VAT Deregistration

DEREGISTRATION OF VAT IN UAE

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Under the UAE VAT Law, businesses and individuals who have applied for VAT in UAE under the Federal Tax Authority (FTA) can opt for VAT Deregistration in the UAE in two different Scenarios.

•  If you have registered for VAT in UAE and the minimum turnover AED 187,500/- has not exceeded in the next 12 months after you have registered for VAT with the Federal Tax Authority (FTA), in such cases, you can apply for VAT Deregistration in the UAE.

Or

•  If businesses and individuals have initially registered for VAT in the UAE with the FTA but gradually the business stops making taxable supplies, then in such cases as well you can apply for VAT Deregistration in the UAE. 

We provide the VAT Deregistration service. 

Fact for your understanding

Your Company applied for VAT Registration in the UAE  on a “mandatory basis” on 2^nd December 2019 and got the Tax Registration Certificate from the FTA on 20^th December 2019.  A few months after registration, in April 2020 the management decided to liquidate the company. In this regard, what will be the answer in the following cases:

1. Can the company apply for deregistration if the taxable supplies made by it for the past consecutive 12 months is more than AED 375,000/-?
2.  Can the company apply for deregistration if the taxable supplies made by it for the past consecutive 12 months is less than AED 375,000/- but more than AED 187,500?
3. Can the company apply for deregistration if the taxable supplies made by it for the past consecutive 12 months is less than AED 187,500?    

What would be the answer in the above cases if the company does not liquidate?

Let us know the relevant provisions in the UAE VAT Law for VAT Deregistration in the UAE.

Above Scenario Vs UAE VAT Law

Since your company decided to liquidate, it is evident that they have stopped making taxable supplies. Hence, your company should apply for de-registration in all three scenarios as per Article 21(1) of the Decree-Law.

1. The application for deregistration should be submitted within 20 business days from the date the company stopped making taxable supplies.

1. The Failure to apply with the FTA for deregistration and/or filing of final tax return or settlement of the payable tax within the deadline would be subject to administrative penalties.

     

 What if your company does not liquidate in the scenarios mentioned above?

• The company has made taxable supplies of more than AED 375,000/- over the past 12 consecutive months. Therefore, it cannot apply for deregistration from VAT.
• Since the taxable supplies made by the company over the last 12 consecutive months were less than AED 375,000/-. It can apply for deregistration as per the provisions of Article 22 of the Decree-law.
• Since the taxable supplies made by the company over the last 12 consecutive months were less than AED 187,500/- and the company does not expect that the total value of taxable supplies and imports subject to reverse charge provisions or the expenses which are subject to tax that will be incurred, will not exceed the said AED 187,500/- during the coming 30-day period.

Therefore, the company should apply for deregistration as per the provisions of Article 21(2) of the Decree-law. And the application for deregistration should be made within 20 business days from the date on which the taxable supplies fall below AED 187,500/-.

Applicable provisions of the UAE VAT Law:

  As per Article 21 of the Decree-Law read with Article 14 of its Executive Regulation:

 A Registrant shall apply to the Authority for Tax Deregistration in any of the following cases:

1. If he stops making Taxable Supplies and does not expect to make any such supplies over the next 12month period.
2. If the value of the Taxable Supplies made over 12 consecutive months is less than AED 187,500/- and said Registrant does not expect that the total value of taxable supplies and imports subject to reverse charge provisions or the expenses which are subject to tax that will be incurred, will not exceed AED 187,500/- during the coming 30-day period.

v  The registrant should apply for deregistration within 20 business days of the occurrence of the conditions mentioned above.

v  Further, as per Article 22 of the Decree-Law, a registrant may apply to the authority for tax deregistration if the value of his taxable supplies during the past (12) months was less than the AED 375,000/-.

v  If the deregistration application is approved, the Authority shall cancel the Tax Registration of the Registrant with effect from the last day of the Tax Period during which the Registrant has met the conditions for deregistration or from such other date as maybe determined by the Authority.

v  Where a registrant requests to be deregistered from tax due to the reduction of his taxable supplies to less than the mandatory registration threshold, the authority will, if in agreement with the registrant, cancel the tax registration with effect from:

1.        the date requested by the a registrant in the application; or
2.        the date on which the request is made if the registrant did not indicate the preferred deregistration date

      A Registrant shall not be deregistered unless he has paid all Tax and Administrative Penalties outstanding and filed all due Tax Returns under the Decree-Law and the Federal Law No. (7) Of 2017 on Tax Procedures.

As per the guidelines issued by the Federal Tax Authority  (FTA)  on registration, amendments; Deregistration, if the date of submission of the de-registration form is more than 20 business days from the date the Taxable Person is required to de-register then, a late de-registration penalty of AED 10,000/-    will be levied by the Federal Tax Authority.

Accordingly, if the VAT deregistration application is approved, only then the Federal Tax Authority will cancel the VAT registration of the registrant and will deregister with effect from the last day of the Tax Period during which the Registrant has met the conditions for deregistration or from such other date as may be determined by the Federal Tax Authority.

Looking for TAX Services in the UAE?

We are here:  http://avaconsultantsdxb.com/

Why You Really Need an AUDITING?

AUDITING TO CREATE A SUCCESSFUL BUSINESS

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Auditing is an independent and methodical examination of books, accounts, statutory records, documents of an entity to determine how far the financial statements and non-financial disclosures present a true and fair view of the concern. It is an effective measure to analyse a company’s internal control. A good auditor can easily fix your issues and helps for the enhancement of the company. It is very seminal for accomplishing business objectives.

Why auditing is important?

1. Will get detailed Pandect.

Auditors can give you a complete picture of your company and business and how it is working. How much effort you put to make the financial part of your company efficient, there will be small mistakes that should be rectified with the help of auditing. A good auditing report can how stable is your company financially.

2. Get an additional perspective.

Through an auditing system, one can detect flaws in your company’s system. Auditors can find you solutions to fix the errors. So all the struggles and financial barriers an entity is facing will be clarified and solved.

3. Will become more reliable.

In business, it is very important to be trustworthy and reliable to customers or clients. Auditing in a firm will bring reliability into your business and creates an image that business is going as planned and believable. In front of tax officials also reliability of your company will be proved.

4. Promote responsibility.

Auditing report can be used to enhance the accountability of managers and employees in the company. Through auditing, they can correct their flaws and improve their focus in your work. In future also they can utilize this to improve their efficiency in work.

HEALTH IS TAX - Tax on Tobacco

TAX MEASURES ARE AN EFFECTIVE MEANS TO REDUCE DEMAND FOR TOBACCO.

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Taxes play a key role in reducing the consumption of cigarettes and other tobacco-related products among the cost-conscious consumers, according to tax experts, doctors and smokers.Taxes might not create a hole in the pockets of well-to-do smokers but cost-conscious and lower middle income people certainly cut down on smoking post-taxes period.

We have seen a decrease in tobacco products in the UAE after the introduction of excise tax. Tax measures are an effective means to reduce demand for tobacco and they help countries reduce consumption to a moderate level. It is not  in completely quitting tobacco consumption, but it certainly has moderate reduction in consumption of these products.

The UAE imposed 100 per cent excise tax on tobacco and tobacco products in October 1, 2017. From December 1, 2019, the Federal Tax Authority levied 100 per cent excise tax on all electronic smoking devices and equipment, as well as liquids used in e-cigarettes. All tobacco products and equipment are also subject to five per cent value-added tax (VAT), in addition to excise, since January 1, 2018. 

After the introduction of excise and VAT, the UAE account for 73.54 per cent combined tax rate on the price of the most sold pack of cigarette brands. Globally, 185 countries levy taxes on tobacco and tobacco products, according to a 2019 WHO report on the global tobacco epidemic. Data showed that 10 countries with the highest taxes on tobacco products include Finland, Bosnia and Herzegovina, Bulgaria, Mauritius, Brazil, France, Chile, New Zealand, Turkey and Montenegro. Some of these interventions include advertising bans, smoking area restrictions, health awareness campaigns, and tax increases on cigarettes.

TIMELINE OF TAX IMPLEMENTATION

Source: World Health Organisation

VAT on Facebook adds

Facebook announced a tax on one of their services in UAE 

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In a notice issued to users in UAE, the social media giant said that it was implementing value-added tax (VAT) on the sale of ads in UAE:

Due to an implementation of a value-added tax (VAT) in the United Arab Emirates, Facebook is now required to charge VAT on the sale of ads in UAE. All advertisers with a 'sold to' of United Arab Emirates that have not provided a tax registration number will be charged VAT at 5% on advertising services.

If you haven't already, here is how to update your account:

Go to Account settings
Add or confirm your state
Add your 15-digit tax registration number
It is important that you provide a valid tax registration number. We are legally required to verify this number with the UAE tax authority. Invalid tax registration numbers will be disregarded and as a result, you will be charged a 5% VAT on the purchase of ads.

Ref: The Facebook Business Team

VAT in Recent years

UAE, Saudi Arabia and Bahrain have already levied VAT in recent years.

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"VAT is something people don't like it but this is something we have been lobbying for. It will come into effect sometime in the beginning of the next year," said Ali bin Masoud Al Sunaidy, Minister of Commerce and Industry in Oman.

Currently, three GCC countries, UAE, Saudi Arabia and Bahrain, have levied VAT as agreed by the six member countries. Oman will most likely be the next GCC country to join the league.

A study by EY had predicted that the adoption of VAT by GCC countries would generate additional annual revenues of $25 billion.

The minister said Muscat is targeting 2.5 per cent to three per cent economic growth this year, unless some geopolitical tension emerges in the neighborhood. They are also looking at diversifying the economy. Reforms are inevitable because when oil prices crashed, our GDP crashed tremendously from 30 billion Omani riyals to 26 billion riyals, but now it is back to 30 billion riyals.

The minister hopes that the oil price will cross $70 a barrel which will be helpful for regional economies. The economy is being revived at 465 but $70 would be more comfortable for most of  the region, not just Oman. However, at $65 and even $60 to $65 barrel, Oman will look more seriously at tourism, manufacturing, fisheries and logistics sectors.

Online sales’ contribution to VAT

E-commerce to contribute significantly to VAT revenue

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E-commerce is expected to significantly bolster government revenues from value added tax (VAT) in the UAE, data on fast growing online sales indicate.

The UAE introduced VAT in 2018 as part of its fiscal strategy to diversify the government revenues. VAT, essentially a consumption tax is universally applicable for all purchased including online purchases with very few exceptions.

In the case of online purchases, according to the Federal Tax Authority (FTA) all purchases are subject to the same 5 per cent VAT as any other purchase made through traditional outlets if the products purchased online are received within the UAE.

The VAT revenue from online sales are becoming increasingly significant in the overall tax revenue in the context of the significant growth in UAE’s e-commerce.

According to a recent study by Visa International and Dubai Economy, the UAE’s ecommerce sales are projected at $16 billion (Dh59.billion) in 2019. At 5 per cent VAT rate, online sales is estimated to have contributed nearly Dh3 billion to government revenue last year.

UAE’s tax revenue, including value-added tax (VAT) made up 5.5 per cent of the total public revenue in 2018, according to the Ministry of Finance (MoF).

The UAE’s total overall revenues reached Dhs456 billion in 2018, of which tax revenues made up Dh25 billion.

The UAE’s decision to introduce VAT benefited the country, as it recorded a budget surplus of 2.2 per cent in 2018, compared to deficits of 0.2 per cent, 1.3 per cent and 6.4 per cent in 2017, 2016 and 2015, respectively.

Currently, the UAE is considered the most advanced ecommerce market in the Middle East and North Africa (MENA), with a penetration rate of 4.2 per cent; the Kingdom of Saudi Arabia (KSA) follows at 3.8 per cent.


ref: Gulf News

Fraudal attempt on Behalf of VAT refund.

NEVER RESPOND TO EMAILS OR TEXT MESSAGES THAT REQUEST YOUR FINANCIAL INFORMATION ON BEHALF OF VAT REFUND - FTA 

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The Federal Tax Authority has warned people against responding to e-mails or text messages that request personal financial or banking information and which claim that VAT will be refunded to those who reply. The authority stressed that these are fraudulent messages and that it never asks people to disclose their personal data via e-mail, text, or over the phone.

The FTA clarified that tax refund operations for legally eligible categories are conducted directly between the authority and the taxpayer, with the authority contacting registrants directly without using any third party mediators. It stressed that it does not authorize any banking, financial or accounting entities to acquire data or collect taxes on its behalf.

The authority also assured that refunds are carried out utilizing the latest secure electronic systems available through the authority's website and that these systems meet the strict safety standards relating to financial transactions. It noted that tax refunds can only be made by using the registrant's bank's IBAN number through its systems, which are electronically linked to the central bank.

The authority's note of warning came in a press statement it issued on Tuesday following information that some bank customers had received emails from unknown entities impersonating banks or other institutions and requesting personal financial information, such as bank account and credit card details, claiming that this data will be used to provide them with a VAT refund.

The authority affirmed that the IBAN bank number of each registrant through which the tax is refunded to eligible categories is already included in the authority's electronic systems, meaning that it would not be requested from people by e-mail, or via text messages, or by any other means.

The Federal Tax Authority clarified that the official systems which it employs to refund tax to those who are eligible are electronically linked between the Federal Tax Authority and the registrant. The systems are accessed using the registrant's unique tax registration number (TRN), with its accurate procedures maintaining the confidentiality of data and safeguarding it from unauthorized access and cyber hacking.

The authority also assured that all registration services, submission of tax refunds, refunds of tax to those legally eligible, and other services or instructions for registrants and taxable persons are carried out in simple steps in a few minutes through the online services portal, which is available around the clock through the authority's official website: www.tax.gov.ae. The authority stressed that the website has been designed in accordance with best international practices aimed at facilitating all processes associated with taxable persons' liabilities with the easiest and fastest technical means.