Archive for the ‘Dubai and regional news’ category

VAT key steps – Synergy Software Systems, Dubai.

January 8th, 2018

- Maintain regular accounting books and records

Account maintenance is now mandatory under UAE VAT Law and it facilitates the correct receipt and payment of cash and other transactions entered by a company. Audited accounts will be needed so don’t wait till year end to find an auditor that suits your business.

2- Make changes to the core processes and accounting departments

It is important to change your core processes and adapt your accounting departments to achieve tax compliance. For SMEs, with limited transactions, the task is easier as the transition is less likely to require significant systematic change or they might use an external bookkeeper or tax agent.

3- Train staff, especially financial management

Employees need proper insight around GCC-wide initiatives to implement VAT across the region and how companies should prepare. Help them de-mystify VAT by providing on the job training and a framework to raise and clarify queries. Avoid disputes with trading partners and ensure staff have the relevant information and training to resolve issues that arise.

4- Review your contracts and the contracts and conditions agreed with dealers

Many businesses negotiated contracts at a time VAT was not payable but running across the implementation dates. It is time to now bring contracts into step with the UAE’s economic context.

- Consider accounting software for bookkeeping

Electronic reporting systems are increasingly being used by tax authorities. The ability to produce the required audit file details on demand will be difficult without a system. Companies that use electronic invoicing are likely to improve the timing of VAT recovery on costs.

6- Adhere to VAT deadlines

Register your company to avoid a fine as severe as AED 20,000. The Federal Tax Authority (FTA) has already been extend the deadline to the 1st January and if you don’t complete VAT registrations you will also have to stop sales till you get your tax registration certificate (TRC).

Note initial returns are due 28 January 2018 so time is running out.

7- Study UAE tax legislation

The implementation of taxes in the UAE came with a whole new set of procedures. we recommend to study and get familiar with the different laws in place including the UAE VAT Law and to discuss with your auditor, tax agent and software provider.

8- Keep an eye out for new information

There have been a slew of clarifications in the last month and some details are still not finalised e.g. with regard to free zones, or which companies will report monthly and which quarterly.

G.C.C VAT transitional arrangements

December 17th, 2017

A​bout ​two​ ​weeks​ ​ago,​ ​H.E.​ ​Khaled​ ​Al​ ​Bustani,​ ​Director​ ​General​ ​of​ ​the​ ​Federal​ ​Tax​ ​Authority
(“FTA”),​ ​announced​ ​on​ ​the​ ​radio​ ​that​ ​the​ ​UAE​ ​will​ ​treat​ ​movements​ ​of​ ​goods​ ​between​ ​UAE​ ​and​ ​the
Kingdom​ ​of​ ​Saudi​ ​Arabia​ ​(“KSA”)​ ​as​ ​“Non-GCC”​ ​Exports​ ​(ie.​ ​when​ ​goods​ ​are​ ​shipped​ ​from​ ​the​ ​UAE​ ​to
KSA)​ ​and​ ​“non-GCC”​ ​Imports​ ​(i.e.​ ​when​ ​goods​ ​are​ ​shipped​ ​to​ ​the​ ​UAE​ ​from​ ​KSA).​ ​

This​ ​means that a ​transitional​ ​period​ ​will apply until​ ​an​ ​Electronic​ ​Service​ ​System​ ​is​ ​introduced​ ​and​ ​both
UAE​ ​and​ ​KSA​ ​consider​ ​each​ ​other​ ​as​ ​“VAT​ ​Implementing​ ​States”. It seems likely that will be both when the full G.C.C has introduced VAT and the electronic reporting system is established across the region.

U.A.E. VAT registration time is running out……..

December 17th, 2017

Companies in the UAE that have not got their tax registration number (TRN) yet will have to procure it within the next 14 days.

Companies who have not completed their VAT registration within the dates prescribed by the Federal Tax Authority (FTA) will have to pay a fine worth Dh20,000 and also stop sales until they get the TRN or tax registration certificate (TRC).

U.A.E. VAT rates

December 9th, 2017

The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018.Selected supplies in sectors such as transportation, real estate and financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax). These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a decision to identify the government bodies and non-profit organisations that are not subject to VAT.

VAT treatment on select industries:
Education
Private and public school education (excluding higher education) and related goods and services provided by education institution 0%
Higher education provided by institution owned by government or 50% funded by government, and related goods and services 0%
Education provided by private higher educational institutions, and related goods and services 5%
Nursery education and pre-school education 0%
School uniforms 5%
Stationery 5%
Electronic equipment (tablets, laptops, etc.) 5%
Renting of school grounds for events 5%
After school activities for extra fee 5%
After school activities supplied by teachers and not for extra charge 0%
School trips where purpose is educational and within curriculum 0%
School trips for recreation or not within curriculum 5%

Healthcare:

Preventive healthcare services including vaccinations 0%
Healthcare services aimed at treatment of humans including medical services and dental services 0%
Other healthcare services that are not for treatment and are not preventive (e.g. elective, cosmetic, etc) 5%
Medicines and medical equipment as listed in Cabinet Decision 0%
Medicines and medical equipment not listed in Cabinet Decision 5%
Other medical supplies 5%

Oil and Gas:

Crude oil and natural gas 0%
Other oil and gas products including petrol at the pump 5%

Transportation:

Domestic passenger transportation (including flights within UAE) Exempt
International transportation of passengers and goods (including intra-GCC) 0%
Supply of a means of transport (air, sea and land) for the commercial transportation of goods and passengers (over 10 people) 0%
Supply of goods and services relating to these means of transport and to the transportation of goods and passengers 0%

Real Estate:

Sale and rent of commercial buildings (not residential buildings) 5%
First sale/rent of residential building after completion of construction or conversion 0%
First sale of charitable building 0%
Sale/rent of residential buildings subsequent to first supply Exempt
Hotels, motels and serviced accommodation 5%
Bare land Exempt
Land (not bare land) 5%
UAE citizen building own home 5% (recoverable)

Financial Services:

Margin based products (products not having an explicit fee, commission, rebate, discount or similar) Exempt
Products with an explicit fee, commission, rebate, discount or similar 5%
Interest on forms of lending (including loans, credit cards, finance leasing) Exempt
Issue, allotment or transfer of an equity or debt security Exempt

Insurance and Re-insurance:

Insurance and reinsurance (including health, motor, property, etc) 5%
Life insurance and life reinsurance Exempt

Food and Beverages: 5% VAT rate

Telecommunications and electronic services:

Wired and wireless telecommunications and electronic services: 5% VAT rate
Telecommunications and electronic services:
– Sovereign activities which are not in competition with the private sector undertaken by designated government bodies Considered outside VAT system
– Activities that are not sovereign or are in competition with the private sector VAT rate dependent on good/service ignoring provider

Not for Profit Organizations:

Activities of foreign governments, international organisations, diplomatic bodies and missions acting as such (if not in business in the UAE) Considered outside VAT system
Charitable activities undertaken by societies and associations of public welfare which are listed by Cabinet Decision Considered outside VAT system
Activities of other not for profit organizations (not listed in Cabinet Decision) which are not business activities Considered outside VAT system
Business activities undertaken by the above organizations VAT rate dependent on good/service ignoring provider

Free zones:

Supplies of goods between businesses in designated zones Considered outside VAT system
Supplies of services between businesses in designated zones VAT rate dependent on service ignoring location
Supplies of goods and services in non-designated zones VAT rate dependent on good/service ignoring location
Supplies of goods and services from mainland to designated zones or designated zones to mainland VAT rate dependent on good/service ignoring location

Other:

Export of goods and services to outside the GCC implementing states 0%
Activities undertaken by employees in the course of their employment, including salaries Considered outside VAT system
Supplies between members of a single tax group Considered outside VAT system
Any supplies of services or goods not mentioned above (includes any items sold in the UAE or service provided) 5%
Second hand goods (e.g. used cars sold by retailers), antiques and collectors’ items 5% of the profit margin

The UAE and Saudi Arabia are the two GCC member countries which will implement Value Added Tax (VAT) Reform from 1st January 2018 whereas the remaining member countries will implement over the coming years.

According to the UAE tax officials, it is anticipated that the new tax reform will help to generate nearly Dh12 billion (around 0.8 percent of GDP) revenue in the initial year after the introduction of the VAT. It might increase to Dh20 billion (around 1.2 percent of GDP) in the succeeding year (2019).

Diwali greetings 19 October 2017 from Synergy Software Systems

October 19th, 2017

Known as Deepavali, a Sanskrit word meaning “rows of lighted lamps”, it is one of the most popular Hindu festivals celebrated across South Asia. But it is also celebrated by Jains and Sikhs.

Diwali, the festival of lights, sees millions attend firework displays, prayers and celebratory events across the world every autumn. The main theme is the triumph of light over darkness and good over evil something to which we can all relate to no matter what our religion.

Diwali falls between October and November, but the exact date changes each year as it is marked by the Hindu lunar calendar. It lasts five days in total, with the festival of lights falling on the third days of celebrations, which is marked on the 15th day of the Hindu month Kartik. This year that falls on 19 October.

The festivities begin with Dhanteras, followed by ‘Narak Chaturdasi’, Deepawali on third day, ‘Diwali Padwa’ on fourth and ends with ‘Bhai Dooj’

May The Beauty Of Deepavali Season
Fill Your Home With Happiness,
And May The Coming Year
Provide You With All
That Bring You Joy!

When You Can Make Someone Else Smile
When You Can Be Someone’s Ally
That’s When You Can Yourself Be Glad
That’s When You’ll Have A Happy Diwali!

Deepawali Ka Ye Paawan Tyohar,
Jeevan Mein Laye Khushiya Aapar,
Laxmi Ji Viraje Aapke Dwar,
Subhkamnayen Hamari Karen Sweekar!!
Wish You And Your Family A Very Happy Diwali

Please note that Synergy offices will close at 5 pm today.

VAT registration U.A.E. – act now deadlines are imminent

October 17th, 2017

The UAE Federal Tax Authority (FTA) online portal is open 24/7 to allow for taxpayers to register for VAT purposes. The FTA has also determined the deadlines for the application for VAT registration based on business turnover.
For larger companies VAT registration is required by 31 October 2017, and such businesses should
immediately consider the timeline requirement given their turnover profile and the other registration
requirements.
Businesses that are required to register for VAT will need to set up an online account on the FTA website and complete the VAT registration form.

The FTA has announced that a phased registration approach has been introduced. In particular, those businesses that meet these criteria must comply with the relevant application dates for registration:
● Businesses with an annual turnover exceeding AED 150 million must apply for registration by
31 October 2017
● Businesses with an annual turnover exceeding AED 10 million must apply for registration by 30 November 2017

● Remaining businesses with an annual turnover exceed the mandatory registration threshold
(expected to be AED 375,000) must apply for registration by 4 December 2017
Prior to the fulfilment of the VAT registration form, the FTA provides a “Getting Started Guide” that shares essential information that businesses should be aware of. This includes information on the registration criteria, registration of a VAT group, and necessity to register if only zero-rated supplies are made.

Additional details clarifying the VAT registration mechanism are found in the VAT registration guide, a document posted on FTA online portal under the “Advice” tab. This document captures the
calculation of turnover for VAT purposes, a walk-through of VAT registration through the FTA
registration portal, registration of a VAT group and types of books and records required to be held by a
taxpayer to ensure accurate tax compliance.

We strongly advise for businesses to visit the FTA website to initiate their VAT registration application by
their applicable deadline after having considered the guidance provided by the FTA and other advice
as required (for instance VAT Grouping).
Businesses should allow time to compile the required information for the VAT registration.

VAT in the U.A.E. – time to act.

October 16th, 2017


VAT, as a general consumption tax, will apply to the majority of transactions in goods and services. A limited number of reliefs may be granted.

As a result, the cost of living is likely to increase slightly, but this will vary depending on an individual’s lifestyle and spending behaviour. If an individual spends mainly on those things which are relieved from VAT, he is unlikely to see any significant increase.

The government will include rules that require businesses to be clear about how much VAT an individual is required to pay for each transaction. Based on this information, individuals can decide whether to buy something.

Implication of VAT on businesses

Businesses will be responsible for carefully documenting their business income, costs and associated VAT charges. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case the ministry needs to establish whether they should be registered. The FTA does have the power to conduct audits on taxable persons and subsequently impose penal measures on those that are not compliant with the law.

A business must register if the total value of their taxable supplies made within the UAE exceeds the mandatory registration threshold over the previous 12 month period, or they anticipate making taxable supplies with a value exceeding the mandatory registration threshold in the next 30 days.

The mandatory registration threshold is AED 375,000.

A business may also apply to register if they do not meet the mandatory registration criteria and the total value of their taxable supplies or taxable expenditure in the previous 12 months exceeds the voluntary registration threshold, or they anticipate that the total value of their taxable supplies or taxable expenditure will exceed the voluntary registration threshold in the next 30 days.

The voluntary registration threshold is AED 187,500.

For the purposes of understanding whether a registration obligation exists, a taxable supply refers to a supply of goods or services, made by a business in the U.A.E., that may be taxed at a rate of either 5%, or 0%. Imports are also taken into consideration for this purpose, when a supply of such goods or services would be taxable when made within the U.A.E.

VAT registration require some official documents. Before submission of an application some important documents must be completed. Businesses will get VAT registration in the form of a VAT certificate, with the help of official documents. Every VAT certificate will have a specific identification number. The identification number will be essential for all the tasks to be carried out for VAT in UAE.

The process for VAT registration and fee submission will be done online. Following documents are required for the registration of VAT in UAE.
1. Copy of Trade License
2. Passport copy of the owner/partners who owns the license
3. Copy of Emirates ID of the owner/partners who owns the license
4. Memorandum of Association (MOA)
5. Contact Details of company (complete address & P.O Box)
6. Concerned person contact details
7. Email of the concerned person
8. Copy of all bank accounts and statements including IBAN
9. Owner has any other entities?
10. Income statement for the last 12 months
11. Expected revenue and expense for the next 30 days after VAT implementation
12. Are they exporting, or importing?
13. Are they dealing with any custom department? If yes. What is the custom code?
14. Are they doing business with any other G.C.C. country? (Country name)
15. If these are representing more than one entity, whether they want one tax group number for allof the entities, or separate tax numbers for each entity.
16.Experience of business (Owners or directors involved in any previous businesses before for the last 5 years?)

The submission of the documents will be done when you have registered online.
After online VAT registration and fees payments, you will be allowed to submit the documents. After the verification of the documents and completion of the process, a VAT certificate will be provided.

VAT will be charged at 0% in respect of the following main categories of supplies:

Exports of goods and services to outside the GCC States that implement VAT
International transportation, and related supplies
Supplies of certain sea, air and land means of transportation (such as aircrafts and ships)
Certain investment grade precious metals (e.g. gold, silver, of 99% purity)
Newly constructed residential properties, that are supplied for the first time within 3 years of their construction
Supply of certain education services, and supply of relevant goods and services
Supply of certain Healthcare services, and supply of relevant goods and services

The following categories of supplies will be exempt from VAT:

the supply of some financial services
Residential properties
Bare land
Local passenger transport

Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods/services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.

VAT-registered businesses generally:
• must charge VAT on taxable goods or services they supply
• may reclaim any VAT they have paid on business-related goods or services
• keep a range of business records which will allow the government to check that they have got things right.

VAT-registered businesses must report the amount of VAT they have charged and the amount of VAT they have paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be done online.

If they have charged more VAT than they have paid, they have to pay the difference to the government. If they have paid more VAT than they have charged, they can reclaim the difference.

Please note there will be a year end rush on consulting services we have already received over 100 inquiries for software consulting support so don’t leave it too late.

Happy 25th anniversary Bayara

October 1st, 2017

Just a short note of congratulations to our customer Bayara celebrating their 25th anniversary (just a year behind our 25th anniversary).

Its always satisfying to see our customers grow using the solutions we implemented and support for them, and proving that the right business systems and partner adds value.

Synergy Software Systems at the Microsoft Manufacturing Masterclass-

September 27th, 2017

A packed house for the Microsoft Manufacturing Masterclass today with stimulating presentations on Digital transformation.

Industry 4.0 : Digitalization of the Manufacturing Sector Masterclass – Meet Synergy Software Systems Manufacturing experts tomorrow H Hotel Dubai

September 26th, 2017

Hear from industry experts, network, meet with us and let us show you Dynamics 365 Finance and Operations Enterprise at this Microsoft Gul sponsored Manufacturing Master Class.

08:00 – 09:00 Registration
09:00 – 09:20 Omar Saleh – Microsoft – Industry Director, Manufacturing MEA
09:20 – 09:50 Gert Thoonen – Business Development Network & Security Services, ME – Rockwell Automation
09:50-10:20 Nicholas Brunet – Middle East Regional Business Leader – 3M
10:20-10:50 Mustafa Farhan – Strategic Transformation Lead, Middle East and Africa, Microsoft
Break
11:00 – 11:30 Suryanka Jatain – Principal – Digital Strategy and Transformation – KPMG
11:30 – 12:00 Assem Khalaili – Executive Vice President, Customer Services – MEA Digital Factory – Process Industries & Drives – Siemens
12:00 – 12:30 Charif Hamidi – Senior Consultant – Strategy – EY

Join us for lunch.
If you have not yet registered then call us now on 00971 43365589 or email Suresh Savari

Dynamics 365 Enterprise Finance and Operations – G.C.C. HR and Payroll from Synergy Software Systems

August 10th, 2017

Our Ax 2012 R3 popular HR and Payroll software was implemented in more than 40 companies.
It is now available in Dynamics 365 Enterprise Finance and Operation, with the first implementation already started.

The product includes comprehensive payroll features as well as automation of many day to day processes for HR and PRO staff.

Extensive Power BI analysis, T@A integration, and mobile approval are additional features

VAT for the U.A.E. some updates – July 2017

July 15th, 2017

Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.

Imports
The place of supply will determine whether a supply is made within the UAE (in which case the UAE VAT law will apply), or outside the UAE for VAT purposes. For a supply of goods, the place of supply should be the location of goods when the supply takes place – with special rules for certain categories of supplies (e.g. water and energy, cross border supplies).

For the supply of services, the place of supply should be where the supplier is established – (with special rules for certain categories of supplies e.g. cross border supplies between businesses).

VAT shall be payable in addition to the custom duties paid by the importer of the goods and cannot be deducted against. VAT shall be computed on the value that includes the customs duties.

Some goods that are imported may be exempt from customs duties but be subject to VAT.

VAT is due on the goods and services purchased from abroad. In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, the VAT would be due on that import using a reverse charge mechanism. In case the recipient in the State is a non-registered person for VAT purposes, VAT would be paid on import of goods from a place outside the GCC. Such VAT will typically be required to be paid before the goods are released to the person.

Exempt and zero rate
- The VAT treatment of real estate will depend on whether it is a commercial or residential property.
Supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate (i.e 5%).
- Supplies of residential properties will generally be exempt from VAT to ensure that VAT does not constitute an irrecoverable cost to persons who buy their own properties. To ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties within 3 years from their completion will be zero-rated.

There is a difference between exempt goods and zero rate. (for example zero rate might be raised in future).
VAT will be charged at 0% in respect of the following main categories of supplies:
• Exports of goods and services to outside the GCC;
• International transportation, and related supplies;
• Supplies of certain sea, air and land means of transportation (such as aircrafts and ships);
• Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
• Newly constructed residential properties, that are supplied for the first time within 3 years of their construction ;
• Supply of certain education services, and supply of relevant goods and services;
• Supply of certain Healthcare services, and supply of relevant goods and services.

The following categories of supplies will be exempt from VAT:
• The supply of some financial services (clarified in VAT legislation);
• Residential properties;
• Bare land;
• Local passenger transport

Financial Services
It is expected that fee based financial services will be taxed but margin based products are likely to be exempt.
Generally, insurance (vehicle, medical, etc) will be taxable.
Life insurance, we understand will be treated as an exempt financial service

The VAT treatment of standard financial services and Islamic finance products, the treatment of Islamic finance products will be aligned with the treatment of similar standard financial services

Businesses that meet requirements the Legislation (such as being resident in the UAE and being related/associated parties) will be able to register as a VAT group. For some businesses, VAT grouping will be a useful tool to simplify accounting for VAT.

Offsetting VAT.
VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. The legislation will include the conditions and limitations concerning the use of this relief.

A scheme will be introduced to allow a UAE national who is not registered for VAT to reclaim VAT paid on goods and services relating to constructing a new residence which will be privately used by the person and his family. This will allow the recovery of VAT on such expenses as contractor’s services and building materials.

To avoid double taxation (where second hand goods are acquired by a registered person from an unregistered person for the purpose of resale), the VAT-registered person will be able to account for VAT on sales of second hand goods with reference to: the difference between the purchase price of the goods, and the selling price of the goods (that is, the profit margin).

The VAT which must be accounted for by the registered person, will be included in the profit margin. The legislation will include the details of the conditions to be met in order to apply this mechanism.

VAT on expenses
A VAT registered person incurs input tax on its business expenses, and this input tax can be recovered in full when it relates to a taxable supply that was made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), then the registered person may not recover the input tax paid.

VAT will not be deductible in respect of expenses incurred for making non-taxable supplies. Furthermore, input tax cannot be deducted when it is incurred in respect of specific expenses such as entertainment expenses e.g. for employee entertainment.

VAT on expenses that were incurred by a business can be deducted in the following circumstances:
• The business must be a taxable person (the end consumer cannot claim any input tax refund).
• VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).
• The business must hold documentation showing the VAT paid (e.g. valid tax invoice).
• The goods or services acquired are used or intended to be used for making taxable supplies.
• VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.

In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable (exempt) supplies.

Businesses will be expected to use input tax (ratio of recoverable to total) as a basis for apportionment in the first instance – (there will be the facility to use other methods where those are fair and agreed with the Federal Tax Authority).

Compliance and returns
Penalties will be imposed for non-compliance. Examples of actions and omissions that may give raise to penalties include:
• A person failing to register when required to do so;
• A person failing to submit a tax return or make a payment within the required period;
• A person failing to keep the records required under the issued tax legislation;
• Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

No special rules are planned for small or medium sized enterprises. The FTA will provide materials and resources available for these entities to assist them in their enquiries.

A supplier registered or required to be registered for VAT must issue a valid VAT invoice for the supply. To be considered as a valid VAT invoice, the document must follow a specific format as mentioned in the legislation. In certain situations the supplier may be able to issue a simplified VAT invoice.

Government entities
Supplies made by government entities will typically be subject to VAT. This will ensure that government entities are not unfairly advantaged as compared to private businesses. Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. It is likely certain government entities will be entitled to VAT refunds – this is designed to avoid budgeting issues and provide a level playing field between outsourced and insourced activities. For the supplies provided for government entities, the treatment of such supplies shall depend on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard tax rate, the treatment would remain the same even if it is provided to a government entity.

Transitional rules
Special rules will be provided to deal with various situations that may arise in respect of supplies that span the introduction of VAT. For example:
• Where a payment is received in respect of a supply of goods before the introduction of VAT, but the goods are actually delivered after the introduction of VAT. This means that VAT will have to be charged on such supplies. Likewise, special rules will apply with regards to supplies of services spanning the introduction of VAT.
• Where a contract is concluded prior to the introduction of VAT in respect of a supply, which is wholly or partly made after the introduction of VAT, and the contract does not contain clauses relating to the VAT treatment of the supply, then consideration for the supply will be treated as inclusive of VAT.

There will, however, be special provisions to allow suppliers to charge VAT in situations where their recipient is able to recover their VAT but where there is no VAT clause.

Payments and claims
Note that VAT will be payable in full not after netting off input tax which will then have to be claimed. This is more of a challenge for cash flow and business risk, especially given the penalties for late payments.
Refunds will be made after the receipt of the application and will be subject to verification checks, with a particular focus to avoid fraud.

The FTA may provide its views on various matters in the law. Taxpayers may choose to challenge these views. However, penalties may be imposed on taxpayers who are found to violate any tax laws and regulations.

Other Emirates
It is expected that businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate. Guidance will be provided to businesses with regards to this. It is expected that the rules will be relatively straightforward for most businesses and will be based, for example, for B2C transactions, on the location of the transaction (e.g. in a retail environment, the location of the shop).

VAT in Dubai starts 1 Jan 2018 – summary

July 4th, 2017

Date of implementation: January 1, 2018
• VAT rate: 5%
• What are exempted: 100 types of staple food, and other essential service sectors such as healthcare and education
• What are not: Electronics, smart phones, cars, jewellery and watches, eating out and entertainments
• Inflation : Experience in other markets says there will be some impact on both inflation and GDP.
Given the low start rate it will have less impact here.
• While the impact of tax on property transactions will impact those above upper middle income group, there may well be a knock on effect to rents, and its likely that the cost of related financial services will hit everyone.
• VAT will also have an effect on the buying power of tourists who may alos have to pay duty tax again on certain goods in their country of origin

There will be a number of items that will be VAT-exempt. Younis Al Khouri, undersecretary at the Ministry of Finance, has said that GCC states had already agreed to exempt about 94 food products, as well as the healthcare and education sectors. . A new law, however, has yet to be released to specify which items are non-taxable.

Expect electronics, clothes, home furnishings, cars etc shall I expect to cost more once VAT is implemented
If you want to own a brand-new mobile phone that costs Dh2,600, for instance, prepare to pay an extra Dh130. In some cases for white goods, manufacturers may absorb some of the 5 per cent, to keep their products competitive but in other countries VAT has often resulted in prices being rounded up. Also non VTA items tend to look more cost favourable and that often leads to retailers pushing up prices on those goods.

Since the VAT law is not out yet, we don’t known the impact on air tickets. The VAT implementation in other countries, for instance in the UK as well as in Singapore (where VAT is called GST), passenger transport carries VAT at zero percent. Increases will likely hit tourism.

Tourism spending is a major source of revenue for the UAE and goods purchased by visitors will not be exempted at the point of sale. Anyone buying perfumes, make-up, luxury bags and big-ticket items in the UAE can expect to pay an additional 5 per cent of the sale price. The Ministry of Economy, however, assured that the tax rate is “deliberately low so that VAT is a limited burden on all consumers.” It also remains to be seen whether tourists will be given the option to obtain a tax refund at some point, as observed in other countries it appears not because the relative number of tourists to residents is pzrticulzrly high here.

The UAE is not discounting the possibility of collecting other forms of tax. “As per global best practice, the UAE is exploring other tax options as well. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes, however,” said the Ministry of Finance.

Businesses are encouraged to implement the new tax system, initial indications are that there will be swingeing penalties for late or incorrect returns. Those with annual turnover of more than AED375,000 (approximately US$100,000) are mandated to register.

Not all businesses in the UAE will need to go through the tedious process of registering for the value-added tax. The Ministry of Finance issued an announcement that states that businesses with a turnover of AED375,000 are required to register for value-added tax (VAT) which will be implemented in the UAE on 1 January 2018.

The ministry has announced that those with revenue below AED375000 but over AED187500 will have an option to register. Which means that they may if they like, register under VAT. But if they don’t then they do not have to collect VAT from their customers.

This number however, if it is an annual number, appears to be very low and it may bring a lot of small businesses within the scope of VAT. It of course also means a lot of registration fees, with the likelihood of annual renewal. This with multi companies and trade licenses need to be clear how many VAT registrations they need.

Group companies that undertake intercompany trading also need to think about the impact of VAA on such cross company sales and what tax will be payable and reclaimable by each company in what timescales.

Some may prefer to register even if they are exempt because if they don’t, they may not be able to claim back the VAT paid on their purchases.

As announced recently, the registration will be open three months before the go-live date. Companies will have the option to register online. Businesses can probably start registering for VAT from 1st October 2017.

For most businesses, VAT returns should be filed every three months. Filing of returns can also be done online using the government’s eServices.

According to the Ministry of Finance, businesses may need to change their core operations, financial management and book-keeping, technology and human resource mix in order to prepare for VAT. “It is essential that businesses try to understand the implications of VAT now and once the legislation is issued, make every effort to align their business model to government reporting and compliance requirements.”

Businesses are also strongly advised to ensure that in all the commercial contracts they enter into, they include a clause that spells out that the VAT burden can be passed on to the consumer.

“Once the law is out, businesses would first have to figure out whether their products/services are taxable or not and if yes, they would have to ensure that their billing or invoicing process is capable of adding a VAT charge to all taxable products. The easiest way to do this is to alter your IT systems to automatically calculate and add VAT to the invoices,” said Pardasani.

Hiring new staff that will enable businesses prepare for and implement the new tax policy should be done at this point in time. “Companies should have started to think about the additional resources they would need to ensure VAT compliance. Depending on how tedious / frequent the process is, companies would need resources based on the complexity of their operations. But one thing to bear in mind is that VAT is not only a finance issue,” said Pardasani. “It flows through all operational departments of the company. This is because wherever a company acquires products or services, it may pay VAT and it would need to capture all the documentation relating to VAT paid, in order to claim refunds

Corporate Social Reponsibility for the U.A.E.

June 12th, 2017

The Ministry of Economy in Dubai today on Monday said that it will be mandatory for the private sector to declare their Corporate Social Responsibility (CSR) initiatives by the end of 2017. The CSR initiative aims to encourage all companies to play a role in charitable, humanitarian work. Mohammad Ahmad Bin Abdul Aziz Al Shehhi, Undersecretary at the Ministry of Economy, discussed the National Strategy’s 11 initiatives for CSR, which were set to develop a supportive and stimulating environment for companies to invest in social responsibility.

The CSR programme is one of six main themes of the UAE’s National Strategy, which aims to encourage all companies to play a role in charitable and humanitarian work.

Percentage

The ministry will announce a minimum percentage that should be allocated to CSR by all private companies.

Companies will be able to register starting July, and will be required to declare their audited CSR accounts to the ministry and upon licence renewal at the Department of Economic Development.

Auditors will be required to ensure the financial statement for the company verifies their CSR initiatives and CSR spending.

Al Shehhi said that another initiative is the establishment of a National CSR Index, which will rank entities in the country, based on the percentage of their contributions and projects.

The assessment process will take place in April 2018, while the Corporate Social Responsibility (CSR) Annual Report and National CSR index results will be announced on Zayed Humanitarian Day in June 2018.

Year of Giving

Sultan Bin Saeed Al Mansouri, Minister of Economy, said the launch of the annual report represents an important milestone for the ‘Year of Giving,’ as such programmes and initiatives introduce a solid base for the organisational system of charity works in the UAE.

“Cooperation between the Ministry of Economy, Departments of Economic Development and Chambers of Commerce and Industry and other governmental and private bodies is an essential and effective driving force for transforming the ‘Year of Giving’ concepts to practical programmes and initiatives,” he said.

Smart CSR platform

Al Shehhi highlighted the different services of the Smart CSR platform, which will be launched in July to enable all private companies to register, and to view the various fields of CSR initiatives. It will include guides and tools to make CSR contributions along with models displaying the implementation process.

“One of the main targets of the programme is to spread awareness about the values of CSR within the private sector. We are sure many private companies have CSR programmes, however, it is time to launch a joint platform based on concrete projects, and build partnerships between the public and private sector,” said Al Shehhi. He pointed out the ministry anticipates that all companies in the UAE who are currently registered in the economic department will become members of the CSR programme, which has now been set as a minimum requirement in the private sector.

The Dubai Chamber of Commerce and Industry recently hosted its annual Dubai Dialogue conference at its premises which focused on the UAE’s Year of Giving and highlighted the important role that public-private partnerships can play in achieving the objectives of the national initiative.

The event, organised by the Chamber’s Centre for Responsible Business, was attended by 150 delegates, including H.E. Sultan bin Saeed Al Mansoori, Minister of Economy of the UAE, H.E. Mohammed Alshehhi, Undersecretary for Economic Affairs at the UAE Ministry of Economy, and H.E. Hamad Buamim, President and CEO, Dubai Chamber, as well as various stakeholders from the UAE’s public and private sectors.

The National Strategy for the Year of Giving comprises over 1,000 initiatives and programmes which cover six main themes, namely corporate social responsibility (CSR), volunteerism, the developmental role of humanitarian organisations, legislative systems and government policies, media, and serving the nation.

In his keynote speech, H.E. Al Mansoori said: “Organising this year’s conference is particularly important in light of the UAE’s move to declare 2017 as the ‘Year of Giving’. The wise leadership is taking a number of relevant steps to develop an integrated framework aimed at spreading the initiative’s principles and encouraging active participation of the government and private sectors at the institutional and individual levels.”

The UAE’s Minister of Economy noted that the government is keen on building a more systematic CSR methodology by offering incentives and monitoring, and putting key indicators into place that measure the initiatives’ progress and their benefit to society. Dubai Chamber’s President and CEO said that forming a united vision for CSR and sustainability in the UAE is one of the main objectives of the Dubai Dialogue conference as it enables organisations to share knowledge, experiences, and best practices in this field.

“Corporate social responsibility is at the core of the Year of Giving strategy, which comprises many initiatives that will have a direct and significant impact on the UAE’s business community and society at large,” added H.E. Buamim.

The 11 initiatives for CSR include incentives, facilities, and financial privileges. Among the financial privileges is the ‘Responsible Procurement’ initiative, which will be implemented in cooperation with the financial departments of the various emirates. It aims to allocate a percentage of government contracts to outstanding companies in the field of CSR. The ministry will also launch the ‘CSR Label’ and ‘CSR Passport,’ which will be awarded to the five most innovative companies in the field.

Another initiative is the establishment of the ‘coordinating forum for CSR.’ The forum will be organised in cooperation with the UAE Chambers of Commerce and Industry, to provide platforms for regular communication in order to build partnerships between private sector companies and leaders of the humanitarian and charitable sectors.

“The country’s leadership has a vision to establish the position for the UAE to be the most giving of the world,” added Al Shehhi.

11 initiatives within the Corporate Social Responsibility (CSR) programme:

1. The Smart CSR website to be launched

2. CSR annual report to be published

3. National CSR index to rank companies based on CSR spending

4. CSR Label

5. CSR Passport

6. Monetary incentives for outstanding companies in the CSR field

7. Mandatory annual declaration of CSR projects

8. Coordinating forum for CSR

9. Annual announcement for CSR

10. Responsible procurement

11. Work committees for CSR

European Union General Data Protection Regulation (GDPR) – 2018 what should GCC countries consider?

May 30th, 2017

The UAE Ministry of Economy is raising awareness among private sector companies of the need to be ready for new European data protection rules, which comes into force one year from now.

The European Union General Data Protection Regulation (GDPR) is set to become law by May 2018. The new rules govern all companies in Europe, as well as all companies trading with European companies and individuals.

The GDPR was drafted to “harmonise the protection of fundamental rights and freedoms of natural persons in respect of processing activities and to ensure the free flow of personal data between Member States

The law includes strong penalties for either misuse of data, or failure to protect the personal data of customers, with fines of up to 4% of annual turnover, or 20m euros ($22m).

HE Juma Mohammed Al Kait, Assistant Undersecretary for Foreign Trade at the Ministry of Economy, noted that the regulation issued by the EU aims to protect the data of every individual in the EU.

This not only impacts companies operating in European countries, but includes all institutions and companies that conduct business, trade and investment activities within EU countries, including the UAE business sector linked with European trade relations.

Due to this, the Ministry is working on deepening its knowledge about the new legislation, its provisions and requirements, and aims to reconcile its operational procedures with European authorities, in adherence with the framework of the GDPR, before May 2018.

Al Kait emphasized the EU is one of the UAE’s most important trade partners. Trade between the two sides generated $65.8 billion in 2016 alone. The UAE has become one of the top 10 destinations for EU exports, and is home to over 41,000 European companies, in addition to over 121,000 EU citizens.

Penalties will also apply to information controllers and processors, including cloud software companies.

The new legislation also outlines terms of approval for the use of data, to prevent companies from using legally illegitimate terms, and gives both parties the ability to easily withdraw if desired.

The compliance world will change dramatically for a number of GCC organizations on 25 May 2018. In just over one year’s time GCC organizations that:
1.have a branch, subsidiary or single representative in the European Union (“EU”);
2.do not have a physical presence in the EU, but offer goods or services to data subjects in the EU; or
3.neither have a physical presence in the EU nor offer goods or services to people in the EU, but monitor the online behavior of data subjects in the EU, will have to ensure that they are complying with the European Union General Data Protection Regulation (“GDPR”).

Who is likely to be affected?

Based on the test set out in the GDPR, the new regulations will likely apply to a significant number of entities in this region.
Obvious examples include:
– major airlines that fly to and from the EU,
- hotel and tourism operators who promote travel to the region to EU data subjects,
- regional banks and other financial service companies that have branches in the financial centres in the EU and online.

Less obvious examples include:
- e-commerce companies that are able to accept payments in euros and deliver to the EU
- mobile apps that can be downloaded by users in the EU and which have access to a user’s contacts, photos or location data.

All of these businesses may need to comply with the GDPR and to mitigate the risk and cost of failure to do so.
If your organization is affected it has three main options:
1. wait and see i.e. do nothing (not advisable);
2.consider what it needs to do to ensure that it does not fall within the scope of the GDPR;
3. take immediate steps to prepare to comply with the GDPR .

For option (2), if your organization does not have an establishment in the EU and does not need to target or monitor EU data subjects then you ight consider making it very clear that your website or app is not for use by EU users (e.g. including geo-blocking EU data subjects).

for option (3), if you have not started the process of ensuring compliance by now, then there is a lot to do.

1.monitor business to consumer business practices, including:
- conducting a data protection audit,
- examining the legal basis on which it processes personal data and updates its privacy policies;
2.monitor internal business practices, including:
- review and update of agreements with data processors,
- implement processes for adoption of pseudoanonymization and privacy by design
- considering the legal basis on which it transfers personal data between jurisdictions;
3.establish compliant accountability processes, including”
- processes for record keeping,
- appointment of a data protection officer or EU representative and dealing with data subjects;
4.invest in infrastructure, including:
- how to determine the severity, and impact on data subjects of a data breach
- to establish robust security processes and procedures for notifying regulatory authorities and data subjects -

The need for compliance, especially for longer-term projects such as records of processing and compliant contracting, must be addressed as soon as is practicable.

Businesses that either operate, target customers or monitor individuals in the EU should :
• Audit: to identify key remediation areas.
• Record of Processing: This mandatory record will require significant internal resources, but will also help to plan and implement GDPR processes. .
• Consider Contract Renegotiations: The GDPR requires that contracts with data controllers include additional obligations. As companies come to renegotiate contracts, ensure that adequate data protection clauses are added.
• Review and update, where necessary, employee notices to be GDPR compliant. If you currently conduct criminal records checks, then review national laws where you operate to ensure you can continue to do so . There is an emphasis on transparency in the GDPR. Notices must be clear, concise and informative. Employees must be adequately informed of all data processing activities and data transfers and the information set out in Articles 13 to 14 must be provided. Criminal records can no longer be processed unless authorized by member state law.

Consider whether your organization is processing any sensitive personal data and ensure the requirements for
processing such data are satisfied While the grounds for processing are broadly the same as those set out
in the current Data Privacy Directive, the GDPR imposes new requirements to gain valid consent. Consent can be withdrawn at any time and systems must be able to handle withdrawal request.

• Review and update, where necessary, customer notices to be GDPR compliant
• Consider whether your notices have to accommodate “child-friendly requirements”. he GDPR requires parental consent for the processing of data related to information society services offered to a “child” (ranging
from 13 to 16 years old depending on the member state.
• Data privacy rights. The current rights to request access to data or require it to be rectified or deleted have been expanded to include a much broader right to require deletion (“the right to be forgotten”), a right not just to access your data but have it provided to you in a machine readable format (“data portability”). Versions of the existing right to object to any processing undertaken on the basis of legitimate interests or for direct marketing and the right not to be subject to decision based on automated processing are also included and expressly refer a right to object to profiling.
These must be clearly communicated in the notices given to data subjects, e.g. privacy policy
• Privacy by design. Ensure processes are in place to embed privacy by design into projects (e.g. technical and organizational measures are in place to ensure data minimization, purpose limitation and security)

Consider what data you hold in emails, in CRM systems, Social media.
What should be your data access use and retention policies?

Personally I think it will be great if this is a way to prosecute the perpetrators of all the spam nd phishing emails I get or at least to remove data form their lists!