Tuesday, January 14, 2020

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

Thursday, December 26, 2019

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.

Saturday, December 21, 2019

Alert for the Companies in UAE !!



Maintain your documents in order to avoid any litigation issues.

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Companies in the UAE have been asked to maintain their documentation in order to avoid any litigation issues related to tax regime, say tax experts.

"It has been two years now [since value-added tax was implemented] and the Federal Tax Authority is not going to accept lack of preparedness as an argument. That is not going to save or benefit companies. If companies don't know, they must ask for clarification. You have to be audit-ready from all aspects. 
"Documentation is the only thing that will save companies. Preparedness to have books reconciled with what returns you have filed and documentation that you have kept to support returns that have been filed will save from litigation," Shah said while addressing members of the Institute of Chartered Accountants of India (ICAI) - Dubai chapter in Dubai on Saturday.
He warned that if companies have not been audited, it doesn't mean they won't be. However, he said, authorities could be lenient only for genuine cases.
"Ignorance of the law is not going to be an excuse as well. If you don't know the law well, study it well. They will not take an excuse that 'I was not advised well'. What will gain sympathy is your documentation and preparedness or ability to produce data within the time frame the authorities have asked," he told the chartered accountant fraternity.
Anish Mehta, chairman of the ICAI - Dubai Chapter, said a healthy life and lifestyle has always been an important measure of the UAE government and with this initiative of adding more products under excise tax, control over illness arising from the consumption of harmful goods can be achieved.
During 2019, he said the FTA released new public clarifications on VAT which will help the tax payers to properly treat their books of account for VAT perspective.
Sundar Nurani, vice-chairman of the ICAI - Dubai Chapter, said UAE businesses that import, produce or stockpile products related to sweetened drinks, electronic smoking devices and tools, liquids used in electronic smoking devices and tools face new compliance and potential registration obligations due to the expansion of the excise tax regime from December 1.
"Non-compliance with the expanded legislation could have a significant commercial impact and businesses could face issues clearing shipments of stock at the border if certain compliance obligations are not fulfilled," he said.
Ref: Khaleej Times

Tuesday, December 17, 2019

Never Worry About VAT and accounting again.


Why Companies Require Tax Consultants/Agents In The UAE?

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UAE is going to complete its second year of the implementation of VAT successfully. According to most sources, implementation of VAT was smooth, transparent and successful despite some initial challenges. The Federal Tax Authority (FTA) was proactive in publishing user and industry guides as a part of pre-implementation and post-implementation process/support which was a key reason for this success. Another was tax consultants and tax agents that supported companies and taxable persons in the UAE to get compliant with the VAT regime.

VAT is relatively a new concept for many UAE businesses. Most businesses find it difficult to navigate VAT on their own due to little or no exposure to tax in the UAE. As a taxable entity, it is crucial to ensure that the business is compliant to VAT laws and regulations. Having a tax expert on your side is imperative to avoid errors, penalties and loss of reputation.

If you set a tax consultant on your side, yes of-course you can sit and relax back without bothering the hassles of VAT return filing. 

 How Tax Consultants/ Agents help you?

  • A tax consultant/agent raises awareness and helps businesses to stay true with the VAT regime whilst an appointed tax agent can act as an intermediary between the FTA and the business.
  • Undertaking the VAT assessment of a business by a tax consultant helps it to prepare for all the processes it needs to undertake and the changes that must be made to work-flow, documentation, accounting, invoicing and ultimately reporting with minimal human inputs.
  • Tax consultants also assist businesses in registering in time and ensuring that they meet the registration criteria including Tax Group registrations.
  • The primary role of a tax consultant, after the initial registration and assessment is to ensure accurate, timely and reliable VAT returns.
  • By using their expertise, tax agents and consultants assist businesses to avoid errors, claim rightful input taxes to maximize profits and help businesses to best manage their cash flows, especially when credit periods to customers exceed the VAT returns period.
  • Tax consultants/agents can also assist in reviewing the VAT returns already filed (health-checks) for accuracy and documentation/records maintained by the taxable persons as per the requirements of the tax law.
  • Appointed Tax Agents are also able to assist businesses with tax audits and responding/representing the taxable person with the FTA in case of queries. This includes Arabic language capabilities as Tax Agents are mandated to have this capability.
  •  Tax agents are often required to liaise with the FTA on behalf of the client for dispute resolution and reconsideration of decisions issued by the FTA. This can lead to significant savings for the business. 
  • Tax laws are subject to change from time to time and keeping abreast of all relevant statutes and laws is the need of the hour. Tax consultants/agent by doing so ensure that businesses do not fall foul on account of not keeping up with the latest regulations and incur penalties.


Tax Agents Are Certified Professionals

Though any professional with requisite qualification and tax experience may assist businesses as tax consultant or adviser, FTA governs individuals and firms that can act as Tax Agents / Tax Agency in the UAE. The FTA has set certain criteria for Firms and individuals before they can act as Tax Agents/ Agency. Some of the criteria are set out below. As is evident, it is FTA’s endeavor to ensure that capable and qualified individuals act as Tax agents so that they are equipped to advise businesses in the UAE.

  • A minimum of three years of practical experience in taxation, accountancy or Law.
  • Proficiency in both Arabic and English languages.
  • Should have qualifications such as Bachelor’s or Master’s degree in tax, law, or accounting from an accredited educational institution.
  • Pass the FTA examination with a passing grade.
  • Physical fitness to undertake the duties and responsibilities as a tax agent.
  • Must be covered by professional indemnity insurance.
  • Must possess a clean record with no crime or misconduct.




Saturday, December 14, 2019

Didn't submit tax return on time?

Penalty for not submitting a tax return on time.

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After the end of the reporting quarter, the FTA gives businesses a minimum of 28 days to prepare and file their VAT return. If 28th of the month falls on either Friday or Saturday, the deadline moves to the next working day. Any VAT returns not filed by the given deadline should be submitted as soon as possible afterwards. FTA will allow you to file VAT returns even if you passed the deadline. In fact, you can't file your VAT randomly. It should filed sequentially one after the other. So it forces you to file returns sequentially, even if you have missed a deadline.



The FTA impose separate penalties for failing to file a return and failing to make payment by the given deadline. There is an automatic penalty for missing a filing deadline which is AED 1,000 in the first instance and then AED 2,000 for subsequent missed deadlines within 24 months. If you fail to settle the tax due by the deadline you will be charged 2 per cent of the unpaid tax, which is charged immediately after the due date. This rises to 4 per cent of the unpaid tax if you have not paid up within seven days of the deadline. If you have still not paid a month after the deadline, you are charged at a rate of 1 per cent each day until the penalty reaches 300 per cent of the tax due. Note that if you make a payment but fail to file the corresponding return, the FTA will not recognise the payment until the return is filed.

Tuesday, December 10, 2019

Conditions for companies to de-register from VAT

FTA defines conditions for companies to de-register from VAT in UAE

Failing to submit application could lead to the imposition of administrative penalties
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Federal Tax Authority, FTA, has defined the conditions for tax de-registration, in accordance with Federal Decree-Law No. 8 of 2017.
The Authority clarified the conditions and procedures for de-registration for Value Added Tax (VAT), since its implementation.
The FTA explained that if a registrant stops making taxable supplies or if the value of the taxable supplies made by the registrant over a period of 12 consecutive months is less than the voluntary registration threshold of Dh187,500 and it is not expected that the total value of the registrant’s anticipated taxable supplies or expenses subject to tax in the coming 30-day period will exceed the voluntary registration threshold, then the registrant must submit a de-registration application to the Authority.
It went on to say that the de-registration application must be submitted within 20 business days of the occurrence of any of the aforementioned cases using the Authority’s e-Services portal, adding, “knowing that failing to submit the de-registration application within the period specified in the tax legislation will lead to the imposition of administrative penalties as stipulated in the Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.”
The Authority confirmed that registrants will not be de-registered unless they have paid all due taxes and administrative penalties and filed all required tax returns for the period in which they were registered as stipulated under the tax legislation.
Ref: Gulf News

Wednesday, December 4, 2019

B2B supplies of healthcare services


Public clarification on Business-to-Business supplies of healthcare services
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The Federal Tax Authority (FTA) has issued a new public clarification (VATP016) on business-to-business supplies of healthcare services.

VAT treatment of healthcare services: 

According to Article 41 of the Executive Regulations, healthcare services may be zero-rated if certain conditions are met.

For the purposes of the Article, “healthcare services” are defined as: "any service supplied that is generally accepted in the medical profession as being necessary for the treatment of the recipient of the supply including preventive treatment."

Therefore, where the patient and the recipient of the supply are not the same person, then the services should be subject to VAT at 5%.


To access VATP016, visit: VATP016

To access the Executive Regulations visit: Executive regulations