UAE Consumer Electronics Sales Will Fall

Perhaps, the whole world is on the verge of witnessing the economic slowdown, earlier, news from India was declaring economic slowdown and now the report of the UAE has emerged sating the same. An industry expert from the gulf news has reported that the consumer electronics industry in the UAE is expected to fall by 0.23 percent to Dh11.95 billion, compared to Dh11.97 billion last year

Ahmad Bakr, the research analyst at Euromonitor International Middle East, has said that sale figure is more than the last year but, the profit has dropped due to the decreases in average selling price.

“Volume is expected to register a 1.8 percent growth but it is lower than last year. Volume for this year is expected to be 12.65 million compared to 12.4 million units last year. The reason is due to the overall slowdown in consumer electronics market. Small appliances are witnessing a negative growth,” he said.

In the electronics goods, there is a significant fall in the laptop segment as more and more people are nowadays using smartphones. However, gaming laptops and architect portable workstations have seen growth in the sale. Among the other segments which saw the growth in the sale are action trackers and natural light-emitting diode (OLED) TVs.

“The fastest growing category under portable consumer electronics is activity wearables due to growing activity awareness and healthy lifestyle among the people. Wearables, including trackers and smartwatches, are growing 60 percent in volume and 32 percent in value,” he said.

OLED TVs has seen a growth of 28 percent in volume, it’s because many new players have entered the market. It must be noted that in UAE, KG, is still the number one electronic’s company in the OLED TV space. But, last year Sony, Loewe, Toshiba, Grundig, Philips, Bang and Olufsen and Panasonic have entered this market. He said that tablets are seeing a growth of 1.3 percent while home cinema and speaker systems are seeing an 8.9 percent growth.

“Bluetooth speakers are growing 24 percent in value but smartphones are growing at 3.2 percent in volume but lower compared to 9 percent last year but in terms of value, it is witnessing a slower growth of 4.18 percent,” he said.
He included that cameras in smartphones have been enhanced and hence resulting in the lower sales report of DSLR and analog camera. The sale report of the camera states that there is a drop of 9 percent in volume and 10 percent in value. Apart from these, the Camcorder sales are expected to fall by 24 percent in volume and value both.

VAT is presumed to slow down the economy of UAE for the first three months of implementation. According to many industry experts, the upcoming VAT in UAE will impact the economy of the nation adversely and the first three months will be the hardest. It’s worth mentioning that GCC-wide value-added tax (VAT) is scheduled to launch in 2018 in UAE.

“Consumers are very pessimistic and very scared and that is going to hit consumer confidence in a big time. But when VAT comes into play and consumers see that the prices have not increased much, except for big appliances and big TVs, they will go and buy it but it will impact in the first quarter of next year,” said Ahmad Bakr, research analyst at Euromonitor International Middle East.

Euromonitor anticipates that sales will be boosted from June or July. “People will buy their products before VAT is introduced and that will slow down the industry for the first three months,” he said.


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How to file VAT Return in Dubai

VAT (Value Added Tax) is all set to implement in Dubai in January 2018. The government, as well as many private institutions, are releasing new information regularly to help people and businesses get familiar with the new tax system as smoothly as possible. Among many things VAT related, one of the most important is VAT tax returns.

As per the normal VAT standard, the returns are filed quarterly, i.e., once in 3 months, or annually in some cases. The VAT returns will be filed online on the official portal of the Federal tax authority. Businesses that are looking forward to making a smooth transition to the new tax system must get familiar with the return filing procedure under VAT in Dubai. In this article, you will learn the same.

What is a VAT Return and Why is it important?

A VAT return is the formal document/statement of the VAT liability of a taxpayer for a particular tax period. It contains the details of VAT liability of the person, tax paid by him, etc. for a tax month or quarter.

VAT returns are important because they contain the records of the tax paid by the users in a given period. It is a formal document that works as a proof that the certain party has paid their tax. The government needs these records to maintain a proper taxation system where each individual pays his/her tax liability on time. These are used by the tax authorities for performing auditing and other activities as per the tax laws. Your VAT return contains the summary of your total earning and the value-added tax paid by your on that earning for that particular period.

Schedule (Due Dates) for VAT Return Filing in UAE

Although the actual dates for filing VAT returns are not yet been announced by the authorities, it is being estimated that the returns will be filed monthly or quarterly based on certain conditions like type and size of the business. Each eligible individual and business in Dubai will be required to register on the portal and file their tax returns as per the schedule. It is important to file VAT returns on time in order to keep good accounts with the authorities and to run a business properly.

As a VAT registered firm, you should file regular quarterly/monthly tax returns, even if you have not done any business or paid tax in a given period.

Procedure for Filing VAT Returns in UAE

The VAT tax returns will most probably be filed online, and there will be no facility for filing tax returns offline or manually. So, the businesses need to get themselves familiar with the online VAT filing process. Upon registration on the VAT portal, each taxpayer will be given a unique TIN and password for their online account on the website. These details are to be used to file returns online. Follow the steps below.

1. Visit the online portal of the Federal Tax Authority at tax.gov.ae
2. Click the return filing option under the e-services section of the portal
3. Log in using your TIN and password
4. Fill in the VAT return form with the details of your business, transactions, tax liability, penalties (if any), etc.
5. Upload the required documents, bills, etc.
6. Verify the details filled by you and submit the form

The exact procedure for filing UAE VAT returns will be revealed only after the launch of VAT in UAE, however, the process is more or less likely to be the same as mentioned above.

There are many audit firms, tax consultants and accountants in Dubai who can help you with the VAT implementation, rules and return filing once the new tax system is launched in the country.

VAT on Free zones in the UAE

UAE free zones are special economic zones which are free from many official government laws, including the Federal law and the Labour ministry laws. However, some of the laws, including the UAE criminal law are applicable in the free-zone regions. The clarification about the application of the new VAT system in such free zones has not yet been made by the government. The UAE VAT Law, under the article 50 to 52, covers these free zones, and the decision regarding the implementation of VAT in these zones is pending for the fourth quarter of 2017.

The concept of free zones has been very successful and popular in the country. Many new zones are being developed under the same mechanism to promote the growth and digitization in the UAE. These free zones are completely exempted from import and export taxes, income taxes, corporate taxes, etc., and have many other facilities like full repartition of capital and profits.

Since the authorities have not yet made any decision about VAT in these free zones, let’s try to understand how it may affect the economy.

Let’s assume that the free UAE zones are exempt from the VAT. Then, the cost of things will be slightly cheaper in these zones as compared to the normal regions of the country. This will largely impact those areas that are situated on the border or near the border of these free zones. People living near free zones in the UAE might see a difference in the prices of various things due to VAT in the remaining areas of the country.

The most significant effect will be on the prices of valuable entities like commercial properties. People will see a noticeable difference in the price of a property located in the free zone area and a property located just a few meters away in the normal area. This might further promote the growth of the onshore commercial environment.

However, it is being estimated that neither the free zones nor the businesses outside the free zones will be exempt from the VAT. There might be a special tax rate for the businesses situated in these free zones, as compared to the normal VAT rate of 5%. Some specific services and commodities, including duty-free goods, will be VAT free in bonded free zones. A bonded free zone is allowed to hold goods before duties are paid on them.

After the implementation of VAT in the country, many small and medium businesses might face a dip in the cash flow due to increase in tax liability. Although there is a provision of tax refund on inputs, there is no clarity on how long it might take for such refunds to process. Even if some businesses do not see the immediate effect on their cash flows, it will impact everyone sooner or later.

It is normal for refunds to be delayed when a new tax system is launched in a country. The government and the authorities are mostly busy in auditing the returns before they begin the refunding process. This is what delays the release of refunds to the involved businesses, which in turn, affects the cash flow in the market.

While the standard UAE VAT rate of 5% is lower as compared to many other economies in the world, the difference in tax liability within the country, such as special relaxation for businesses in the free zones, will impact the economy.

The new UAE VAT law mentions the concept of designated zones, but it is still not clarified whether the free zones will be kept under these Designated Zones or not. Therefore, it is also not clear how these free zones will be treated after the implementation of VAT in the country. If free zones are kept under designated zones, they will be free of any VAT liability, as designated zones will be not covered under the VAT system. As per the UAE VAT Law, there will be no tax on the transfer of goods from one designated zone to another. However, the government might define some special conditions under which the businesses situated in a designated zone will still be liable to pay VAT.

It is being estimated that more information regarding this might be released by the fourth quarter of this year.

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The UAE and Saudi Arabia ready for VAT, Other GCC Members to Follow

All the member countries of GCC mutually agreed to implement VAT Regime in January 2018. Out of the six member states, UAE and Saudi Arabia said they are all set to introduce the new taxation regime, however, it is expected that the rest of the GCC member states will implement it later.

Jihad Azour, the International Monetary Fund (IMF) director for the Middle East and Central Asia said that it is anticipated that the VAT regime will create GDP between 1.3 to 2%. Despite varying timetables, it will be implemented across all the GCC member states.

While Speaking at the launch event of IMF’s Regional Economic Outlook report in Dubai, Azour said “all” the six member countries of the GCC are dedicated to preparing to implement VAT system in the regions, that he called “an important tax reform that requires preparation” and communication with the private sector “to be ready to help them.”

He further added that “Countries, especially those with a buffer, can decide on the timing of implementing those measures.”

“Saudi Arabia and the UAE are the two largest economies, and both of them have reiterated their commitment to introduce [VAT]. Other countries can follow the suit. It’s a domestic type of tax. The impact of this tax on other countries will be fairly limited “, said Azour.

Azour added that the 5% rate of the VAT, with a large number of products and services exempted or zero-rated, will help reduce the impact on prices by 1.5 to 2%.

Azour said that the VAT will be levied at each stage of supply chain at the rate of 5 percent on goods and services. A large number of products and services will come under the exempted or zero-rated category. The upcoming tax regime will help to reduce the impact on prices between 1.5 to 2 percent.

The prime minister of Kuwait – Sheikh Jaber Mubarak Al Sabah of Kuwait government resigned from its position on Monday. Azour said in IMF discussions that Kuwait is still dedicatedly working and preparing to implement VAT Regime.

“I think we will have to wait until the government is formed, and for the government to [come up] with its economic programme, to see if VAT is still in their plan.”

VAT Rates in UAE from 2018

                               

The Value Added Tax (VAT) system will be introduced in the UAE and other GCC states from 2018, most probably in January only. The standard tax rate of VAT will be 5% for most products and services, while some specific categories, like healthcare, some food types and education, might be exempted from tax. The government, as well as local businesses, are making required preparations for the implementation of VAT policies.

The UAE officials estimate that the country might generate about 10-12 billion AED in revenues within one year after the implementation of the VAT.

The oil industry of the UAE has witnessed some degrades in the past months and its contribution to GDP has gone down significantly from the previous 90 percent. So, the officials are not positive about getting high revenues from this industry. The real estate sector of the country is also experiencing some decline due to the degrading situation of the oil industry.

One purpose of the VAT is to diversify the economy of the nation. The VAT system is likely to impact the different consumer sectors in different ways, depending on the incomes and the money people are eager to spend on various goods and services.

The VAT rate of 5% in UAE is much lower as compared to VAT in other countries. This, in addition to the tax exemption of certain food items, is not likely to have any diverse impact on the spending ability or desire of the locals.

There are several reasons why VAT is being implemented in the UAE and other GCC countries. The government needs new income sources in order to keep providing good facilities and to promote infrastructure development in the area. The VAT rate has been kept at a lower side so that there is no major impact on the standard of living. Other main reasons behind the VAT implementation are the recovery of the country’s economy, reduction of their dependency on petroleum products and building and maintenance of national wealth.

VAT is expected to bring many reforms in the existing tax system in the country. The officials are struggling with the issues regarding the implementation of these reforms. These issues, including the issues with budget and influence of oil prices, have been discussed several times before and now, these are rising again.

The VAT implementation issues and legal concerns are being dealt by the UAE government to ensure a smooth transition to the new tax system. The minor tax rate will ensure that it doesn’t have any significant impact on the lifestyle of the UAE residents. The implementation of VAT in the UAE will ease the pressure caused by the country’s tax-free mechanism and will put it in line with the international tax standards.

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VAT Guidelines Issued by Federal Tax Authority (FTA)

Some important guidelines have been issued by the UAE Federal Tax Authority (FTA) in respect of the Value Added Tax (VAT) System.

It is anticipated that the VAT regime will be implemented from 1st January 2018 in UAE, in compliance with the international standards.

Business enterprises must implement the following guidelines before registering for the VAT system, said FTA.

1. VAT is an indirect taxation system levied at each stage of the supply chain of goods and services. It has already been enforced in 150 countries across the globe, including 29 European states, and also Australia, Canada, New Zealand, Singapore, and Malaysia.

2. VAT will be borne ultimately by the end consumer and it is levied at each stage of the supply chain. Business enterprises will collect tax from the consumers on behalf of the government.

3. Businessmen will have to pay the amount of tax to the government that they collect from their consumers. Later, the businesses can claim (input credit) from the government the tax they already paid to the suppliers.

4. The upcoming taxation regime in UAE, VAT will provide a new source of income to the government that will be used to render high-quality public services to the consumers. It includes roads, hospitals, parks, public schools and civil services. The upcoming taxation system in the UAE will help the officials to reduce the dependency on oil, thus it will help create a sustainable and stable economy in the country.

5. The VAT rate has been decided by the UAE government and it will be levied at the standard rate of 5 percent throughout the country. It will be applicable at each stage of the supply chain of all goods and services and it includes commercial buildings, food, and hotel services unless there is a special provision that exempts a particular service/product from tax.

6. Zero VAT rate will be applicable on several goods and services in the UAE. This will include gold for investment, health, education, the supply of international transport of passengers, goods, and exports, and the first supply of residential buildings.

7. VAT will not be imposed in some cases, including the local transportation of passengers, bare land, rendering of some financial services and provision of residential buildings.

8. All the businesses who are engaged in rendering goods and services and come under the category of zero VAT rates, they also must register under the VAT system. Later, they can claim from the government the VAT they had paid on their purchases. On the other hand, All the businesses who are supplying exempted goods and services will not be able to reclaim VAT incurred on their purchases.

9. All the businesses whose taxable supplies and imports exceed the mandatory threshold limit of AED 375,000 must be registered under the VAT system.

10. Businesses, whose annual turnover is below the mandatory threshold limit, can register voluntarily under the VAT Regime, given that they pass the voluntary registration threshold limit of AED 187,500.

11. All the businesses must be registered under the VAT system as soon as possible to avoid the last minute rush. If any eligible business fails to register by 1st January 2018, a penalty will be charged as mentioned in the Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

12. To register for the VAT system, businesses can use the Federal Tax Authority Website (https://tax.gov.ae/ar/index.aspx), which is open 24 hours and seven days.

13. It is essential for all the businesses to maintain proper financial records, including the records of Profit and Loss, records relating to fixed assets, balance sheet, payroll, inventory stock levels as well as accounting records, including payments, receipts, purchases, sales, revenues, and expenses.

14. Before 1st January 2018, businesses are allowed to charge VAT on any of the goods and services.

15. A business with turnover more than the voluntary threshold limit can register voluntarily under the VAT system. This facility is specifically designed for the newly established businesses having no turnover to be eligible for normal VAT registration.

16. VAT Regime is on the way – several businesses will be required to revise their major operations including financial management practices, the methods they will use to maintain the accounting books and records, and the technology they use in the accounting books.

17. Tax Group is one of the useful tools that can be exercised by the businesses to simplify the VAT accounting. In respect of this, the businesses that meet certain requirements mentioned under the legislation – such as having a registered address or a place of residence in the UAE and being related in some official manner (like being managed by the same board) – can apply for a Tax group registration.

Impact of VAT on UAE Real Estate Sector

From 1st January 2018, VAT will be levied on the consumption of goods and services in UAE. Businesses, end-users, and individuals are unhappy with the introduction of VAT in UAE. The rough idea has appeared about the VAT framework, sectors, zero- rated goods that will be exempted from the tax. Ultimately consumers and end- users have incurred all taxes, so they must be aware that devil lies in the details.

Real-estate is one of the sectors which impacts all expatriates and citizens in UAE in the form of house rents and prices, we will tell you how VAT will impact UAE property.

According to Khaleejtimes, It is clear that commercial property (sales and leases) will be levied with VAT at the standard rate of 5 per cent whereas residential property will be exempted from the VAT. Exceptions of property in UAE, On the sale of new residential property VAT will charge at zero rate of VAT whereas bare land will be exempted from VAT.

 Sellers, landlords and developers of the property must have to pay VAT at the standard rate of 5 per cent while doing property transactions. Additionally, VAT will be charged on the normal selling price or rent, so that developer, landlord and seller will not suffer a cost [except cash flow] from the introduction of VAT. From the introduction of VAT, the cost of buying or selling commercial property will increase. Buyer or tenant must register under the VAT and is likely to recollect the VAT charged, [which will be the case the majority of time], the burden of tax on the property must not create an additional cost [except cash flow].

Letting or selling all property in UAE including retail outlets will be levied VAT at the standard rate of 5 per cent. However, after the introduction of VAT in UAE will increase the price of commercial property in the transactions of buying or leasing property.

 Implementation of VAT totally depends on the seller’s or landlord’s decision to take up the VAT as a cost in their business or passing it to buyer’s or tenants. Later, the buyer or seller is capable of recovering the VAT on their purchase.

In the views of Trade, “Businesses such as financial institutions and banks are unlikely able to recover VAT fully on the purchase of property, however prices of property (in the case of buying or selling) in UAE increases resulting burden of VAT, will be a direct cost for them”.

Valuation and prices of commercial property price are likely to increase. The commercial and retail sector is likely to be more expensive by five percent in the case of rental pricing. However, there may be an effect on the prices and valuation may be increased by two to five percent. All this is an assumption before the introduction of VAT. Of course, we are waiting to see the exact impact in the property.

The rent prices of commercial property totally depend on the mutual understanding between landlord or tenant whether the tenant wants to pay VAT+ Rent price on the property or not. If in case the tenant is ready to pay rent+ VAT prices on the property, it automatically increases the price of the property.

Rent agreement and sales contracts in the case of existing property, the payment clause will be reassessed to understand whether the landlord/ seller have the capacity to pay/ charge pay VAT that has already been agreed.

On the resale, residential property is likely to be exempted from VAT. This promotes activity in the secondary market. Experts or higher authorities are waiting for the tax implementation in UAE as it will generate more revenue in UAE budget shortage and fund infrastructure projects.

However, after the implementation of VAT, it automatically increases the property prices in UAE. There is a positive impact of this, it can help in albeit marginally, the boom- bust cycles and ease, which can be hugely disruptive.