UAE cabinet decision on fee abolition to have positive impact on economy More foreign direct investments expected to flow into UAE

Al Manara Centre in Al Safa.

Abu Dhabi: The latest decision by the UAE cabinet to abolish fees for more than 1,500 government services will have a positive impact on the economy.

The UAE cabinet on Tuesday decided to amend and waive fees for more than 1,500 government services provided by the Ministry of Interior, Ministry of Economy, and the Ministry of Human Resources and Emiratisation, according to a statement on WAM.

“The UAE government is well aware of the challenges that are facing the country, especially the private sector, and is working hard to enhance the business environment and create new opportunities,” said Tariq Qaqish, managing director of asset management at Menacorp Finance.

UAE businesses welcome [the] cabinet decision of the government to reduce fees for a number of federal services. Initiatives of this nature along with other measures like provision of long-term visas and permanent residence will have a positive impact on UAE as an investment destination.

- Padmanabha Acharya, president of Indian Business and Professional Group

“We do believe there will be a positive impact on the economy in the long term, bringing in more foreign direct investments that are sustainable [and which] will definitely be an added value.”

A top business group also welcomed the decision.

“UAE businesses welcome [the] cabinet decision of the government to reduce fees for a number of federal services. Initiatives of this nature along with other measures like provision of long-term visas and permanent residence will have a positive impact on UAE as an investment destination,” said Padmanabha Acharya, president of Indian Business and Professional Group.

“We await further details on the amount of actual reductions and waivers so that the benefits can be fully quantified.”

The comments come as the UAE government takes a number of measures to boost the economy. Apart from the reduction and cancellation of fees, the UAE government also introduced an investment law last year to boost the economy.

A top official from the Ministry of Economy recently told Gulf News that Foreign Direct Investment (FDI) inflows into the UAE are expected to jump to $15 billion (Dh55.1 billion) per annum by 2021 due to the new investment law.

The UAE government is well aware of the challenges that are facing the country, especially the private sector, and is working hard to enhance the business environment and create new opportunities.

- Tariq Qaqish, managing director of asset management at Menacorp Finance

“The investment law has already come in 2018 and a FDI committee has been formed. Very soon within few months, the sectors which have been opened for 100 per cent foreign investment will be available,” said Mohammad Al Shehhi, undersecretary of ministry of economy.

The World Bank, on the other hand, predicts that the UAE’s economy will grow at a rate of 2.6 per cent in 2019, jumping to 3 per cent in 2020 due to investments in infrastructure projects ahead of Expo 2020 Dubai as well as the government’s stimulus plans. By 2021, the economy is forecast to reach 3.2 per cent.

The Abu Dhabi Executive Council also approved a resolution to exempt all new economic licences issued in the emirate from all local fees for two years. A decision reducing the fees of 98 basic services charged by the Abu Dhabi Municipalities on the private sector was also taken to encourage investments in the emirate.

The two resolutions are part of the Abu Dhabi Government Accelerators Programme, also known as ‘Ghadan 21’, which aims to enhance the competitiveness of Abu Dhabi in the business, investment, society, knowledge innovation and lifestyle sectors. The government is spending Dh50 billion under the Ghadan 21 programme.

The Department of Tourism in Abu Dhabi also reduced tourism fees from 6 per cent to 3.5 per cent and municipal fees from 4 per cent to 2 per cent.

The municipality hotel room fee per night has also been brought down from Dh15 to Dh10. The fee will be waived for long-term guests staying for more than one month.

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FTA implements penalties for tobacco tax violations. Penalties have been set for nine types of violations

Tobacco Products

ABU DHABI: The Federal Tax Authority on Saturday said it will begin implementing penalties for violations of the “Marking Tobacco and Tobacco Products Scheme,” which calls for digital tax stamps to be applied to the packaging of tobacco goods before supplying them to local markets.

Authority said penalties are meant to curb attempts at commercial fraud, and protect consumers from contraband, low-quality products that do not conform with standards and harm health and the environment. The FTA said the mechanisms have been set to implement the new legislation, which outlines the commitments of both the taxpayers and the Authority, and sets mechanisms to tighten controls in UAE markets and ensure governance and transparency.

Penalties have been set for nine types of violations. A person who possesses or handles Designated Excise Goods that do not carry a digital tax stamp incurs a penalty of Dh50,000 and 50 per cent of the excise tax due. If a person knowingly allows his premises to be used for the sale of unstamped goods, that person shall incur a penalty of Dh25,000 for the first violation and Dh50,000 in case of repetition.

If a person alters or prints over Digital Tax Stamps, they are subject to a penalty of Dh50,000 and 50 per cent of the Excise Tax due.

If a person fails to report the movement of designated excise goods, they will incur a penalty of Dh20,000 for each time the violation.

When a person fails to comply with the requirements to securely store the Digital Tax Stamps as determined by the Authority, a fine of Dh50,000 per incident will be applicable.

In case a person fails to comply with time limits for returning unused stamps to the Authority, the penalty is Dh50,000 per incident, whereas failure to affix Digital Tax Stamps in the manner and location specified by the authority results in an administrative penalty of Dh25,000 for the first violation and Dh50,000 in case of repetition.

If a person conducts unauthorized trading, swapping, selling, or otherwise supplying of stamps, they incur fines of Dh25,000 for the first violation and Dh50,000 in case of repetition, in addition to 50 per cent of the amount collected as tax. If a person re-uses stamps that had previously been used, they are subject to a penalty of Dh50,000 and 50 per cent of the Excise Tax due.

As of May 1, 2019, the import of any type of cigarettes into the UAE not bearing Digital Tax Stamps has been prohibited; meanwhile, the sale across UAE markets, or importation or production of all types of cigarettes not bearing Marks will be prohibited as of August 2019. This is part of the timeline for the “Marking Tobacco and Tobacco Products Scheme”, which went into effect on January 1, 2019, and allows for electronically tracking cigarette packs from production and until they reach the end consumers, to ensure full compliance with Excise Tax obligations.

The Federal Tax Authority asserted that the scheme will be gradually expanded to cover all tobacco products.

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Egypt’s economy seen growing 5.5% in year to end of June Non-oil private-sector activity contracted for the seventh consecutive month in March

CAIRO: Egypt’s economy is expected to grow 5.5 per cent in the fiscal year that ends in June, according to economists polled by Reuters, a forecast slightly higher than the one offered by a survey three months ago but lower than the government’s target.

The economy, with the exception of the oil industry, has struggled to attract foreign investors since the 2011 uprising that unseated Hosni Mubarak.

Egypt’s non-oil private-sector activity contracted for the seventh consecutive month in March, according to the Emirates NBD Egypt Purchasing Managers’ Index (PMI). Private-sector activity has expanded in only five months over the last three years.

“Medium-term economic growth is underpinned by improving fiscal finances, reforms to strengthen the business environment and rising investment in key sectors,” said Nadene Johnson, an economist at NKC African Economics. “But structural constraints are keeping the growth forecast slightly subdued.” On Tuesday, Egypt’s election commission said nearly 90 per cent of voters in a referendum had approved constitutional changes, a move that could allow President Abdul Fattah Al Sissi to stay in power until 2030.

Al Sissi’s supporters say he has stabilized Egypt and needs more time to reform and develop the economy.

Aiming to shore up investor confidence, Egypt has been implementing economic reforms as part of a three-year, $12 billion agreement with the International Monetary Fund in November 2016. The reforms included a value-added tax, cuts to energy subsidies and a steep currency devaluation.

The median forecast from 20 economists polled April 8-22, before the referendum result, put growth at 5.5 per cent in the current 2018/2019 fiscal year, lower than the government’s target. Three months ago, the median of 14 economists predicted 5.3 per cent GDP growth.

Medians projected 5.6 per cent GDP growth in the fiscal year ending in June 2020 and 5.7 per cent in the 2020-2021 fiscal year.

Egypt is targeting growth at 5.6 per cent in the 2018-2019 fiscal year, Finance Minister Mohammad Maait said in February, compared with its previous target of 5.8 per cent. It targets 6.1 per cent growth in 2019-2020.

Economic growth will be “fuelled mostly by government spending on national projects and infrastructure,” said Yara Elkahky, an economist at Naeem Brokerage. “Household consumption growth, however, is expected to remain muted as purchasing power still remains tight.” The new consensus put Egypt’s urban consumer inflation at 14.2 per cent, down from the 15.5 per cent projected three months ago.

Annual urban consumer price inflation slowed to 14.2 per cent in March from 14.4 per cent in February. It is expected to decelerate to 12.0 per cent in the 2019-2020 fiscal year and 9.6 per cent in the 2020-2021 fiscal year.

Core inflation, which strips out volatile items such as food, fell to 8.9 per cent in March from 9.2 per cent in February.

Millions of Egyptians live below the poverty line and struggle to meet basic needs. They have faced rising costs since the pound was floated.

Most remaining fuel subsidies are due to be lifted by mid-June.

Elkahky expects inflation “to continue declining amid normalised supply levels and seasonality impacts,” adding that inflation could drop further as the Egyptian pound appreciates against the dollar.

“Risks to fiscal sustainability are still substantial,” said Maya Senussi, senior economist for the Middle East at Oxford Economics. She added that “could weigh on the general thrust of the (government’s economic reform) policy.”

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FTA Marks 500 days of VAT The Authority processed 1.5 million digital transactions to refund taxes to tourists

Abu Dhabi: The UAE marked 500 days of implementation of value added tax (VAT) in the country with very high rate of tax compliance.

“The rates of compliance with tax laws and procedures have increased exponentially among all taxable businesses,” said Khalid Ali Al Bustani, Director General of the Federal Tax Authority (FTA).

VAT went into effect on January 1, 2018, at a rate of 5 per cent on the supply of most goods and services.

“Compliance was made possible by the seamless, flexible, and clear procedures the FTA has rolled out through electronic, fully paperless systems that are among the most advanced of their kind in the world, underpinned by a sophisticated legislative environment that meets the highest standards in the field,” said Bustani.

The Authority said it has processed 1.46 million digital transactions to refund taxes to tourists. The system has been lauded by tourists for its fast, easy, and clear procedures, where nearly 8,110 transactions were processed on a daily basis.

The VAT Recovery on the Building of New Residences by UAE Nationals programme has benefitted a large number of UAE nationals. “A significant number of UAE citizens have benefited from the VAT Recovery on the Building of New Residences by UAE Nationals programme, with its simplified electronic procedures,” said Bustani.

The system has received more than 800 applications, 375 of which were approved allowing applicants to recover Dh4.74 million worth of taxes, incurred on the construction of their homes. This aligns with the vision of the UAE’s wise leadership to develop a modern housing system for citizens and provide high living standards for them.”

The number of users who registered in the system for VAT purposes now exceeds 300,000 companies, individuals, and tax groups, asserting the FTA’s commitment to maintaining continuous communication with all parties concerned with the tax system, answering as many as 405,000 phone queries and 105,000 emails, bringing the total number of enquiries processed in 500 days to more than half a million. Meanwhile, the user base is expanding rapidly, which compelled the Authority to authorise 123 clearing and forwarding companies, increase the number of accredited tax agents to 357, and commission 28 accredited tax accounting software vendors.

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Economies cannot afford to wish away Taxes. Europe’s carbon tax call will prove unpopular and curb spending, but it needs to be done

Before stepping down as German Chancellor, Angela Merkel plans to impose a tax on carbon pollution, which in turn has re-ignited a debate, especially in the developed countries. This focuses on the effectiveness of such a tax and its ability to tackle complex issues such as funding state budgets, reducing deficits, and financing development projects.

Although economists have mixed views, they agree that a tax would be a double-edged sword and must be only used to achieve desired goals without damaging other economic aspects that are as important, if not more, than taxes.

The German disagreement on this issue, however, is useful and logical. The declared reason that promoted Merkel to propose a carbon tax is to reduce greenhouse emissions, particularly in areas of transport and construction.

However, this kind of tax, as some economies suggest, will stunt growth rates and affect the spending capacities of the middle-class, not to mention the low-income segments. According to Bloomberg, Merkel said that carbon taxes should not increase the burden on people as much as possible.

Currently, Merkel’s party and others within the ruling coalition are in disagreement on this issue, particularly as the Germans are already paying €25 billion (Dh102.77 billion) annually in environmental-friendly energy allocations.

Taxes are a complicated issue, especially in light of the increase in public spending in many countries and which would lead to reduced revenues. Decision-makers are confronting a difficult equation.

On the one hand, they have to finance budgets and reduce deficits, while at the same time maintain the growth rates and raise living standards of its people, who undoubtedly will be affected by the new taxes.

The first part of the equation is simple. New taxes require no more than a legislation or a decision by the authorities, and yet this will have an impact on growth rates. All sectors will be affected and impact demand for goods, services, job opportunities, and spending on leisure and durable goods.

Taxes will affect the competitiveness of the country because of the high cost of investment and living standards, and this is what Europe will feel the most, even as it tightens regulations to fight what it calls tax havens.

These are countries with very low “effective” rates of taxation and fees for foreign investors. Or they don’t levy taxes at all so as to be a magnet for investments. This measure has in fact helped revive those countries whose people enjoy high income levels despite the lack of any natural resources.

However, such a complex and longstanding topic as taxes, which has been addressed by classical economists, is gaining new meaning.

This is due to societies’ transition to higher forms of growth. Taxation requires in-depth studies to identify its forms of usage and time of implementation, which would help economies gradually absorb and adapt, and thus reduce the negative aspects.

Taxation has long been a basic component and no advanced economy can be developed without it. But dealing with it must be done with caution and gradual to avoid the negative consequences as much as possible.

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VAT refunds for pavilions at Expo 2020 Dubai

Only official participants - countries and intergovernmental organisations which have received and accepted official invitation from the UAE - in a non-commercial capacity as an exhibitor will benefit from this VAT refund scheme.

Maximum 20% of pavilion space allowed for commercial activity to claim tax return.

Countries and inter-government agencies will be able to claim value-added tax (VAT) refund

for the costs incurred for the developments of pavilions at Expo 2020 Dubai.

According to a Cabinet decision posted on the Federal Tax Authority's (FTA) website, the commercial space should be less than 20 per cent of the space to be entitled for the refund. The Expo 2020 Bureau will largely administer this process.

Anurag Chaturvedi, managing partner at Chartered House, said the official participants of Expo 2020 may claim a refund where it is incurred in direct connection with the construction, installation, alteration, decoration and dismantlement of their exhibition space.

The application for refunds will be submitted to the bureau, which will perform an initial audit and then request the FTA to refund the amount. The official participant would have to obtain a certificate of refund entitlement from the Expo 2020 Bureau. "A certificate of refund entitlement shall not be granted to any official participant in respect of imports and supplies covered more than 20 per cent of the exhibition space or presentation is used, or intended to be used, for commercial or non-official purposes," Chaturvedi said.

The UAE, as part of the GCC framework, levied 5 per cent VAT on a host of goods and services from January 1, 2018. It expects to generate Dh12 billion revenues in 2018 and Dh20 billion in 2019. VAT refunds will reduce the cost of setting up pavilions and other related charges for the participating countries of Expo 2020, which will run for six months from October 20, 2020, onwards.

Jitendra Gianchandani, chairman and managing partner at Jitendra Consulting Group, said only official participants - countries and intergovernmental organisations that have received and accepted official invitation from the UAE - in a non-commercial capacity as an exhibitor will benefit from this VAT refund scheme.

"This means official participants in a commercial capacity will not be entitled for the VAT refund. Apart from that official participants will not be entitle for the refund if more than 20 per cent of the exhibition space is used for the commercial purpose," he added.

Gianchandani noted that the official participant may also claim VAT refund paid on the import of goods for personal use by the official participant's section commissioner-general, section staff and beneficiaries.

Per the notification, Gianchandani further explained that where a refund has been granted to the official participant in respect of any import of goods, these goods cannot be sold for a consideration or transferred free of charge without prior consent in accordance with the procedures agreed upon between the FTA and the Expo 2020, and without payment of the tax.

Nimish Goel, partner at WTS Dhruva Consultants, said the decision will benefit participants to claim VAT refund, especially where it is not registered for UAE VAT.

"This will encourage greater participation of companies in Expo 2020. By way of granting refund of VAT, the government is effectively making all purchases and imports of goods and services tax-free. A refund shall be available for all purchases used in construction and building of pavilions at the Expo," said Goel.

"This is a very positive step that goes to show that UAE government is highly committed to have increased participation of the companies and governments leading to a significant increase in footfall and increased investment in the country."

Girish Chand, director at MCA Management Consultants, said this Cabinet decision will benefit pavilions that are primarily showcasing their country capabilities and products and do not have non-official/commercial element in excess of 20 per cent of the leased-out space.

"If they're registered, they will be entitled to input tax credit. However, if they are not registered, this will enable them to claim refund on the goods and services cost incurred on constructing the pavilions and the maintenance cost over the Expo duration. This benefit would be extended to VAT incurred on import of goods for personal use of the official participant's section commissioner-general, section staff and beneficiaries," Chand added.

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Tax Authority ordered to refund Pepsi distributor Dh12 million. The dispute committee ruled in favour of Dubai Refreshments, recalculating tax bill

The Dubai Refreshments factory at Al Quoz. It produces three out of the top four beverages in the region.

Dubai: Dubai’s tax resolution committee has ruled in favour of Dubai Refreshments, the Dubai-based distributor of Pepsi, in a dispute over how much tax it owed the government.

The Federal Tax Authority contended that Dubai Refreshments owed it Dh20.8 million, levied by the government office on the inventory of soft drinks held by the company on October 1, 2017, according to a statement from the company to the Dubai Financial Market (DFM), where its shares are traded.

October 1 was the date that a 50 per cent excise tax was introduced on sugary soft drinks.

Instead, the UAE’s Tax Dispute Settlement Committee (TDSC) found that Dubai Refreshments only owed Dh8.8 million in taxes, rejecting the FTA’s claim and ordering it to repay the company the extra Dh11.9 million.

In its statement on the bourse, Dubai Refreshments noted that the ruling could be appealed “before the competent courts following the procedures and laws of the country.”

In response to this, the company said it was “currently reviewing the ruling and the available options of action in accordance to the applicable laws and regulations.”

The ruling reflected the UAE’s commitment to the rule of law and access to justice, according to Mahmoud Abuwasel, the co-founding partner of law firm Bin Nakhira & Partners, who have represented clients in tax disputes exceeding one billion dirhams.

“This ruling shows that where the taxable person pays the due tax and penalties before resorting to the TDSC, or the courts…the TDSC will study the matter in earnest and grant the taxable person remedy where possible,” Abuwasel told Gulf News.

“This ruling is an excellent reflection of the UAE’s paramount adhesion to the rule of law and access to justice.”

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For more information please visit our website https://www.a-h-g.net/or drop us an email on ahg@a-h-g.net.

We are a reliable Audit firm operating since 1991 and Approved TAX Agent by the Federal Tax Authority, UAE. We are currently present in 4 countries delivering the best Audit, TAX, Advisory and  Accounting services.