ACCOUNTING AND TAX JOURNAL: UAE VAT

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Monday, December 9, 2024

UAE to impose 15% minimum top-up tax on large multinationals from January - Happy New Year in Advance

By Tasleem Faraz MinhasDecember 09, 2024UAE VAT No comments:

The United Arab Emirates will impose a minimum top-up tax (DMTT) of 15% on large multinational companies operating in the country starting in January, the finance ministry said on Monday as the government seeks to boost non-oil revenue.

The DMTT is part of the OECD's global minimum corporate tax agreement which has 136 signatories, including the UAE, to ensure big companies pay a minimum 15% and to make tax avoidance harder.

In amendments to the corporate tax law, the UAE's finance ministry said the DMTT will apply to companies with consolidated global revenue of 750 million euros ($793.50 million) or more in at least two out of the four financial years preceding the ones in which the tax comes into effect.

The UAE, including Dubai, is a hub for multinationals in the Middle East and the tax amendments come a year after the UAE began rolling out a 9% business tax, with exemptions for the many free zones which power its economy.

The DMTT comes under the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, which stipulates that large multinational enterprises pay a minimum effective tax rate of 15% on profits in each country where they operate.

The UAE's finance ministry said it is also considering introducing a number of corporate tax incentives, including one for research and development (R&D) that would apply for tax periods starting in 2026.

The expenditure-based incentive would offer a potential 30%-50% refundable tax credit depending on the size of the company's operations in the UAE and revenue, the ministry added.

A refundable tax credit for high-value employment activities that would be granted to companies as a percentage of eligible income costs for employees is also being considered and could be applied as early as Jan. 1 2025, the ministry said.

UAE residents confident about state of their finances, impact of VAT falling

By Tasleem Faraz MinhasMay 07, 2019UAE VAT No comments:

A fifth of UAE residents are confident about their finances, compared to a year ago

When it came to cost of living, 40 percent said they felt they could not get by, compared to 51 percent in Q3 2018.

Residents in the United Arab Emirates continue to be upbeat about the state of their finances, while fewer and fewer report they are seeing any impact from the introduction of value-added tax (VAT) on goods and services since last year, according to a new survey released on Tuesday.

The Consumer Confidence Tracker Q1 2019 from financial website yallacompare surveyed around 1,000 UAE residents on the state of their finances and attitudes towards work.

The results found that 21 percent of respondents feel more confident about their finances than they did 12 months ago, compared to 22 percent in Q4 last year and 14 percent in Q3 2018.

The percentage who said they feel less confident dropped to 38.3 percent in the first quarter of this year, down from 41 percent in Q4 2018 and 53 percent in Q3 2018.

When it came to cost of living, 40 percent said they felt they could not get by, compared to 51 percent in Q3 2018.

VAT was introduced to the UAE at the start of 2018, but the concerns around its impact appear to be diminishing.

Those who said they were struggling with VAT dropped to 14.8 percent in Q1 2019, from 16.1 percent in Q4 2018 and 26.9 percent in Q3 2018.

“It’s clear from the Q1 findings that consumer confidence is holding up after the big improvement we saw at the end of 2018,” said Jonathan Rawling, CFO of yallacompare.

“Consumers are now accustomed to VAT and have factored it into their household budgets. As a result, confidence levels are now back to, or exceeding, where they were at the start of 2018 and we expect to see them stay there for the foreseeable future.”

Despite the yallacompare results, the rising cost of living is the top concern among young people, according to the results of the Arab Youth Survey released last week.

The survey found that 56 percent believe it is the biggest obstacle facing the Middle East, followed by unemployment with 45 percent and slow economic growth with 31 percent.

Source:

Arabian Business | Article by: Shane McGinley

UAE approves full list of penalties under VAT

By Tasleem Faraz MinhasApril 19, 2019UAE VAT No comments:

UAE approves full list of penalties under VAT

The UAE cabinet has approved the list of administrative penalties that will be imposed on businesses for violations of the tax laws.

Each fine or penalty will be no less than AED500 and no more than triple the value of the tax on the transaction in question.

The following lists the administrative penalties for violations related to tax procedures, VAT, and excise tax.

Violations related to tax procedure

1. Failure to keep the required records specified by the tax procedures law and the tax law.

AED 10,000 for the first time.
AED 50,000 for each repeat violation.

2. Failure to submit the required records in Arabic when requested by the Authority

AED 20,000

3. Failure to submit a registration application within the timeframe specified by the tax law.

AED 20,000

4. Failure to submit a deregistration application within the timeframe specified by the tax law.

AED 10,000

5. Failure to inform the Authority of an amendment to tax records that needs to be submitted.

AED 5,000 for the first time.
AED 15,000 in case of repetition.

6. Failure to notify the authority that a legal representative has been appointed for the business within the specified timeframe. The penalties will be charged to the legal representative.

AED 20,000

7. Failure of the legal representative to file a tax return within the specified timeframe. The penalties will be charged to the legal representative.

AED 1,000 for the first time.
AED 2,000 in case of repetition within 24 months.

8. Failure of the Registrant to submit a tax return within the timeframe specified by the tax law.

AED 1,000 for the first time.
AED 2,000 in case of repetition within 24 months.

9. Failure to pay the tax stated in the tax return/tax assessment form within the timeframe specified by the tax law.

The taxable person will incur a late payment penalty as follows:

2% of the unpaid tax is due immediately.
4% is due on the seventh day following the deadline for payment.
1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.

10. Submission of incorrect tax returns.

Two penalties are applied:

Fixed penalty of:

(AED 3,000) for the first time.
(AED 5,000) in case of repetition

Percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows:

(50%) if the Registrant does not make a voluntary disclosure or he made the voluntary disclosure after being notified of the tax audit and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first.
(30%) if the Registrant makes a voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit.
(5%) if the Registrant makes a voluntary disclosure before being notified of the tax audit by the Authority.

11. Voluntary disclosure by a business of errors in a tax return, tax assessment, or refund application.

Two penalties are applied:

Fixed penalty of:

(AED 3,000) for the first time.
(AED 5,000) in case of repetition

Percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows:

(50%) if the Person/Taxpayer makes the disclosure after either of the following conditions applies: a) they have been notified of the tax audit and the Authority has started the audit process, or b) they have been asked for information relating to the tax audit.”
(30%) if the Person/Taxpayer makes a voluntary disclosure after being notified of the tax audit but before the start of the tax audit.
(5%) if the Person/Taxpayer makes a voluntary disclosure before being notified of the tax audit by the Authority.

12. Failure of a business to voluntarily disclose errors in a tax return, tax assessment, or refund application before a tax audit.

Two penalties are applied:

Fixed penalty of:

(AED3,000) for the first time
(AED5,000) in case of repetition

50% of the amount unpaid to the Authority due to the error.

13. Failure of a person or business to facilitate the work of the tax auditor.

AED 20,000

14. Failure of the Registrant to calculate tax on behalf of another person as required under the tax law.

The Registrant shall incur a late payment penalty as follows:

2% of the unpaid tax is due immediately once the payment is late.
4% of the amount of tax which is still unpaid is due on the seventh day following the deadline for payment.
1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.

15. Failure to account for tax due on import of goods as required under the tax law.
50% of unpaid or undeclared tax.

Violations related to VAT

Failure by the taxable person/business to display prices inclusive of tax.

AED 15,000

Failure by the taxable person/business to notify the Authority of applying tax based on the margin.

AED 2,500

Failure to comply with conditions and procedures related to the transfer of goods in designated zones.

The penalty will be the higher of AED 50,000 or 50% of the tax, if any, unpaid on the goods as the result of the violation.

Failure by the taxable person/business to issue a tax invoice or alternative document when making any supply.

AED 5,000 for each missing tax invoice or alternative document.

Failure by the taxable person/business to issue a tax credit note or alternative document.

AED 5,000 for each missing tax credit note or alternative document.

Failure by the taxable person to comply with the conditions and procedures regarding the issuance of electronic tax invoices and electronic tax credit notes.

AED 5,000 for each incorrect document.

Violations related to excise tax

Failure by the taxable person/business to display prices inclusive of tax.

AED 15,000

Failure to comply with conditions and procedures related to the transfer of excise goods in designated zones.

The penalty shall be the higher of AED 50,000 or 50% of the tax, if any, unpaid on the goods as the result of the violation.

Failure by the taxable person to provide the authority with price lists for the excise goods they produce, import or sell.

50,000 for the first time.
20,000 in case of repetition.

FTA Issues Guidelines for Foreign Businesses' VAT Refund in UAE

By Tasleem Faraz MinhasFebruary 12, 2019UAE VAT No comments:

The Federal Tax Authority (FTA) has outlined four conditions that would allow foreign businesses to recover value-added tax (VAT) incurred in the UAE.

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.

Secondly, such foreign businesses must not be a taxable person in the UAE.

Thirdly, they must also be registered as an establishment with a competent authority in the jurisdiction in which they are established;

and finally, they must be from a country that implements VAT and that equally provides VAT refunds to UAE businesses in similar circumstances.

The 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 1 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 minimum claim amount of each VAT refund application submitted by business visitors is Dh2,000.*****

VAT in UAE: You Need to Deregister if...

By Tasleem Faraz MinhasJanuary 23, 2019UAE VAT No comments:

An industry expert expects a 'few thousand companies' in the UAE will deregister from the VAT system.(File photo)

Taxable persons/companies must apply for this if they fulfill any of the conditions laid down by the law.

Companies and individuals who registered with the Federal Tax Authority (FTA) for value-added tax can deregister if their annual turnover did not exceed Dh187,500 ($51,000) 13 months after registering with the FTA.

Anurag Chaturvedi, managing partner at Chartered House Tax Consultancy, said if a registrant did not make the taxable supplies within 12 months from the date of registration and also did not anticipate that within next 30 days after the end of tax year the the taxable supplies or expense will exceed Dh187,500, then an application for deregistration can be made.

Citing an example, he said if a tax registrant applied for voluntary registration on January 1, 2018, and its tax year ended on December 31, 2018, and that registrant has not made supplies equal to Dh187,500, it shall evaluate if its taxable supplies or taxable expenses will exceed the voluntary threshold within the next 30 days (ending on January 30). An application for deregistration can be made before February 20.

"If a tax registrant applied for voluntary registration on June 1, 2018, in that case his tax year will end on May 31, 2019. He shall assess his supplies and expenses within June 1, 2018 to June 30, 2019," Chaturvedi explained.

Kinnari Doshi, managing partner at NR Doshi & Partners, said taxable persons/companies must apply for deregistration if they fulfill any of the conditions laid down in the Decree Law and Executive Regulations and failure to apply within the timeframe specified will attract an administrative penalty of Dh10,000. "We believe that a few thousand companies would apply for deregistration either because they would fulfill the conditions laid down in the Decree Law and the Executive Regulations or are being liquidated in their normal course of operations. At the same time, we believe that many more companies would register because they would satisfy the registration criterion defined in the law," Doshi said.

Highlighting the effects of deregistration, she noted that deregistration from VAT bring a few benefits to businesses. "Businesses would not incur costs for complying with the VAT Laws. Furthermore, their goods and services would be cheaper to non-registered individuals and businesses as no VAT would be levied."

"However, business would not be able to claim back VAT on expenses that they incur after deregistration. Additionally, they would be required to pay VAT on inventory or other assets that they purchased while they were registered, irrespective of whether they claimed VAT on such assets. These assets would be considered as deemed supply i.e. the self-supply of assets on hand at the date of deregistration," Doshi added.

David Stevens, partner for VAT implementation in the GCC at EY, said if a business is not eligible to be voluntarily registered because either their taxable turnover or expenses are below the required threshold value of Dh187,500, then they should deregister.

"Furthermore, we understand that the FTA is checking registration eligibility to ensure very small businesses that should not be registered are indeed excluded from registration and deregistered if they did obtain registration late in 2017 for whatever reason," added Stevens.

Pratik Shah, resident partner and VAT expert at WTS Dhruva Consultants, said businesses that registered with the introduction of VAT and not making any taxable supplies or having average taxable supplies of less than Dh16,000 per month in the previous 12 months would be required to mandatorily deregister as per UAE VAT legislation.

Considering the turnover amount is very nominal, Shah expects very few businesses will be required to mandatorily deregister.

He noted that businesses need to analyse deregistration carefully.

"The key drawbacks are VAT charged by suppliers will become cost to the company which may result in increase in prices and businesses not registered under VAT may also not be considered a preferred supplier by their VAT-registered customers."

Source: khaleejtimes, Article by Waheed Abbas