23 Nov
Emirati members of Dubai SME to get up to seven-year exemption on licence fee
The fee exemption applies to registered Emirati members who have not completed the five-year period
The Government of Dubai has extended the five-year exemption given earlier to Emirati members of Dubai SME from paying licence fees to seven years.
Under Article No. (10) of Law No. (23) 2009, the licensing fee applicable on SMEs was Dhs1,000 for the first three years from the issuance of the licence, and Dhs2,000 for the fourth and fifth years.
The extension of fee exemption granted now applies to registered members of Dubai SME who have not completed the five-year period stipulated in Article No. (10) of Law No. (23) 2009. New members are not eligible for the extension.
The five-year exemption granted earlier contributed to reducing financial burdens faced by startups.
The decision was made as part of a directive issued by Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Dubai Crown Prince and Chairman of The Executive Council, as part of a series of initiatives aimed to support entrepreneurs and their startups to tide over the challenges posed by the pandemic and to address their concerns about growth and cash flow.
The Department of Finance, in coordination with the General Secretariat of the Executive Council and Dubai SME, has launched a series initiatives for small and medium-sized companies since 2018, which included allocating 20 per cent of government purchases for Dubai SME members and special dealings with regard to primary and final insurance as well as accelerating payment of corporate dues, in addition to other benefits granted by Law No. 12 of 2020 on Contracts and Warehouse management in Dubai Government.
In Dubai, SMEs constitute nearly 95 per cent of all companies, employing 42 per cent of all workforce in the emirate and contributing to around 40 per cent of Dubai’s GDP, according to state-run news agency WAM.
Since 2002, Dubai SME has supported 10,803 member SMEs with incentives and relief measures worth over Dhs995m.
“Dubai has already announced five stimulus packages worth AED7.1 billion in the aftermath of Covid-19 and the outcomes have been phenomenal in terms of the emirate resuming full-scale economic activity while also enhancing its business competitiveness and investment attractiveness,” said Abdulrahman Al Saleh, Director General of the Department of Finance, Government of Dubai.
“Emirati entrepreneurs should be particularly supported and motivated since they are critical to ensuring the sustainability of the labour market and building a competitive national cadre, a key target emphasised once again by the leadership in the ‘Projects of the 50.’”
Source:https://gulfbusiness.com/emirati-members-of-dubai-sme-to-get-seven-year-exemption-on-licence-fee/
22 Nov
Dubai sets up task force to drive green finance ambitions
Dubai’s financial regulator has set up a task force to drive forward standards related to sustainable finance, which is becoming increasingly popular in the Gulf region.
Dubai Financial Services Authority (DFSA) said it has launched the Task Force on Sustainable Finance (TFSF) in the Dubai International Financial Centre (DIFC).
Comprised of members from 12 DIFC-based entities, the TFSF aims to drive forward discussions regarding sustainable finance in the DIFC with the aim of supporting the application and adoption of global regulatory standards.
DFSA said sustainability forms a key area of its regulatory focus and is actively involved in numerous sustainability-orientated regulatory groups, including the Network for Greening the Financial System (NGFS), the Sustainable Insurance Forum (SIF) and the UAE Working Group on Sustainable Finance.
In launching the TFSF in the DIFC, the DFSA aims to harness its involvement in global forums and the global experience of DIFC firms to bring global best-practice to the development of sustainable finance in the DIFC.
Christopher Calabia, chief executive of the DFSA, said: “The financial services sector has an important role to play in ensuring that we leverage the power of the purse to reduce emissions and funnel capital toward innovations in energy and carbon capture that will help us to flatten the curve of increases in average temperatures.”
He added that as a significant global hub for banking, securities, and insurance, the DIFC has a part to play in this work as well which is why the engagement of industry leaders in discussions with regulators and supervisors is so important.
Representatives from Blackrock, Credit Agricole Corporate and Investment Bank, HSBC Bank Middle East Limited, Lloyd’s of London, Moody’s Investors Service Middle East Limited, Natixis, PwC, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, and Zurich Insurance Company Ltd attended the meeting.
The SFTF will next meet in January to discuss the next steps and how the work could be progressed, a statement said.
Last month, HSBC CEO Noel Quinn forecast that 2021 is set to be the first trillion-dollar year for green bonds, with a “major industrial transformation” in the next decade pushing firms to become carbon neutral or carbon light.
Speaking at the Middle East Green Initiative Summit in Riyadh, Quinn said that in the first nine months of 2021, green social and sustainable bonds raised more than $777 billion.
Saudi British Bank (SABB) recently became the first Saudi institution to make a green deposit as the clamour for sustainable finance increases in the Gulf region.
The funds, deposited with HSBC in the UAE, will be used solely to finance green initiatives.
It was the first green deposit issued in UAE dirham and one of the first green deposits made by a financial institution in the Middle East.
The deal comes just a few months after HSBC launched green deposits in the UAE. The bank said interest in the sustainable financing option has been immediate, with this being the third green deposit issued so far.
Source:https://www.arabianbusiness.com/gcc/uae/dubai-sets-up-task-force-to-drive-green-finance-ambitions
06 Nov
Does serving a notice period come under VAT’s coverage?
An employment contract between an employee and employer is outside the scope of VAT. This is a universally recognized principle and always mentioned in the VAT legislation.
Although the UAE VAT Law does not specifically define employment contracts as outside the scope of VAT, the Taxable Person Guide clarifies this. Under the UAE VAT Law, a supply must be made by a person conducting business – i.e., any regular or ongoing activity conducted with a degree of independence and continuity. Due to the requirement that a business must be an independent activity, the activities of employees are not treated as being in the course of business.
As such, employees are not liable to charge VAT on their remuneration or salary. Having said that, there are certain transactions between the employee and employer that occur outside the employment contract.
Liable for recovery
An organisation may recover from an employee: visa charges for dependents, personal mobile expenses, insurance of employee dependents, vehicle usage charges, etc. We will discuss the VAT treatment of recoveries made by organisations in lieu of employees not serving their full notice period.
When an employee resigns, in the normal course of business, the employee must serve a notice period, as may be mutually agreed in the employment contract. During the notice period, he or she should be present on all the working days.
In certain situations, the employee may not want to serve all or part of the notice period. In which case, either the employer waives off the requirement of servicing the entire notice period, or the employee may be asked to pay an amount equivalent to the salary of the unserved notice period. The question that arises is whether the money received by the organisation for the unserved notice period constitutes consideration for a ‘supply’?
Compensation
Article 119 of the Employment Law provides that if the employer or the employee has failed to serve notice to the other party for termination of the employment contract, the party obliged to serve the notice period shall pay to the other party compensation known as ‘compensation in lieu of notice’ equal to the pay for the unserved notice period. Such compensation is payable even if such failure to notice or such reduction of the period does not cause damage to the other party.
From a VAT perspective, one may be tempted to refer to the VAT Public Clarification on VAT Treatment of Compensation-type payments issued by the Federal Tax Authority (FTA). The Guide clarifies that:
- A fine or penalty may be imposed for contravening the terms of an agreement.
- Where a person has caused damage to another person, the person causing damage may be required to make a payment to compensate for such damage or loss.
The Guide provides that fines and penalties are not a consideration for any supply, and therefore outside the scope of VAT. Also, where the payment is compensation for breaching pre-existing terms of a contract, it is unlikely to be a consideration for a supply and therefore outside VAT’s scope.
If one were to closely read the provisions of UAE Employment Law, the compensation is payable even if such failure to notice or such reduction of the period does not cause damage to the other party. Therefore, one could argue that compensation in lieu of an unserved notice period is not a fine or payment in lieu of damages. It is to be seen if the FTA will refer to the provisions of employment laws to evaluate whether a payment is a fine or a payment in lieu of damages.
One may note that the UAE VAT Regulations define ‘Supply of Services’ to include cessation or surrender of a right. In the case of notice pay recovery, one may argue that the organisation is giving up its right to an employee serving the notice period, in lieu of consideration, and hence the same would be taxable at 5 per cent.
Not swayed by descriptions
In considering whether a payment is a consideration for a supply or is in the nature of penalty, it is important to ignore the labels or titles given to a payment. A description of a receipt as ‘penalty’ or ‘compensation in lieu of damages’ will not prevent the nature of the payment from being considered for a supply.
The VAT treatment of recovery of notice pay must be considered in conjunction with the rights of the employer, employee, employment contract and the local labour laws. There may not be a universal answer, and each situation must be evaluated on its own facts.
Source:https://gulfnews.com/business/analysis/does-serving-a-notice-period-come-under-vats-coverage-1.1636013253767
05 Nov
India cuts taxes on petrol, diesel ahead of Diwali to boost economy
The Indian government on Wednesday reduced taxes on petrol and diesel in a bid to improve consumer sentiment, as Asia’s third-largest economy recovers from the shocks of severe lockdowns to control the spread of the coronavirus.
The excise duty on petrol has been reduced by Rs5 ($0.0671) per litre, and that on diesel by Rs10 ($0.1342) per litre, the government said in a statement.
Following the federal move, at least ten states ruled by Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP), or his allies, said late Wednesday they would go further and reduce local fuel taxes by as much as Rs7 a litre.
The tax relief comes on the eve of the Hindu festival of Diwali, which marks the beginning of a busy festive season in India, typically marked by increased consumer spending.
Recent months have witnessed a steady growth in consumer spending in India, with a relaxation on curbs on travel and business operations due to a dip in the number of coronavirus cases.
But high fuel prices have been hurting the margins of corporates as well as farmers, who contribute a significant chunk to the economy. The cut in fuel taxes is likely to come as a boost to manufacturers and farmers.
“Given that inflation expectation is building up, there was a need to relook at the tax component,” said NR Bhanumurthy, economist and vice chancellor at the Bengaluru-based BR Ambedkar School of Economics. “This will cool down the inflation expectation to some extent, which will augur well for sustained GDP (gross domestic product) growth.”
Modi’s government has faced increasing criticism from its main opposition Congress party over rising fuel prices in recent weeks. In a country where a majority of the people live on less than $2 a day, taxes make up a large component of fuel prices: a litre of petrol comes at Rs110.04 while diesel comes at Rs98.42 in New Delhi.
Before the cut to prices announced on Wednesday, taxes made up about 52 per cent of the price of petrol and about 47 per cent of that of diesel.
Spiking global oil prices have pushed up the retail prices of petrol and diesel to a record high this month in India, which is the world’s third-biggest oil importer and consumer and ships in about 85 per cent of its oil needs from overseas.
Global oil prices surged to $86.40 a barrel on October 26 – the highest since October 2014 – battered by the hit to economies from the Covid-19 pandemic, although they since eased to about $82.5 per barrel.
Source:https://www.khaleejtimes.com/economy/india-cuts-taxes-on-petrol-diesel-ahead-of-diwali-to-boost-economy
