الأحد، 31 مارس 2019

Fresh round of taxes may hurt UAE retail market. First round in 2017 hurt sales, analysts say as UAE studies options for further taxation

The Ministry of Finance has not yet concluded its study and has not disclosed what items may be taxed afresh.


Dubai: As the UAE examines options to implement the excise tax on a broader range of products, analysts say the retail market may not be ready for yet another round of taxation.
The country’s Ministry of Finance confirmed on Sunday that they are conducting a joint study with Saudi Arabia to discuss with the Kingdom’s government the “addition of new goods to the selective tax list”. They did not elaborate on when this may be rolled out.
This follows the implementation of an excise tax of 100 per cent on tobacco and energy drinks, and a 50 per cent tax on carbonated drinks, which went in to effect in October 2017.
Sales of energy drinks have since plunged. Research from Euromonitor International suggests that energy drink companies in the UAE have seen sales drop by as much as 65 per cent in the 15 months after the tax was introduced.
Similarly, Colin Beaton, a retail expert and managing director of consultancy Limelight, said that any additional taxes now may hurt retailers, especially as growth in consumer spending slows down.
“I think it’s widely acknowledged that the retail market is soft in the UAE right now, and probably retail distributors would not look forward to additional taxes on products to make them more expensive because that would have an impact on sales,” he said.
Beaton pointed that in many western countries, sin taxes — as the excise tax has been dubbed — are most commonly implemented on alcohol, cigarettes, and petrol.
More broadly, governments tend to tax items for which an increase in prices would not cause a significant difference in local currency. In that case, and in line with the UAE’s target to reduce consumption of unhealthy items; fast food, crisps, and sweets could be the next logical target for excise tax, Beaton said.
The Ministry of Finance has not yet concluded its study and has not disclosed what items may be taxed afresh.
In neighbouring Oman where the government will also introduce a ‘sin tax’ in June 2019, the tax will cover the same categories as the UAE, but with the addition of alcohol and pork.
Meanwhile, in the United Kingdom where the government is trying to change consumer behaviour through taxes, sugary soft drinks with a sugar content above five grams per 100 millilitres are levied under the sin tax. The British government said the tax has led more than half the manufacturers to cut the amount of sugar in their drinks.
Financial news website, Argaam, reported earlier that the Ministry of Finance was considering sending a technical team to other Gulf countries to study the possibility to expanding the excise tax to cover other products.
Argaam then reported in February, based on a report by Al Khaleej newspaper, that Younis Al Khoury, the Ministry’s undersecretary, said a team has indeed gone to Saudi Arabia to discuss the matter.

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الخميس، 28 مارس 2019

Saudi Arabia’s new rules set to raise Islamic tax for some banks Bu most of the kingdom’s major banks will end up paying the lower limit

Riyadh: Saudi Arabia set out new rules for the calculation of an Islamic tax on banks that’ll result in them paying between 10 per cent to 20 per cent of net profit.
The General Authority of Zakat & Tax set limits for the taxable asset base of between four times and eight times net profit, according to a statement on its website.
That’s equivalent to a corridor of between 10 per cent and 20 per cent of net income, Bloomberg Intelligence analyst Edmond Christou said.
Most of the kingdom’s major banks will end up paying the lower limit, he wrote in a note.
Saudi Arabia was in talks with local banks to increase the tax rate to as high as 20 per cent of net income, Bloomberg News reported, citing people with knowledge of the matter.
The tax authority denied it had plans to raise the levy. The current rate is 10 per cent after deducting returns on government bonds.
Major banks in Saudi Arabia reached settlements worth a combined 16.7 billion riyals ($4.5 billion) with the tax authority in December, ending a dispute over accounts stretching back as far as 2002 in some cases.

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السبت، 23 مارس 2019

FTA bans sale of unmarked tobacco products from August 1, 2019 Digital marks will be placed on the packaging of tobacco products

DUBAI. The Federal Tax Authority, FTA, has announced that the selling or distribution of any unmarked tobacco products will be prohibited across all local markets as of August 1, 2019.
In a press statement issued on Monday, the Authority said that it held a series of training workshops to introduce inspectors across the UAE’s economic development departments to the objectives and implementation methods to apply as per the ‘Marking Tobacco and Tobacco Products Scheme’, which went into effect in January 2019.

According to the FTA statement, the workshops seek to ensure preparedness before carrying out inspection campaigns to verify that the Marking Tobacco and Tobacco Products Scheme is being implemented.
The Authority noted that the sessions are part of the FTA’s effort to raise awareness of the tax system among relevant authorities and entities to combat tax evasion and better monitor markets.


FTA Director-General, Khalid Ali Al Bustani, underlined the importance of these courses to the successful implementation of the scheme, which facilitates inspections and strengthens market control procedures to prevent the sale of non-tax-compliant products.
“Digital marks will be placed on the packaging of tobacco products and registered in the FTA database; the marks contain data that can be read using a sophisticated device,” he explained, adding that the new training workshops are part of the Authority’s commitment to maintaining constant communication with all relevant government and private-sector entities to keep them in the loop with developments surrounding tax procedures and gauge their opinions and suggestions to ensure the UAE tax system is implemented easily and seamlessly.
During the workshops, FTA representatives shed light on the legislation and resolutions pertaining to the scheme, including the Cabinet Decision No. 42 of 2018 on Marking Tobacco and Tobacco Products, which outlines the mechanism to place the Digital Mark indicating that Excise Tax has been paid, whereby tobacco manufacturers are required to place the Marks on the products within the production facility immediately after packaging, if produced in the UAE, or before importing them if they are produced abroad. The FTA has determined a specific placement and method to apply the Digital Marks to each product.

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الخميس، 14 مارس 2019

Oman to enforce new ‘sin tax’ in June

Ashtray full of cigarette butts. For illustrative purposes only


Dubai: Cigarettes, alcohol, energy and soft drinks are going to be more expensive from June, when a new national tax is applied in Oman.
The ‘selective tax’ — or sin tax, will be enforced in 90-days time after His Majesty Sultan Qaboos bin Said issued a Royal Decree that approves the new levy.
The Royal Decree stated: “By the first Royal Decree, His Majesty Sultan Qaboos bin Said approves the Selective Tax Law. The Tax Law will come into effect after 90 days.”
“The Selective Goods Tax Law comes as a result of the GCC Standard Agreement on Selective Tax, issued in 2016 by Saudi Arabia, the United Arab Emirates, the Kingdom of Bahrain and the State of Qatar. This tax shall be levied on goods that have damage to public health or the environment in varying proportions,” a statement from Government Communication Center said on Wednesday.

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الأحد، 10 مارس 2019

Contractors want faster processing on VAT refunds That and reduced payment cycles are the only way to ‘survive’, says contractor




Dubai

For UAE’s contractors, when they get VAT refunds is getting to be as important as the amounts involved.
“As a main contractor, I will have to pay all the VAT-related costs to the subcontractor or supplier,” said K.A. Siddiqui, Partner at Dubai Walls Construction. “It automatically becomes part of the LPO (local purchase order). There can’t be any delay on our part because any delay will invite penalties and becomes a criminal offence.
“The second I invoice something, I have to pay up … whether the client had paid me or not.”
Which is why contractors are now insisting on clients and project promoters to, in turn, shorten the payment cycles in releasing funds due to them.
“Where possible, we insist on a monthly settlement cycle with the client — if for any reason a project gets stuck, it will be the contractor who gets exposed in the market,” Siddiqui added. “And if for any reason projects and payments are stuck, we can take corrective measures when in a monthly cycle.
“Because if a cheque bounces, it will be the contractor who will feel the pain the most. This is why the construction sector needs to see faster processing of VAT refunds.
“Until then, settling within 30 days is the only way to survive.”

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الخميس، 7 مارس 2019

FNC member presses for VAT waiver for low-income groups. 3,670 VAT-related violations reported in 2018, says minister

Na’ama Al Sharhan


Abu Dhabi: A member of the Federal National Council put a motion to the Ministry of Economy to waive the value added tax (VAT) for low-income people and instantly impose penalties on violators of the VAT laws.
Na’ama Al Sharhan, a member from Ras Al Khaimah, put a question to Sultan Bin Saeed Al Mansouri, Minister of Economy, concerning the action taken against businesses, which use the value added tax to manipulate prices of goods and services.
Al Sharhan said although the introduction of value added tax in the UAE has diversified the government revenues while limiting inflationary impact to the minimum, the impact on the low-income people is tangible.
“So I propose waiving the VAT tax for the low-income people whose monthly income is up to Dh10,000 and those who receive social assistance,” Al Sharhan told the House.
The member said instant action should be taken against offenders of the law as part of the Ministry of Economy’s efforts to follow up on the implementation of the value added tax and to fight unjustifiably increased prices.
The minister admitted there have been illegal practices on the part of certain businesses, but said action was taken against these businesses.
“Some 3,670 violations were issued last year after conducting more than 13,846 inspection trips to markets across the emirates against businesses which failed to comply with the VAT laws,” Al Mansouri told the House.
Penalties range from Dh500 and not more than 300 per cent of the value of the tax of the transaction with the violation case.
All companies are required to strictly comply with all VAT rules and must keep track of required records as mandated by the law. Failure to do so will subject the violators to pay the unwanted penalties and fees.
Failure by the taxable business to display prices inclusive of tax carries a fine of Dh15,000, while failure to issue a tax invoice or alternative document when making any supply carries a fine of Dh5,000 for each missing tax invoice or alternative document.
Failure by the taxable person to provide the authority with price lists for the excise goods they produce, import or sell carries Dh50,000 fine for the first time, and Dh20,000 in case of repetition.
Al Mansouri said the inflationary impact following VAT’s introduction was modest (2.6 percentage points on a month/month basis between December 2017 and December 2018). In part, this was due to the impact of exemptions and zero-rated items. In addition, the ongoing deflationary trends in international markets also helped to contain inflation.
The minister said the ministry receives complaints from the customers from 8am to 11pm on a daily basis.
“At the beginning of this year, the ministry also launched an initiative to reduce or keep prices of 5,000 goods unchanged,” Al Mansouri said.
Of the six Gulf Cooperation Council states, only Saudi Arabia has introduced the tax along with the UAE from January 1, 2017.

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السبت، 2 مارس 2019

UAE Federal Tax Authority issues guide on foreign business refunds 4 conditions that would allow foreign businesses to recover VAT



Dubai: The Federal Tax Authority (FTA) has announced it will allow foreign companies to claim back Value Added Tax (VAT) incurred while doing business in the UAE, in a move that experts say will attract greater investment into the country.
FTA outlined four conditions when allowing foreign businesses to recover VAT)incurred in the UAE in a new guide on “VAT Refunds for Business Visitors”, on the FTA’s official website.

Conditions

To be eligible for the VAT refund, the first condition is that foreign businesses must not have a place of establishment or fixed establishment in the UAE or in any of the VAT-Implementing GCC States that fully comply with the provisions of the Common VAT Agreement of the Cooperation Council for the Arab States of the Gulf.
Second, such foreign businesses must not be a Taxable Person in the UAE.
Third, they must also be registered as an establishment with a competent authority in the jurisdiction in which they are established.
And finally, the fourth condition is that they must be from a country that implements VAT and that equally provides VAT refunds to UAE businesses in similar circumstances.
FTA Director General, Khalid Ali Al Bustani, described the refund procedure as clear and transparent, noting that it supporting economic activities in the areas in which the visiting business of the country participates, which is reflected positively on many sectors including tourism, trade, exhibitions, conferences, etc.

Mechanism

HE stated that the mechanism is in accordance with the Federal Decree-Law No. 8 of 2017 on Value Added Tax and the terms and conditions set in its Executive Regulations, which call for refunding taxes paid on supplies or imports made by a foreign entity not residing in the UAE or any of the Implementing States, subject to meeting certain conditions.
HE further explained that reciprocity is a key condition for the procedure, whereby the Authority will refund the VAT to businesses resident in countries that refund VAT for UAE businesses visiting their territories.
The Federal Tax Authority clarified that the period of each refund claim shall be a calendar year, noting that for claims in respect of the 2018 calendar year, refund applications can be made as of April 1, 2019.
However, for subsequent calendar years, the opening date for accepting refund applications will be March 1st of the following year; this means that for the period from January 1 to December 31, 2019, applications will be accepted as of March 1, 2020.
The FTA went on to stress that the minimum claim amount of each VAT refund application submitted by business visitors is Dh2,000, which may consist of a single purchase or multiple purchases.
The Authority urged potential applicants to hold on to the original tax invoices on the purchases for which they would like to reclaim VAT, as they will be required to be submitted along with the refund applications.
Businesses residing in any GCC State that is not considered to be an Implementing State may still submit a VAT refund application to reclaim VAT incurred in the UAE under this scheme, the FTA assured, outlining only 3 situations where VAT cannot be reclaimed.
The first situation is if the Foreign Business in question makes supplies in the UAE, unless the recipient is obliged to account for VAT under the Reverse Charge Mechanism.
Secondly, a VAT refund cannot be processed if the Input Tax in respect of any goods or services is “blocked” from recovery and, therefore, not recoverable by a Taxable Person in the UAE.
The third and final situation where a refund is not possible is if the Foreign Business is a non-resident tour operator.

Reaction

“We believe it is a great initiative by the UAE authorities and will provide incentive to foreign businesses visiting UAE to attend and participate in the exhibitions, conferences, trade fairs and business meetings,” said Anju Krishan, a partner at Haynes Path Management Consultancy.
Currently, it is unclear which countries will be eligible for the scheme. The FTA has not disclosed which countries intend to reciprocate the programme.
On this, Krishan said she hoped for more clarity.
“We believe further clarity could be provided by issuing a list of countries that are reciprocating VAT refunds to UAE businesses,” she said.
Krishan said that it could be an “administrative hassle to maintain the original tax invoices for the entire year before the claim can be made for refund by the foreign business visitors.”

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