Fitness First and its members in the UAE, over VAT being applied to membership agreements signed and paid for last year.

Many members complained about requests from the company to pay the tax for the 2018 portion of their membership, even though they had already paid the cost of their membership according to Fitness First’s 2017 prices, which did not include VAT.

The dispute prompted Ahmad Al Zaabi, acting director of consumer protection at Dubai Economy, to clarify the rules.

“The agreement should state that the fee applicable does not include VAT or any of the tax concerned, and also specify that the merchant reserves the right to charge VAT or any other tax that may be implemented in the country at any point during the agreement period,” Mr Al Zaabi said in a statement in January.

If such terms are not stipulated, the contact will be considered “silent” and the merchant “cannot charge VAT from the consumers, or gain an accepted settlement with their consumers”.

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The VAT status of offshore companies in the United Arab Emirates

The United Arab Emirates (UAE) implemented the Value Added Tax (“VAT”) on 1 January 2018 under Federal Decree No. 8 of 2017 on Value-added Tax (“VAT Law”). Further guidance as to application of the VAT Law was provided by the Executive Regulations promulgated by Federal Decree Number 52 of 2017 (“Executive Regulations”) and Cabinet Resolution No. 59 of 2017. Unfortunately none of these documents clarifies the VAT status of offshore companies established in free zones in the UAE, which is the subject of this article.

An offshore company is similar to a free zone company in that both are registered with and licensed by a free zone authority and both can be fully owned by foreign owners. However, while free zone companies are primarily established to carry out trade and export activities, the purpose behind offshore companies is usually for asset diversification and investment protection.  Offshore companies have the additional benefits of no minimum capital requirement, no requirement for physical office space coupled with eligibility to own real estate onshore in the designated areas and to open and operate bank accounts in the UAE. Offshore companies have a registered office address in the UAE, which is usually that of the registered agent, but are not entitled to conduct business activities in a free zone or onshore. 

What factors are considered in assessing whether or not VAT law would apply to offshore companies?

The VAT Law requires any company providing Taxable Supplies within the UAE exceeding the Mandatory Threshold of AED 375,000 to register with the Federal Tax Authority (“FTA”) and obtain a Tax Registration Number (“TRN”). The question is whether this requirement applies to offshore companies established in free zones. 

The Cabinet Resolution No. 59 of 2017 has named several free zones as Designated Zones, including the Jebel Ali Free Zone (where offshore companies may be incorporated) alongside other 19 free zones in the UAE (these are outside of the scope of VAT). Article 51(1) of the Executive Regulations expressly states that a Designated Zone shall be treated as being outside of the State and outside of the Implementing States for the purposes of VAT law. However, Article 51(9) stipulates that all companies incorporated within a Designated Zone to be treated as being inside the State. We see this as only a prima facie position and therefore we will not discuss this discrepancy. 

Place of supply

The VAT treatment of a supply will be determined depending on the place of supply. The general rule is that the place of supply of services is determined by the place of residence of the supplier. 

Offshore companies will generally face three scenarios which will be affected by the VAT regime:

i) Exporting goods and services outside the UAE 

There is currently little distinction from a VAT standpoint between offshore companies registered in ‘Designated Zones’ and other free zone companies.   Article 31 of the Executive Regulations provides that the export of services shall be zero-rated where the services are supplied to a non-resident recipient and who is outside the state at the time that the Services are performed. Therefore, a supply of services by an offshore company outside the VAT Implementing State (currently the UAE is the only Implementing State) will be zero-rated.

ii) Holding vehicle An offshore company is entitled to hold and own interests  including real estate onshore.  

If these interests are engaged in taxable supply, we would expect for such supply to trigger a tax liability. A distinction must be drawn between real estate being utilized for commercial activity which, will attract VAT (if above the mandatory threshold then registration with FTA is required), and for residential purposes (i.e. not used for a taxable supply). The latter is unlikely to attract VAT liability. 

iii) Supply of services by onshore company to offshore companies

In the course of supplying services or holding assets, an offshore company may contract the services of onshore companies. For example, an offshore company may appoint lawyers or auditors who are based onshore. These suppliers will be entitled to charge VAT on invoices issued by them to the offshore company. 

Furthermore, the supply of services directly in connection with real estate or personal moveable assets located onshore will also be taxable. 

Specific examples

Below we consider the scenarios which would often arise in course of the operations of an offshore company.  

a) Exemption to Article 31 of the Executive Regulations  If the supply provided by an offshore company is intended to be received by a non-resident (a company that has no place of residence within the State), then ordinarily such supply will be zero-rated. However, if the non-resident has an employee or a director in the State who is receiving such supply, then standard rate VAT will apply to such services. 

b) Another example  

Given that offshore companies do not have an office space in the free zones, the registered agent offer the registered address service to such offshore companies. If the registered agent is an onshore company, two consequences would follows:

1) Services offered by the registered agent to the offshore company, including the annual agency fee, would be subject to VAT;

2) The law would still treat the principal as actual recipient of goods/services where the agent “regularly exercises the right of negotiation and enters into agreements in favor of the principal” (Article 33). Although, strictly speaking this does not make a difference from the VAT standpoint because regardless of whether the services are supplied to the agent (based onshore) or the principal (based in a Designated Zone) they will be subject to VAT. 

In conclusion, the special status of offshore companies, which is different from both onshore and free zone companies, makes the application of the VAT principles somewhat difficult.  The Executive Regulations provide some guidance in this regard but they do not specifically address offshore companies leaving some provisions open to interpretation. The above analysis demonstrates that there are situations where offshore companies would be making taxable supplies and therefore should consider tax registration. JAFZA has advised in a circular issued in November 2017 that the supply of goods and services in JAFZA at each stage of production and distribution shall be subject to standard 5 % VAT. Therefore, each offshore company would be advised to register a TRN to remain on the safe side. 

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The tax-hike freeze sends out a clear message

The UAE Cabinet’s decision is a message of reassurance for businesses and consumers 

Many enquiries were raised by citizens and residents alike questioning the possibility of increasing the value-added tax (VAT) rate from 5 per cent to 10. Later on, it turned out that these were just baseless rumours.

Although there were no clarifications at that time, the response to the rumours was based on an understanding of the economic situation over nearly four decades as well as on the decision-making processes in the country, which takes into account all possibilities. It was not long before the UAE Cabinet decided not to impose any new taxes for the next three years, which is a sound decision that sends a strong message to the markets and also responds to the tax-hike rumours.

The Cabinet’s decision is important and for many reasons. First, it strengthens the confidence of both consumers and the business sector. Everyone is now reassured that there is to be no tax increase and can confidently chart their investment programmes. This in turn creates some kind of stability that will attract more investments.

Second, the decision reveals how transparent and clear the decision-makers have been and this will protect the country’s economic and commercial standing, given its status as a global hub for trade and finance. This has created a sense of satisfaction among consumers and the business sector and strengthened confidence in the country’s markets.

It also comes at a time when global trade is facing the possibility of a trade war between the world’s largest economies as a result of decisions here and there. This includes the recent decision taken by President Donald Trump to impose additional tariffs on his country’s steel and aluminium imports, thus disadvantaging the exports from China, the European Union and other countries to the US.

The US decision has been met with threats of countermeasures by China and the EU, with the latter planning to impose additional tariffs on its imports of US clothing and products. China is expected to take countermeasures to protect its interests, which means the US is likely to take even more protective measures.

GCC aluminium exports to US

This means the troubled conditions for trade will result in repercussions for various countries and they need to deal with the ramifications or reduce any potential damage at the very least. The GCC countries, for example, export about 30 per cent of their aluminium to the US and these will be covered by the new US measures and force them to search for alternatives, reduce costs or take protectionist decisions.

This depends on the nature of the Gulf aluminium industry and its position in the international commodity markets. At the same time, the US president hints at the possibility of taking other decisions as part of his economic policies, through which he will reconsider many of the economic and trade agreements signed by previous administrations and were, as he suggests, unfair to his country. This means stoking the fires of crisis in international trade relations.

In light of these developments, the UAE’s decision on no further tax hikes reaffirms its role as a guarantor of trade and investment and that economic decisions are aimed at providing more facilities for investors and businessmen. This has contributed to transforming the country’s markets into a global hub for trade and transport and for re-exports, which is gaining more importance thanks to the changes in the transport sector.

The Cabinet’s decision is expected to strengthen this position further and strengthen the business competitiveness of the country on the global stage.

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VAT implementation makes SME lending safer

SME lending undergoes some fundamental changes

Dubai: The UAE’s banking sector stands to benefit from the implementation of Value Added Tax (VAT) as the new tax system makes the balance sheets of corporates, particularly the small and medium enterprises (SMEs) more transparent, said Abdul Aziz Al Ghurair CEO of Mashreq Bank and Chairman of the UAE Banks Federation.

“VAT makes it difficult for these companies to inflate their sales and falsify balance sheets when availing loans. This allows banks to get better visibility of the financial position of a company before granting them loans,” said Al Ghurair.

Banks which suffered huge loan losses in 2015 and 2016 in their SME portfolios have recognised these losses and the provisions cycle is expected to end this year. Learning a lesson from the past mistakes, SME lending is going through some fundamental changes in the country.

“SME loans are going to face some new terms and conditions. In many cases banks will attempt to collateralise these loans. While it improves asset quality of banks, business too will benefit as cost of these loans are expected to be lower,” Al Ghurair said.

VAT is expected to have only a limited impact on the profits of banks, although most banks are currently absorbing VAT on regulated fees on services that is taxable under UAE tax laws. A central bank decision is expected this month on the issue whether banks can pass on VAT cost on all regulated services to customers.

New EIBOR mechanism

The UAE’s banking sector will soon follow a new method of calculating Emirates Interbank Offered Rate (EIBOR/interbank rate of interest).

“Older mechanism based on interbank borrowing rates did not reflect the actual interbank rates as most interbank loans/deposits are too short term in nature. The new methodology for calculation of the EIBOR will be based on cost of deposits that will better reflect cost of funds,” said Al Ghurair.

Under the new EIBOR calculation methodology, the interbank rates will be derived from the average of cost of deposits of a panel of 8 banks and the rates will be reset every month.

Innovation

The UAE banking sector, Al Ghurair said, has joined the global trend of technology transformation, digitisation and innovation that is sweeping financial services sectors around the world.

“A number of banks in the country are investing in innovation, digitisation and technology transformation. Customers in the UAE are fast adopting digital banking services. In many cases customers are demanding more digital solutions that brings major cost savings to banks and convenience to customers,” said Al Ghurair.

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VAT has not impacted deal flow, according to experts

Among the sectors identified as significantly affected by VAT are construction, real estate and export industries

 

The implementation of 5 percent value-added tax (VAT) in the UAE and Saudi Arabia has not impacted deal flow in the GCC, even as many companies found themselves unprepared, according to experts speaking at the Institute of Chartered Accountants in England and Wales (ICAEW) corporate finance faculty roundtable in Dubai.
According to the panellists, despite the fact that the flows of deals was not impacted there remain uncertainties regarding the items subject to the tax, as well as a “sentiment of denial” across businesses that affected their ability to be ready on time. Now, however, businesses are embracing VAT.
“We are living in a very exciting period,” said Michael Armstrong, FCA and ICAEW regional director for the Middle East, Africa and South Asia (MEASA). “There is no doubt that VAT implementation will improve business conditions and create more stable economies over the long run.”

The panel noted that many businesses do not have access to consultants with VAT experience, which means that smaller businesses with no access to tax advice are struggling with the compliance processes.
The panellists added that while some businesses experienced a negative consumer reaction to the implementation of VAT, it is likely to only be a short-term effect that is negated by the positive long-term economic impact of VAT.
Among the sectors that the panellists identified as significantly affected by VAT are the construction, real estate and export industries. They noted that because of the long tenure of construction projects, businesses with existing contracts hadn’t factored in VAT when planning and found it difficult to pass the cost of the tax onto their customers.

Many panellists applauded the UAE government’s efforts to provide guidance to make the tax’s implementation process as simple as possible for stakeholders.
“As a young legislative body, it’s tough for the UAE tax authority to address all concerns raised by businesses,” Armstrong added. It has been a hasty incorporation process, but as time unfolds, VAT will create a more transparent, credible and internationally accepted economy.
“Time will tell whether this increased transparency will make the UAE more or less competitive,” he added.

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FTA: VAT registration in three easy steps for UAE businesses

 The Taxable Person or an official representative can register through the e-Services portal, available 24/7 on the FTA website

ABU DHABI: The Federal Tax Authority, FTA, has reaffirmed that registering for Value Added Tax, VAT, can be done in three easy steps through the e-Services portal on the Authority’s website, taking no longer than 15-20 minutes.

The Taxable Person or an official representative can register through the e-Services portal, available 24/7 on the FTA website, which was designed according to best international practises to facilitate registering for VAT, filing VAT returns, and paying due taxes, in addition to providing information and guides to raise public awareness around the tax system.

In a press statement issued today, the FTA once again urged businesses to take advantage of the decision to waive late registration penalties until 30th April 2018, which took into consideration the lack of readiness among businesses when VAT first went into effect.

The decision reflects the Authority’s commitment to guiding taxable persons and ensuring their full compliance to avoid administrative penalties. Businesses are required to access the website, go to the e-Services portal and set up an account by clicking on "Registration".

A verification email is then sent, following which the account is accessible through "Login" button. Users can then begin the 3-step registration process by going to "Create an Account", filling the form, and finally, clicking "Submit for Approval".

The FTA has urged businesses to provide accurate information and make sure they enter it properly into the application form. To complete the registration process, scanned documents must be attached, including the business or trade license, passport/Emirates ID (for UAE residents) of the manager or owner of the business, and the authorized signatory (if the signatory is not the manager him/herself), as well as proof of authorization for the manager or signatory (e.g. articles of association, power of attorney attested by notary, etc.).

The Federal Tax Authority clarified in a press statement that any natural or legal person conducting business in the UAE is required to register for VAT if their taxable supplies exceeded AED375,000 in the previous 12 months, or are expected to exceed that amount in the next 30 days. Taxable Supplies are identified as all supplies of goods and services made by a Person that are not exempt, in addition to imported goods and services.

Two or more legal persons conducting business in partnership may apply for Tax Registration as a Tax Group, the FTA explained, outlining a set of conditions for such a registration, namely: Each of them has a place of establishment or fixed establishment in the UAE; if the persons are related parties, i.e. they are not separated in economic, financial or regulatory aspects; or if one or more of the Persons in the group control the others.

Persons intending to register as a Tax Group need to nominate a representative member who shall apply to register them.

The representative member applies first by completing a VAT registration application stating that the intention is to be part of a Tax Group.

After the representative member is issued with a Tax Identification Number, TIN, the additional members of the group may be added through Tax Group Registration.

Members can be added whether they have registered separately or not. After the process is complete and the application to add members has been submitted, a TRN will be issued for the whole Group.

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Businesses must comply with VAT

Businesses across the UAE must comply with the value added tax (VAT) law by filing their returns on time, experts at a session on VAT returns and reporting stressed.

Organised by the Institute of Chartered Accountants of India (ICAI) Dubai Chapter, the session provided clarity on the process of filing returns, as well as registration for businesses that have not done so yet.

"In the beginning it was challenging for the businesses to register for VAT, as it was new for everyone," said Naveen Sharma, chairman, ICAI Dubai Chapter. "But, with time and clarifications from the Federal Tax Authority (FTA), the businesses started getting their doubts cleared which helped them in the registration process. I think, as of now, all big organisations have already registered for VAT, but some small businesses in the market are still struggling with registration process. In due time, I think they will also be able to register themselves."

Asked about how clear businesses are on filing returns, Sharma said that the VAT return form is very clear. "Guidelines issued by the FTA helped a lot in getting the clarity. But, businesses are facing some difficulties like getting the right invoices on time, reports from the system, etc. In due time and experience, I feel these issues will be resolved and businesses will get comfortable with VAT concepts and returns."

Similarly, Mansoor Sarwar, regional director of Technical and Pre-Sales at Sage Middle East, noted that larger corporations and multinationals have handled VAT-implementation well, as they prepared well in advance. "It is the small and medium businesses who are finding the process overwhelming. The majority of smaller companies we have spoken to are only somewhat prepared or are not prepared at all for VAT. A lot of them are still uncertain about how to get their accounting and business systems ready, and have not gotten their employees trained for VAT-compliance."

The learning curve, he said, is steep for a lot of small and medium companies, especially with regards to how to returns-filing, refund claims or how to conduct tax audits. "The simplest solution is to implement an internationally-recognised accounting software which is VAT-compliant. Find a software provider with prior VAT-implementation experience. Companies should also use a registered tax agent for support during this transition. Lastly, it is important that businesses remain proactive when it comes to VAT, and take the necessary steps to be ready."

Asif Master, director of Finance at Al Shirawi Group, added that the FTA has recently waived administrative penalties for non-registration till April 30, 2017. "We feel that it has been done so that those businesses who are left behind can catch up with the VAT registration. It is a welcome and positive move by the FTA to consider the difficulties being faced by the small and medium size businesses. Due to lack of preparedness and time many business could not register well within timeline."

"We recommend all the businesses to read the return filing guide released by the FTA," he added. "It is a nice and detailed document which explains what should be reported in each field of the return. Key is to check if all your transactions which took place during the month are properly captured and reported in the return. Export and exempt supplies are tracked separately and reported in the return. In case of imports, whatever is not included in the auto populated value in the FTA return, ensure you report it in the adjustment columns. Input credit should be claimed only which is allowed as per the rules in the return."

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UAE approves first batch of tax agents

 

Federal Tax Authority says agents will be 'key contributors to the successful implementation of the tax system in the UAE

The Federal Tax Authority (FTA) has approved the first batch of registered tax agents, after meeting the required standards, conditions and qualifications, in addition to passing the authority’s tests.

Khalid Al Bustani, FTA director-general, said that agents are "key contributors to the successful implementation of the tax system in the UAE".

The agent may represent any entity or individual before the Authority, helping them meet their commitments and know their rights, state news agency WAM reported.

The registration of the first tax agents comes just weeks after the UAE launched value added tax (VAT).

Tax agents strengthen ties between the FTA and taxable individuals, he said, revealing that the authority is about to register a second batch.

They aim to help businesses achieve tax compliance, manage records, and avoid errors in registration and the filing of tax returns.

 ''Tax agents will play an important role in tax compliance, and as strategic partners for businesses, represent them in businesses entities and fulfil their tax obligations toward the authority, tax agents will provide a lot of services to business sector." 

For More Information Please Contact Us HERE .