News Update

UAE's Federal Tax Authority issues warning over VAT scam

Date: 10 Sep, 2019

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External URL: https://www.arabianbusiness.com/banking-finance/427698-uaes-federal-tax-authority-issues-warning-over-vat-scam

The UAE’s Federal Tax Authority on Tuesday issued a warning after reports of scammers trying to target bank customers over VAT refunds.

In response to reports that some bank customers have received emails from unidentified sources impersonating banks and financial institutions requesting personal data in the promise of helping them claim VAT refunds, the FTA reaffirmed that they can only be processed through its official website.

The authority said that some recipients have been asked to provide personal data, including names, credit card numbers, and PIN codes, claiming that providing the information will allow them to recover VAT.

“Refunding taxes for legally eligible applicants is a direct transaction between the registered business and the FTA, and does not call for any intermediaries,” it said in a statement.

“The process is completed via advanced electronic systems, available on the FTA’s official website, which includes security features for financial transactions. It is done through official channels using the International Bank Account Number (IBAN), and via systems under the authority of – and electronically linked to – the UAE Central Bank.”

The FTA warned all registered businesses, calling on them to remain vigilant and maintain the confidentiality of their personal data.

FTA's dialogue led to smooth VAT implementation in the UAE, says Abdulla Al Gurg

Date: 10 Sep, 2019

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External URL: arabianbusiness.com/politics-economics/427427-ftas-dialogue-led-to-smooth-vat-implementation-in-the-uae-says-abdulla-al-gurg

The UAE’s Federal Tax Authority’s (FTA) dialogue with larger corporations will eventually trickle down to smaller traders, among whom the value-added tax (VAT) process has sometimes been problematic, according to according to Abdulla Al Gurg, the CEO of the Easa Saleh Al Gurg Group (ESAG).

According to Al Gurg, ESAG – which is the exclusive UAE agent for the British American Tobacco Company and its subsidiaries – is one of the most significant sources of revenue from VAT and excise tax in the country.

Despite some concerns that were expressed ahead of the implementation of VAT, Al Gurg said he believes the process was overall handled smoothly.

“I respect them [the FTA] and admire their hard work creating something from nothing,” he said. “It must have been a huge challenge to take it from the point of just being an instruction to the point of actual being a thing that we live by.”

Al Gurg added that “everything has a process, and I think it couldn’t have been better”.

“I admire the approach and willingness of discussion they had with us,” he added.

“You don’t get a lot of government entities that are very open in dialogue.”

Trickle-down effect

Although he said that some – particularly smaller companies – have faced difficulties with the VAT process, he is confident that the FTA’s willingness to address them with larger companies will have a trickle-down effect on the economy.

“I’m not saying there are no problems, but when there is a problem, it is handled and taken care of,” he said. “Maybe the small traders don’t feel that way. It’s a very different experience

“But if they are willing to change for us, the effects will ripple through,” he added. “It just needs a bit more patience.”

In June, the government announced that it collected AED 27 billion in VAT last year, far exceeding its target of AED 12 billion.

IMF says VAT should be doubled to 10% in Saudi Arabia

Date: 09 Sep, 2019

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External URL: https://www.khaleejtimes.com/business/global/imf-says-vat-should-be-doubled-to-10-in-saudi-arabia

The International Monetary Fund (IMF) has suggested that the value-added tax (VAT) should be doubled from five percent to 10 percent in Saudi Arabia in consultation with the other Gulf countries.

Analysts expect the hike in VAT rate will come only after 2021 once Kuwait and Oman will also be ready to implement it and as a customs union, the increase makes sense across the GCC countries.

“The introduction of the VAT in January 2018 was a landmark achievement, with revenue collections exceeding expectations. The reduction in the registration threshold at the beginning of 2019 has also gone smoothly. Staff suggested that consideration be given to raising the VAT rate from 5 to 10 percent, in consultation with the GCC,” IMF said in a report prepared its staff after consultation with the authorities in the Kingdom.

The UAE and Saudi Arabia introduced the five percent value-added tax from January 2018 with both the countries surpassing their tax collection targets.

Thaddeus Best, an analyst at Moody’s Sovereign Risk Group, said as a customs union, it is logical that GCC countries would seek to keep their VAT rates harmonised in order to prevent tax arbitrage opportunities emerging within the GCC.

“However, as the hesitant implementation of five percent VAT across the GCC since 2018 shows, there is some scope for VAT differentials to be tolerated, so long as they are relatively small and temporary, as it is currently the case in the GCC with only three out the six countries having implemented the measure so far. Nevertheless, we think it is unlikely that Saudi Arabia, the UAE and Bahrain would raise VAT rates further until the remaining GCC sovereigns have finalised their VAT frameworks,” Best told Khaleej Times.

VAT receipts set to boost Ras Al Khaimah surplus in 2019, says Fitch

Date: 06 Sep, 2019

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External URL: https://www.arabianbusiness.com/politics-economics/426118-vat-receipts-set-to-boost-ras-al-khaimah-surplus-in-2019-says-fitch

Fitch Ratings has affirmed Ras Al Khaimah’s long-term foreign-currency issuer default rating (IDR) at ‘A’ with a stable outlook, saying the emirate has a low and declining government debt burden and high GDP per capita.

The ratings are also supported by the benefits of RAK’s membership of the UAE, while the emirate’s small size and weaknesses in the policy framework weigh on the ratings, Fitch said in a statement.

“The emirate derives substantial support from its membership of the UAE… Close integration within the UAE has allowed the emirate to focus on its development strategy and build a relatively diversified economy dominated by manufacturing and services,” it added.

Fitch said it expects the debt of the government and its state-owned enterprises to fall to below 20 percent of GDP in 2019 from 33 percent in 2015.

It added that the debt will fall further to close to 17 percent of GDP in 2020 as the government uses VAT receipts for the early repayment of AED678 million of private placements.

Fitch noted that the government’s fiscal surplus increased to 2.6 percent of GDP in 2018 from 1.4 percent in 2017, buoyed by the recovery of mining and quarrying activities and receipts from the sale of the government’s 41 percent stake in Union Cement Company.

Fitch also forecast a fiscal surplus of 2.7 percent of GDP in 2019, largely underpinned by RAK’s receipt of close to two years’ worth of VAT, amounting to over 2 percent of GDP.

VAT was introduced in the UAE in 2018 and collected at the federal level, but an agreement on the share to be remitted to individual emirates was only reached in early 2019, which delayed the disbursement of the first year’s collection.

Fitch added that GDP growth will slow slightly to 2.5 percent in 2019 from 2.8 percent in 2018 as the momentum from the rebound after the Qatar embargo fades and UAE-wide growth is expected to remain muted while the development of RAK’s container port could also spur new investment in the free zones and the broader economy.

However, the continuation of the housing market slump in Dubai has led to a reduction in building permits and mortgages issued in RAK and could also weigh on tourism, Fitch said.

Decreasing hotel occupancy rates were seen during the first half of 2019 although they remain high.

“The government is making progress on developing the emirate as a tourist destination, and a doubling of hotel capacity by 2023 is in the pipeline. A further escalation of tensions between Iran and the US and its regional allies could also have repercussions for RAK,” Fitch noted.

VAT registration call for BD 18,750–500,000 generating entities

Date: 03 Sep, 2019

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External URL: https://www.nbr.gov.bh/releases/57

The National Bureau for Revenue (NBR) highlighted that the VAT registration process is open for entities generating or expected to generate between BD 18,750 and BD 500,000 in annual vatable supplies.

Concerned entities that wish to register early for VAT with the NBR will have the option of choosing the date to start implementing VAT until the end of the grace period.  The NBR stressed that collaboration and raising awareness on technical and procedural aspects of VAT are of utmost importance to ensuring the success of the VAT application process.

The NBR noted the positive cooperation provided by businesses regarding the proper application of VAT, adding that more than 4500 entities have registered for VAT since its launch within the Kingdom on 1 January 2019.

 

For further information, please contact the Call Center on 80008001 or email vat@nbr.gov.bh, in addition to leveraging the information available on NBR’s website (www.nbr.gov.bh), Twitter, Instagram and YouTube channel.

How to make 'recovery of cost' under VAT

Date: 27 Aug, 2019

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External URL: https://www.khaleejtimes.com/business/how-to-make-recovery-of-cost-under-vat

Taxability of ‘recharges’, typically applicability of VAT is a subject matter of debate and interpretation across the VAT jurisdictions. The term ‘recharge’ also commonly known as ‘recovery of cost’ is generally not defined in the legal statues but has gained significant importance from a VAT determination viewpoint, purely because it is not clear whether a recharge in itself involves any supply of goods or services attracting VAT.

A recharge happens when there are three entities involved. For example, Entity B incurs costs charged by Entity A which are then recharged by Entity B to Entity C. In each of the supplies, the VAT treatment could potentially change, depending on nature of the transaction, relationship between the entities and whether recharge is at cost or with a mark-up.

The challenge in determining the VAT liability for recharges are multi-fold.

First, it needs to be determined whether the costs that are recharged were incurred for customer’s direct benefit or were they, in fact consumed by the supplier and later recharged to the customer.

Second, it needs to be determined whether the recharge in itself constitutes an independent supply or is it ancillary to the principal / main supply. Also, it is equally important to ascertain whether the person reimbursing the amount is acting in the capacity of an agent (i.e. recovering payment made on behalf of another person) or recovering the expenses incurred as a principal.

FTA begins procedures on updated excise goods

Date: 24 Aug, 2019

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External URL: http://www.wam.ae/en/details/1395302781424

The Federal Tax Authority, FTA, has begun carrying out procedures related to implementing the latest Cabinet Decision on Excise Goods, Excise Tax Rates, and the Method of Calculating the Excise Price, issued in August 2019, which expanded the scope of excise goods to include electronic smoking devices and liquids, and sweetened drinks.

The new Decision goes into effect on 1st January 2020, adding these products to the list of Excise Goods, which included tobacco and tobacco products, energy drinks, and carbonated drinks – products that have been subject to Excise Tax since 1st October 2017.

In a press statement issued today, the Authority asserted that the new Decision is part of the government’s continuous efforts to promote healthy lifestyles in the UAE community and curb the spread of diseases stemming from consumption of harmful goods. These measures align with the UAE Vision 2021, which seeks to ensure the UAE is among the best countries in the world across all sectors.

As part of the first phase of implementing the Cabinet Decision, the FTA called on producers, importers, and stockpilers of sweetened drinks with added sugar to abide by the Decision and start registering for excise tax purposes, noting that Excise Tax is an indirect tax that is imposed on certain products deemed harmful in an effort to curb their consumption.

The Authority revealed that it has updated the electronic registration system for excise goods to allow for adding the new products included in the amended Cabinet Decision.

An entirely new registration procedure was put in place as of 18th August 2019, and the FTA called on all concerned businesses – including producers, importers, and stockpilers of Excise Goods – to take the initiative and register said goods in the new system.

Transfer of a Business as a Going Concern - VATP015

Date: 22 Aug, 2019

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External URL: http://www.allaboutvat.com/wp-content/uploads/Summary-VATP-015-Transfer-of-a-Business-as-a-Going-Concern-21Aug2019.pdf

In accordance with Article 7(2) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (the “Decree-Law”), the transfer of whole or an  independent part of a business from a person to a taxable person for the purposes of continuing the business that was transferred is not considered to be a supply for VAT purposes.

As a consequence of not being a “supply” for VAT purposes, such transfer of  a business, commonly known as a “transfer of business as a going concern” or a “TOGC”, is not subject to VAT. This rule has a compulsory application.

Summary

This Public Clarification discusses the conditions that have to be met for a  transfer to qualify as a transfer of a going concern under Article 7(2) of the
Decree-Law.

UAE Cabinet to expand list of excise taxable products in January 2020

Date: 21 Aug, 2019

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External URL: http://wam.ae/en/details/1395302780784

In a step to reduce consumption of unhealthy goods and modify consumers’ behaviour, the UAE Cabinet adopted a decision to expand the list of excise taxable products to include sweetened beverages, sugary drinks and electronic smoking devices, starting 1st January 2020.

According to a statement released by the Cabinet General Secretariat, “The decision comes to support the UAE government’s efforts to enhance public health and prevent chronic diseases directly linked to sugar and tobacco consumption.”

“A tax of 50 percent will be levied on any product with added sugar or other sweeteners, whether in form of a beverage, liquid, concentrate, powders, extracts or any product that may be converted into a drink,” the statement added.

“The decision also requires manufacturers to clearly identify the sugar content in order for consumers to make sensible healthy choices.

“A tax of 100 percent will be also levied on electronic smoking devices, whether or not they contain nicotine or tobacco, as well as the liquids used in electronic smoking devices. The decision aims at reducing the consumption of harmful products that put the health of people and environment at risk,” it continued.

“In 2017, the UAE Government started introducing excise tax on specific goods, which are typically harmful to human health or the environment,” the General Secretariat of the Cabinet concluded.

Expo 2020 will drive VAT in UAE by US$8bn

Date: 21 Aug, 2019

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External URL: https://www.intergameonline.com/coin-op/news/expo-2020-will-drive-vat-in-uae-by-us8bn

Dubai’s Expo 2020 will drive VAT revenues over $8bn this year, according to Rajiv Hira, chairman, RHMC Managing Consultants. However the large increases would not be sustained long-term.

Hira, in a newspaper interview in the Arabian Business, said that over 300,000 businesses and tax groups registered for VAT would provide the figures.

Nearly 200 countries are participating in the Expo 2020, reports the tax consultancy, with growth in retail, hospitality, aviation and shipping.

“Considering the distribution of $7.3bn (AED27bn) on account of VAT, it can be easily concluded too touch around $8bn although we will be observing an increase in capital spending at a faster and larger scale, whereas VAT collection will not increase in that speed.”

In another report, the VAT tax revenues are being split between central and local government, by the UAE Cabinet, at a ratio of 30-70 in favour of local government.

Around 25 million people are expected to visit Dubai for Expo 2020.

MoF announces amendment of the Cabinet Decision on excise goods, rates

Date: 21 Aug, 2019

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External URL: http://www.wam.ae/en/details/1395302781065

In order to direct efforts towards reducing the negative effects of harmful consumption patterns, the Ministry of Finance announced the details of the amendment of Cabinet Resolution No. (38) of 2017 regarding excise goods, excise tax rates and the formula to calculate the excise price.

In addition to the goods currently subject to excise tax (i.e. tobacco products, soft drinks and energy drinks), excise tax will also be imposed on e-cigarettes and the liquids used with them, as well as beverages sweetened with added sugar.

The decision to amend excise goods and the formula of calculating excise price is to achieve government directives in terms of rationalizing consumer behavior related to harmful products, which contributes to raising community members’ public health levels, and reducing the negative health consequences caused by these products. This decision is in line with the UAE’s commitment to implementing the GCC Unified Agreement for Excise Taxes and to complement efforts to achieve economic integration among the GCC countries.

Obaid bin Humaid Al Tayer, Minister of State for Financial Affairs, pointed out that these new amendments to the Cabinet’s decision on excise tax are part of the UAE’s keenness to reduce harmful consumer practices by establishing a legislative and procedural base that supports national efforts to curb unhealthy practices that cause chronic diseases.

He said: “These amendments comes in line with the government’s orientation that excise tax policy targets consumption patterns harmful to public health, in order to complement efforts to raise awareness about the damaging effects of consumables harmful to health. It contributes to strengthening the health system’s work in controlling prevalent diseases and reducing the cost of treating them, promoting community health, motivating individuals to spend effectively, reducing the negative impact of harmful substances on the environment, and encouraging producers to develop better alternatives.”

Pursuant to these amendments, effective 1 January 2020, a 100% excise tax on electronic smoking appliances and liquids used in these devices, and 50% excise tax on beverages and sugary drinks has been set. These goods were identified in addition to existing excise goods such as tobacco and tobacco products (100%), energy drinks (100%) and soft drinks (50%). The decision also specified the formula of calculating the excise and retail price, and the Federal Tax Authority (FTA) shall have the power to determine the procedures necessary to prove the classification of any product as an excise good.

At the same time, the Cabinet set the minimum standard price for tobacco products, which set the excise price of tobacco products not less than 0.4 dirhams per roll of cigarettes, and 0.1 dirhams per gram of hookah tobacco, ready-to-use tobacco and similar products. The Minister of Finance will issue a decision on the implementation date, which is set to be before 1 January 2020.

Sugary drinks to cost more in UAE from January 2020

Date: 20 Aug, 2019

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External URL: https://www.khaleejtimes.com/news/government/sugary-drinks-to-cost-more-in-uae-from-january-2020-

The UAE will levy excise tax on additional sugary and smoking products from next year in order to reduce consumption of these unhealthy products linked to chronic diseases.

The UAE Cabinet has approved a proposal to impose 50 per cent excise tax on products with added sugar and sweeteners, whether in the form of a beverage, liquid, concentrate, powders, extracts or any product that may be converted into a drink. While 100 per cent excise tax will be levied on electronic smoking devices – whether or not they contain nicotine or tobacco – liquids used in electronic smoking devices will also be levied the same tax.

From October 2017, the UAE started to levy 50 per cent “sin tax” on sugary and energy drinks and 100 per cent tax on smoking products in order to curb the consumption of these harmful products.

Anurag Chaturvedi, managing partner at Chartered House Tax Consultancy, said the new products which are likely to be included in the list are candies, cookies, cakes, pastries, pies, doughnuts, canned juices, ice creams, yogurts, milkshakes etc.

“We have already seen the impact on energy drinks, where a fall of 65 per cent in sales was reported after the introduction of the excise tax. Definitely, I see a reduction in the sale of these products as the prices shall go up. With VAT already being levied on these products and with the addition of excise tax, prices will go up and consumers automatically shall reduce the consumption of these products,” said Chaturvedi.

He said UAE businesses must expedite their process as January 1, 2020, provides not too much time for companies to upgrade their systems, educate their employees and be prepared for this new introduction of excise levy on products with added sugar and sweeteners.

A statement released by the Cabinet General Secretariat said that manufacturers of these sugary products must clearly identify the sugar content to make it easier for the consumers to make sensible healthy choices.

Nirav Shah, director at Fame Advisory DMCC, said it would be very interesting to see what this list will include as sweetened beverages could be as common as soft drinks, or the authorities will restrict it to excessive sugary sports drinks only.

“Inclusion of e-cigarette is interesting too, as their contention has been that they do not contain tobacco and used frequently by people trying to stop tobacco consumption. Moreover, all of these items will have to comply with stringent requirements for sale in local markets, similar to other products covered in excise,” Shah said.

The UAE will also add tobacco products used in shisha under excise tax from the fourth-quarter of this year, prohibiting the import of any type of shisha tobacco into the country if they don’t bear the digital marks.

The UAE enjoys one of the highest tax compliance rates of close to 100 per cent for tax return requirements of excise tax, which is estimated to generate up to Dh7 billion in annual revenues for the UAE federal budget. With the addition of new items under the “sin tax”, revenues are expected to increase next year. The UAE also imposed five per cent value-added tax (VAT) on a host of goods and services from January 2018, which helped the UAE raise Dh27 billion.

99% of firms in Bahrain sign up for VAT

Date: 19 Aug, 2019

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External URL: https://www.zawya.com/mena/en/economy/story/99_of_firms_in_Bahrain_sign_up_for_VAT-SNG_150314917/

The National Bureau for Revenue (NBR) has announced that 99 per cent of relevant enterprises operating in Bahrain have successfully registered with tax authorities.

The NBR identified 12 enterprises that are in violation of Bahrain’s VAT Law by not submitting a registration application, paying the tax by the deadline, or filing their return form.

 The bureau said they had been fined, warned of further action which may lead to the suspension of their Commercial Registration.

New UAE tax rule on two products from November 1

Date: 19 Aug, 2019

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External URL: https://www.khaleejtimes.com/business/local/fta-to-implement-phase-2-of-tobacco-marking-scheme

The Federal Tax Authority (FTA) is ramping up its efforts in preparation to implement the second phase of the ‘Marking Tobacco and Tobacco Products Scheme’, where it will be expanded to cover waterpipe tobacco (known in Arabic as ‘Mu’assel’) and electrically heated cigarettes as of November 1, 2019.

Digital Tax Stamps will be made available for purchase by producers and importers of waterpipe tobacco and electrically heated cigarettes, the authority revealed, as it held its second awareness workshop in Dubai to introduce them to the scheme’s procedures and objectives, as well as the timeline for the second phase. The workshop was led by FTA experts and representatives from De La Rue, the company commissioned by the authority to operate the system.

The FTA asserted that the scheme was launched to support its efforts to collect taxes, combat tax evasion, and protect consumers from commercial fraud. The FTA went on to note that these preparations follow the successful implementation of the Scheme’s first phase, where the sale and possession of any cigarette packets not bearing the ‘Digital Tax Stamps’ was prohibited across local markets as of Thursday, August 1, 2019.

FTA director general, Khalid Ali Al Bustani, said: “This workshop is part of the authority’s plan to raise tax awareness among taxable businesses, maintain constant communication with professionals working across all economic activities, and keep them in the loop with regards to the latest developments in tax procedures. These workshops allow us to listen to their opinions and suggestions, and address any obstacles they may be facing to ensure a smooth implementation of tax laws. The authority is committed to strengthening its partnerships with the various relevant entities in both the government and the private sector. These strategic partnerships are crucial for successfully implementing the tax system.”

He added that the FTA is also dedicated to organising continuous awareness campaigns, seminars, and workshops for all business sectors. FTA experts went into the details of the upcoming phase two of the ‘Marking Tobacco and Tobacco Products Scheme’, noting that as of November 1, 2019, the Digital Tax Stamps will be made available for purchase, where producers and importers of waterpipe tobacco (‘Mu’assel’) and electrically heated cigarettes are required to place them on these products to indicate that all due taxes have been settled. As of March 1, 2020, it will be prohibited to import into the UAE any of the Excise Goods outlined in FTA Decision No. (2) of 2019 on Marking Tobacco and Tobacco Products, if they do not bear the stamps. Then starting on June 1, 2020, it will no longer be permissible to supply, transfer, store, or possess said Excise Goods in the UAE unless they have the stamps.

Federal Tax Authority launches new electronic system to register excise goods

Date: 17 Aug, 2019

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External URL: http://www.wam.ae/en/details/1395302780330

The Federal Tax Authority,FTA, has launched a new electronic system for registering excise goods as part of its plans to continuously develop the tax system as a whole, and excise tax procedures, in particular.

In a press statement issued today, the authority explained that the new system offers accurate and transparent procedures for registering excise goods with clear guidelines and standards in addition to the new reporting requirements related to excise tax returns and declarations.

The launch is aligned with the UAE leadership’s directives to enhance the country’s global competitiveness through continuous improvement of government services and ensuring accurate and transparent processes.

The FTA called on all businesses dealing with excise goods to follow the new process of registering excise goods and ensure all required documents are readily available when submitting the registration request for the goods. The requirements clarified in the new guides include products details, ingredients, marketing information including images and videos, lab tests in some cases, and the retail price of the product based on the UAE retailers or in the relevant country in case it is not sold in the UAE.

In relation to the new reporting requirements of the excise tax, the authority urged the excise taxable persons to comply with the new declarations and tax return forms and reporting requirements including import, produce, release from designated zones, and local purchase scenarios, which ensures increased transparency and accuracy. Additionally, The Authority pointed to the new manuals and guides it launched to raise awareness among taxpayers and offer them instructions on how to register excise goods in the new system, and comply with the new reporting requirements and forms in the excise tax system. The FTA invited businesses subject to excise tax to make use of these manuals to educate their staff about the new system, as well as the procedures for implementing excise tax in general.

Any Person who produces or imports an excise good to be sold in local markets is subject to excise tax, as is any Person who stockpiles said goods or releases them from a designated area, the FTA asserted, urging all relevant businesses to take the initiative and register their excise goods in the new system, as per the terms and conditions stipulated in the Cabinet Decision on excise goods, which specifies the tax rates they are subject to and outlines the method used to calculate excise prices.

The FTA asserted that there is no threshold for excise tax, meaning that any business with activities involving excise goods is required to go ahead and register in the new system, calculate its tax amounts, and refer to the FTA website for information and manuals that outline the required procedures for producers and importers of excise goods, and for excise goods stored in designated zones.

Expo 2020 Dubai to help drive VAT revenues over $8bn this year

Date: 14 Aug, 2019

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External URL: https://www.arabianbusiness.com/politics-economics/425747-expo-2020-dubai-to-help-drive-vat-revenues-over-8bn-this-year

Increased spending on Expo 2020 will help value added tax (VAT) revenues in the UAE push to over $8 billion (AED30bn) this year, according a Dubai-based tax consultancy.

Revenues will also be boosted by a growth in retail, hospitality, aviation and shipping, but Rajiv Hira, chairman, RHMC Management Consultants, said the huge increases will not be sustained over the longer term.

Hira told Arabian Business: “Considering the distribution of $7.3bn (AED27bn) on account of value-added tax, it can be easily concluded to touch around $8bn (AED30bn), although we will be observing an increase in capital spending at a faster and larger scale, whereas VAT collection will not increase in that speed, due to the following factors: Entities will be entitled able to claim input tax on capital spending; and VAT is already paid on account of advances for the projects related to 2020 (including other capital spendings).”

What is the penalty for not submitting a tax return on time?

Date: 12 Aug, 2019

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External URL: https://www.thenational.ae/business/money/vat-q-a-what-is-the-penalty-for-not-submitting-a-tax-return-on-time-1.897461

The Federal Tax Authority always gives businesses a minimum of 28 days after the end of the reporting quarter to prepare and file their VAT return. When the 28th of the following month falls on either a 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. The FTA portal will allow you to file a return for a quarter after the deadline has passed. In fact you cannot file another VAT return until you have filed the previous one, 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 Dh1,000 in the first instance and then Dh2,000 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.

Dubai businessman Khalaf Al Habtoor urges for end to Skype ban in UAE

Date: 07 Aug, 2019

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External URL: https://gulfbusiness.com/dubai-businessman-khalaf-al-habtoor-urges-for-end-to-skype-ban-in-uae/

Dubai billionaire businessman Khalaf Al Habtoor has urged the UAE leadership to reconsider fees such as VAT while also renewing his call to lift the ban on VoIP services such as Skype and WhatsApp.

“Our region is going through tough political conditions that affect the economic climate in general,” the founder and chairman of conglomerate Al Habtoor Group said on Twitter.

The Emirati businessmen urged UAE leaders “to reconsider some of the laws, practices and fees imposed, which will have a positive impact on the economy”.

The UAE imposed a 5 per cent value added tax (VAT) on goods and services in January 2018.

Tally Solutions Hosts ‘Bahrain VAT Summit’ to Discuss VAT Implementation and Compliance in the Next Half Year of 2019

Date: 07 Aug, 2019

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External URL: https://www.albawaba.com/business/pr/tally-solutions-hosts-%E2%80%98bahrain-vat-summit%E2%80%99-discuss-vat-implementation-and-compliance

Tally Solutions, a leading international accounting and compliance software provider, recently hosted a summit on value-added tax (VAT) in Bahrain as part of its ongoing efforts to raise awareness of businesses on the new taxation system in the country.

The recently concluded ‘Bahrain VAT Summit’ at the Sheraton Bahrain Hotel featured renowned VAT and technology experts, who shed light on the changes that had taken place in the country six months after the implementation of the VAT law. They also tackled the proposed steps that could be taken in the remaining half of 2019 to ensure correct and timely VAT compliance and implementation.

Guest speaker Manu Nair, CEO of the Emirates Chartered Accountants Groups, discussed the key reforms rolled out at the national level during the first 180 days of VAT implementation and their subsequent business impact. Further, Nair highlighted the expectations in the next 180 days of VAT in the country to help companies prepare better.

The attendees consisted of VAT-registered businesses with queries around the new law; companies which were planning to voluntarily register; and enterprises with questions about the registration requirements for the second and third phases of VAT deployment.

UAE VAT collection set to grow 30% to Dh35 billion in 2019

Date: 01 Aug, 2019

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External URL: https://www.khaleejtimes.com/business/local/uae-vat-collection-set-to-grow-30-to-dh35-billion-in-2019-

Greater compliance due to new legal aspects such as country-by-country reporting and Base Erosion and Profit Shifting (Beps), increased spending for Expo 2020, and more companies listing for value-added tax (VAT) will help the UAE to increase its revenues through VAT by up to 30 per cent this year, say tax experts.

Jomon K. George, chairman of The Institute of Chartered Accountants of India’s South Region, estimated that the UAE’s VAT collection is expected to increase by Dh8 billion or 30 per cent in 2019 to reach Dh35 billion as compared to Dh27 billion last year.

“With increased Expo 2020 spending, VAT revenues would easily be Dh35 billion-plus this year. The way Expo is being marketed by Dubai, naturally the spending and consumption will increase which will enhance tax collection in the UAE, notably in Dubai,” George said.

Sangeetha Nahar, executive member of The Institute of Chartered Accountants of India (ICAI) – Dubai chapter, believes that awareness is spreading and the market is becoming more mature.

Banned in UAE: Sale and possession of cigarettes without Digital Tax Stamps is prohibited from 1st August

Date: 01 Aug, 2019

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External URL: https://gulfnews.com/uae/government/banned-in-uae-sale-and-possession-of-cigarettes-without-digital-tax-stamps-from-august-1-1.1564572318879

Abu Dhabi: From tomorrow, August 1, the sale and possession of all types of cigarettes not bearing the Digital Tax Stamps will be prohibited across UAE markets – the Federal Tax Authority (FTA) announced.

Prohibiting the sale in local markets of cigarettes packets not bearing the Digital Tax Stamps is part of the timeline set for the ‘Marking Tobacco and Tobacco Products Scheme’, which went into effect at the beginning of 2019.

What does the tax stamp mean?

The scheme seeks to electronically track cigarettes packs from the production facility and until they reach the end-consumer, in order to protect consumers from low-quality products, combat tax evasion, and ensure that the Excise Tax due on these products has been settled.

This is as per Cabinet Decision No. (42) of 2018 on Marking Tobacco and Tobacco Products and FTA Decision No. (3) of 2018 on Implementing the Marking Tobacco and Tobacco Products Scheme.

“The Authority has sought to implement an integrated and widespread awareness campaign starting from the second quarter of 2018 – several months before the ‘Marking Tobacco and Tobacco Products Scheme’ went into effect – to allow sufficient time for local markets to prepare for the Scheme and avoid any adverse effects to their commercial activities,” FTA Director General Khalid Ali Al Bustani explained.

“Furthermore, the Authority collaborated with the system operator to carry out an extensive awareness campaign through its official website, social media accounts, newspapers, television, and radio. Workshops were organised, bringing together individuals and organisations involved in the manufacture and trade of tobacco and tobacco products, introducing them to the Scheme, and answering their queries.”

Public Clarification Disbursements and Reimbursements -Ref#VATP013

Date: 01 Aug, 2019

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External URL: http://www.allaboutvat.com/wp-content/uploads/Public-Clarification-No.13.pdf

In commercial transactions, a person may incur expenses and subsequently recover such expenses from another party. The VAT treatment of the subsequent recovery of expenses depends on whether the recovery is
tantamount to a “disbursement” or “reimbursement”.

VAT Public Clarification Disbursements & Reimbursements VATP013

Date: 31 Jul, 2019

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External URL: http://www.allaboutvat.com/wp-content/uploads/VATP013-Disbursements-and-Reimbursements.pdf

The key elements to consider payments as disbursements:

The payments should be made as an agent of the principal.

The invoice should be in the name of principal.

There should be authorisation from principal for payt.

There should not be any markup on the transaction.

VAT Public Clarification VAT Treatment of Options and Option Premiums VATP014

Date: 31 Jul, 2019

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External URL: http://www.allaboutvat.com/wp-content/uploads/VATP014-Public-clarification-Option-premiums.pdf

This PC clarifies that options in only equity and dent instruments would be treated as exempt.

Significantly tax credit notes can be issued for reversing any earlier wrongly charged VAT and the resultant VAT impact should be executed by both the parties in their VAT records.

Designated Zones for the purposes of the Federal Decree-Law No. (8) of 2017 on  Value Added Tax

Date: 31 Jul, 2019

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External URL: http://www.allaboutvat.com/wp-content/uploads/Designated-Zones-11-07-2019-Latest.pdf

Based on:
– Cabinet Decision No. (59) of 2017 on Designated Zones for the purposes of the
Federal Decree-Law No. (8) of 2017 on Value Added Tax (effective 1 January
2018); and
– Cabinet Decision No. (35) of 2018 on Amending the List of Designated Zones
Annexed to the Cabinet Decision No. (59) of 2017 on Designated Zones for the
purposes of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (effective
18 June 2018).
– Cabinet Decision No. (43) of 2019 on Amending the List of Designated Zones
Annexed to the Cabinet Decision No. (59) of 2017 on Designated Zones for the
purposes of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (effective
4 July 2019).

NBR holds two consecutive VAT workshops

Date: 29 Jul, 2019

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External URL: https://www.nbr.gov.bh/releases/56

The National Bureau for Revenue (NBR) held two consecutive interactive VAT workshops to recap general and sector-specific VAT concepts, including invoicing and filing.

Following a question-and-answer session, 138 attendees representing 85 entities were given the opportunity to visit a unique interactive demo-center that provides innovative learning experiences to ensure effective implementation of VAT.

Today’s workshop is a continuation of the series of workshops organised by the NBR to provide an inclusive platform for all stakeholders from the public and private sector in order to increase businesses’ awareness of VAT return filing procedures ahead of deadlines.

Bahrain’s economic growth to decelerate further in 2019

Date: 25 Jul, 2019

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External URL: https://www.ameinfo.com/industry/finance/bahrains-economic-growth-decelerates-2019

The economic outlook for Bahrain’s economy remains clouded by persistent weakness in government finances, evident by significant fiscal deficits and rising public debt levels, large external financing needs, a general slowdown in non-oil activity and limited prospects for oil sector growth.

According to ICAEW’s latest Economic Insight report, economic growth in Bahrain more than halved last year, from 3.7% in 2017 to 1.8% in 2018, with further deceleration seen in 2019 to 1.6% amid a major drive to overhaul government finances, which include spending cuts, new taxes and other fiscal consolidation measures.

FTA Board of Directors Holds 9th Meeting, Showcases Report on the Authority’s Accomplishments and Ongoing Development Projects

Date: 24 Jul, 2019

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External URL: https://www.tax.gov.ae/press-releases/FTA-Board-of-Directors-Holds-9tht

The Board of Directors of the Federal Tax Authority (FTA) held its ninth meeting today (Wednesday, July 24, 2019) headed by FTA Chairman His Highness Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance, at the Ministry of Finance’s headquarters in Dubai.

The Board looked into the performance of the FTA’s various systems, which facilitate registration, the submission of Tax Returns, and refunding tax to legally eligible groups through multiple Schemes, including the VAT refunds for nationals building new residences in the UAE, the Tax Refunds for Tourists Scheme, and the VAT Refunds for Business Visitors.

The FTA Board of Directors ratified the Authority’s financial statements for 2017 and 2018, and approved several executive decisions regarding the FTA’s internal regulatory and administrative policies and operations. Attendees at the meeting then went on to showcase the Authority’s recent accomplishments, where the various tax schemes have exhibited improved performance, and the number of businesses and tax groups registered for VAT surpassed 307,000, while the number of those that registered for Excise Tax totalled 724.

Furthermore, the figures revealed that the user base for the tax system is expanding rapidly, which compelled the Authority to authorise more than 123 clearing and forwarding companies, increase the number of accredited Tax Agents to 395, and commission 28 accredited tax accounting software vendors.

H.H. Sheikh Hamdan bin Rashid Al Maktoum applauded the FTA’s performance and achievements, which were also lauded by experts, as well as local and international institutions. H.H. went on to highlight the Authority’s efforts to achieve the tax system’s stated developmental, economic, and social objectives, citing the strategic partnerships the FTA has forged with government and private entities, which catalysed the drastic increase in self-compliance rates and in tax awareness among taxpayers and the public.

“The tax system has begun achieving many of its main objectives, most notably the diversification of the UAE’s resources,” H.H. added. “This allows us to continue providing high-quality services for future generations, in line with the UAE Vision 2021 and its objectives to build a sustainable ecosystem and integrated infrastructure.”

NBR holds two consecutive VAT workshops

Date: 23 Jul, 2019

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External URL: https://www.nbr.gov.bh/releases/55

The National Bureau for Revenue (NBR) held two consecutive interactive VAT workshops to recap general and sector-specific VAT concepts, including invoicing and filing.

Following a question-and-answer session, 210 attendees representing 125 entities were given the opportunity to visit a unique interactive demo-center that provides innovative learning experiences to ensure effective implementation of VAT.Today’s workshop is a continuation of a series of workshops organised by the NBR to provide an inclusive platform for all stakeholders from the public and private sector in order to increase businesses’ awareness of VAT return filing procedures ahead of deadlines. 

UAE must allow itself flexibility on tax regime

Date: 23 Jul, 2019

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External URL: https://gulfnews.com/business/analysis/uae-must-allow-itself-flexibility-on-tax-regime-1.65340045

VAT itself must be treated as a work in progress and changes made where and when needed.

In 2018, the UAE’s Gross Domestic Product (GDP) was estimated at $414 billion. It was in the same year that a value-added tax (VAT) of 5 per cent was introduced for the first time, with a targeted revenue of Dh12 billion.

The federal share of the revenues was set at 30 per cent, and the seven emirates claiming the remainder 70 per cent. According to the CIA Factbook’s 2017 estimates, UAE’s household consumption alone represented 34.9 per cent of GDP, which when multiplied by $414 billion and then by 5 per cent produces a projected VAT revenues’ figure of Dh26.5 billion.

That said, VAT revenues collected in 2018 surpassed the announced target, with Dh27 billion. Of the Dh27 billion, Dh8.1 billion went to the federal government and Dh18.9 billion to the seven emirates in proportion to the share of VAT-related transactions that took place in each emirate.

As a result, Dubai claimed the highest share among the seven, receiving more than 40 per cent of the Dh27 billion collected in VAT revenues. Given that more than one year elapsed since VAT’s introduction, it is time to discuss its impact and what can be improved moving forward.

NBR holds two consecutive VAT workshops

Date: 23 Jul, 2019

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External URL: https://www.nbr.gov.bh/releases/55

The National Bureau for Revenue (NBR) held two consecutive interactive VAT workshops to recap general and sector-specific VAT concepts, including invoicing and filing.

Following a question-and-answer session, 210 attendees representing 125 entities were given the opportunity to visit a unique interactive demo-center that provides innovative learning experiences to ensure effective implementation of VAT.Today’s workshop is a continuation of a series of workshops organised by the NBR to provide an inclusive platform for all stakeholders from the public and private sector in order to increase businesses’ awareness of VAT return filing procedures ahead of deadlines.