Recto: TRAIN contains 'self-executory' fuel tax-freeze provision

MANILA, Philippines — Amid calls to suspend the implementation of the excise tax on fuel under the tax reform law, Senate President Pro Tempore Ralph Recto said on Thursday that the statute had a “self-executory” tax-freeze provision in the event of high prices of oil.
According to Recto, the tax-freeze provision of the Tax Reform for Acceleration and Inclusion Law would kick in when the benchmark price of crude oil reached $80 per barrel.
Recto said that the TRAIN provided for a “price-triggered collection moratorium” which was reiterated by the Bureau of Internal Revenue Revenue Regulations 2-2018, the law’s implementing rules and regulations on petroleum products.
“The tripwire is USD80 per barrel, based on Dubai crude as reflected in MOPS,” Recto said.

“This is the circuit breaker in TRAIN. When oil touches this price, the excise tax increase on gas is suspended,” he added.
He also rejected the argument by officials from the Department of Finance that for this to take effect the agency must first issue a separate IRR.
Recto stressed that the language of the law was clear and it must be self-executory and automatically implemented.
“The halt in the collection of petrol taxes should be as fast as our collection under TRAIN when oil prices soar,” he said.
On Wednesday, Sen. Paolo Benigno “Bam” Aquino urged his colleagues in Congress to amend the TRAIN law to put in place more safeguards in the statute amid concerns over climbing inflation.
Aquino said that the suggestion from the Palace that the excise tax on fuel could be suspended in 2019 was “too little, too late.”
The Liberal Party senator is urging the passage of an inflation-based suspension of the TRAIN Law’s excise tax provision.

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Under his proposal, the collection of additional petrol taxes would be suspended if inflation for the past three months exceeded official estimates.
Recto cited Section 5 of RR 2-2018 which provided for the suspension of excise taxes on fuel if the average Dubai crude oil on the Mean of Platts Singapore for the past three months reached or exceeded $80 per barrel.
Sen. Grace Poe meanwhile wants to provide another layer of social protection for poor families amid the spike in the prices of goods and services that may have been partly caused by the TRAIN Law amid reports that the government has failed to provide cash transfers to many of its 10 million household target.
“We should think of ways to lighten the burden of our countrymen especially in the province due to the increase in the price of electricity, water and goods and the possible fare hike,” she said in Filipino.
Poe’s Senate Committee on Public Services is scheduled to conduct a meeting in Iloilo City on Friday to ascertain the possible “domino effect” of the TRAIN Law.
Recto said that compounding the problem of inflation was the depreciation of the value of the peso and the soaring prices of petrol.
Just this week, the peso fell to its lowest value in 11 years, closing at 52.465 to a dollar.
The TRAIN Law kicked into effect on Jan. 1, 2018 and was sold by the government as an important revenue source for its ambitious infrastructure and social services programs.
It has been blamed for the increase in inflation in the past months, with inflation rate for April settling at 4.5 percent, the highest in five years. This pushed the year-to-date inflation to 4.1 percent which was already above the 2 to 4 percent target of the Banko Sentral ng Pilipinas.

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VAT q&a: 'Do I have to use the FTA's approved software provider to make my tax return?

I’ve heard people talking about Federal Tax Authority accredited accounting software and can see on the FTA website that there are only four software providers listed, with most of the well-known names missing. Is it mandatory to use one of these accredited providers? I’ve been happily using an unaccredited accounting package since January and don’t want to change it unnecessarily. LA, Fujairah

The Decree Law and Executive Regulations do not prescribe that a business must use accredited accounting software to record their financial transactions and you have rightly noticed that many of the best known and trusted financial software providers are missing from the list. As far as I am aware there is also no mandatory requirement for software providers to become FTA accredited.

One of the key requirements is that it can produce a VAT return file that integrates with the FTA’s e-Tax portal and automatically populates the tax return. This means you do not need to manually input numbers from your VAT reports into the online return, and may reduce the risk of errors in the submitted return.

However, what is most important is that your accounting software of choice meets your business needs and fully complies with the VAT legislation in terms of producing compliant tax invoices and credit notes. Further, that it captures key data to facilitate submission of your quarterly returns and is also capable of being audited in detail by the FTA should they wish. The FTA require that VAT records are retained for a minimum of five years so the system should be effectively backed up and archived for the required period. I suggest you read the sections in the Legislation and Executive Regulations covering tax invoices and credit notes , and record keeping. These start at articles 65 and 78 of the Decree Law, and articles 59 and 71 of the Executive Regulations. As long as your chosen accounting system allows you to fully adhere to the FTA requirements there is no issue with it not being accredited

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UAE Scraps Tax on Diamonds 

 

The United Arab Emirates (UAE) has exempted trading in gold, diamonds and precious metals from value-added tax (VAT), according to government news outlets.

The government is implementing the change by introducing a “VAT reverse-charge” mechanism, the Emirates News Agency (WAM) reported Tuesday. That process transfers the tax obligation from an overseas supplier to the recipient. The recipient makes the declaration of both the purchase and the sale, meaning that the two entries “cancel” each other out, resulting in no tax payment.

“#UAE Cabinet approves a decision to exempt…gold-and-diamond investors and importers from… value-added tax,” the Dubai Media Office said in a Twitter post the same day.

Though VAT was introduced in the UAE only recently, authorities made the decision to exempt gold and diamonds to improve the ease of doing business in the country, according to WAM. Trade has declined by up to 60% following the implementation of the tax in January, Arabian Business cited retailers as saying.

The Dubai Multi Commodities Centre, which had opposed the VAT introduction, declined to comment.  

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The UAE's new residency and ownership rules - a watershed moment

New UAE rules will have far-reaching effects across the country's economy

The UAE’s surprise announcement that it will allow full foreign ownership in companies and grant long-term visas to select investors and professionals is set to have far reaching effects, ranging from the encouragement of foreign investment and helping the UAE become a magnet for highly skilled professionals to providing a positive boost to the country’s real estate sector, according to a number of experts.

The new rules will allow for residency visas of up to 10 years for specialists in scientific, medical, research and technical fields, and are a long awaited departure from the previous regulations that called for the establishment of businesses to have a local partner owning 51 percent of the venture. Additionally, the new rules provide for five-year visas for students and 10 year-visas for “exceptional” students.

Attracting FDI

The UAE’s decision to allow full foreign ownership comes at a time when the country is in the midst of an ambitious diversification effort as it moves to become even less dependent on oil. Among the main benefits of the change, many are claiming, is that it will boost growth by attracting more foreign direct investment, primarily into non-oil sectors, as well as encouraging foreigners to set up more businesses in the country.

“Many people held back from investing here as they felt there was no long-term tenure and they were dependent on a short-term visa,” Chavan Bhogaita, the head of market insights and strategy at First Abu Dhabi Bank told Bloomberg. “Now, with a 10-year visa and 100 percent foreign ownership, investors and people looking to set up and grow businesses here will have more confidence.” 

A boon for the real estate sector

Real estate is one of the sectors that stands to benefit most from this move, as the changes should encourage the UAE’s expatriate population to remain in the country for longer periods. The announcement was immediately hailed by real estate professionals and construction executives as a genuine turning point for the industry.

“Longevity of residence for expats is going to be a game changer as the population’s historically transient nature gives way to semi-permanency,” Faisal Durrani, partner and head of research at Cluttons, told Arabian Business. “The move will clearly go some way to stemming the loss of human talent from the UAE and will also contribute to more stable and sustainable demand for residential and commercial property from domestic buyers. This privileged group of expats [who benefit from the changes to the rules] will undoubtedly feel a greater sense of belonging, which will facilitate the emergence of stronger and deeper communities.”

Durrani’s comment was echoed by Core Savills partner Edward Macura, who said the announcement would be a boost to both supply and demand in the property sector “by way of attracting and retaining long-term investors and also skills professionals.”

“Direct and indirect effects are expected to come into play, such as population stabilisation and growth, renewed confidence in the property market and an increase in expat end-user purchasers, who are likely to invest in their own homes within the UAE instead of repatriation to their home markets.”

“Extremely encouraging” for start-ups and entrepreneurs

The new rules are expected to help start-ups and entrepreneurs by cutting down on costs. According to Aramex founder and Wamda Capital managing partner Fadi Ghandour, the new ownership rules are “truly a game-changer any way you look at it. 

“It will make life much easier for entrepreneurs and businesses for entrepreneurs and businesses in general,” he added. “It will attract new investments, new talent, new capital, certainly new start-ups.”

Fares Ghandour, a partner at Wamda Capital, said that the longer residencies and ownership rules created by the changes to the law will also encourage more people to begin operating as freelancers and reduce their dependence on free zones.

“Beyond employment, the residency will give more cushioning for freelancers and researchers to reside in the country without the need to depend on employment,” he noted. “I think the local ownership laws are more interesting than the residency permit laws actually, because [they] will reduce dependence on free zones and free zone real-estate which is inflated relative to the onshore market.”

Free zones here to stay

Despite the fact that the new ownership laws will mean that businesses hoping to set up shop in the UAE will no longer need to be located in free zones to avoid having to have a local partner, that isn’t to say that the importance of free zones will diminish. In fact, according to Virtuzone chairman Neil Petch, free zones also stand to benefit, as do UAE nationals.

“The new mandate will remove the worry of personality liability from PSCs [professional services companies] whilst at the same time not removing the revenue stream for local agents which would have caused resistance to this highly positive move,” he said. “Indeed, Emiratis exposed to liabilities from defaulting expats would no longer be a concern. In short, it’s a win-win, boosting confidence and thus the economy.”

Petch also remarked that while some companies may “evolve” onto onshore companies in the wake of the rule changes, he doesn’t believe that there will be a decrease in the number of companies seeking to set up shop in free zones. “The changes with respect to mainland companies will serve more as an obvious means to evolve for smaller companies now growing into larger ones than as a competitor to the start-ups being incubated in the UAE’s low tax environment,” he says.

“For every company that evolves from free zone to onshore, expect five or ten to come from Europe, Asia or the States as they realise that the UAE’s low tax environment represents a far better choice than previous favourites Cyprus, Malta, Singapore, Hong Kong and Monaco.” 

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