The Federal Tax Authority (FTA) on Saturday announced that the number of businesses registered for value-added tax (VAT) exceeded 296,000 while 650,000 VAT returns were submitted in 2018.

Highlighting the results of the first year of imposition of VAT, it said 7,200 retail shops took part in the tourist refund scheme, with over 5,000 transactions being processed on average per day.

The authority, however, didn’t disclose its target of Dh12 billion revenues from VAT in the first year of operation.

Khalid Ali Al Bustani, director-general of FTA, said a holistic and balanced tax system has been set up to make the UAE one of the world’s first countries to implement a fully electronic paperless tax system. He attributed the high compliance rate to the easy procedures set for submitting tax returns and paying due taxes.

The introduction of VAT in the UAE went into effect on January 1, 2018, at a 5 per cent rate on the supply of most goods and services in the country.

Thomas Vanhee, founding partner at Aurifer Middle East Tax, said the FTA realised a feat which no other mid-to-big size economy has realised before.

“It introduced excise tax and VAT in a country which had no federal taxes and no national enforcement body. The numbers of the first year of VAT show a high take-up by businesses and a high compliance rate in terms of the registrations and VAT returns filed. Stakeholders have been engaged to ensure a smooth implementation,” he said.

As in-depth audits are being planned for 2019, Vanhee said there will be greater scrutiny of the VAT returns filed and the numbers behind them.

“This will constitute an important test of how businesses implemented VAT beyond the mere filing of returns. The strict penalty framework constitutes an incentive to get matters right. The public and private clarifications go a long way in getting interpretations right. However, a lot of businesses should be making tax and penalty provisions for 2018 as they face relatively important exposures,” he added.

Mayank Sawhney, partner, Crowe, said the first year came with its own share of teething problems such as wrong interpretation and applications of the provisions of VAT law, wrong and delayed filing of VAT returns, people making taxable supplies in the UAE above the registration threshold limits such as director’s remuneration, rent from commercial properties, etc., not having registered for VAT on time and hence not having charged VAT on their taxable supplies, etc.

Going forward, the FTA is going to conduct tax audits on businesses, which will ensure that the they take compliance with VAT more seriously than what they have been doing in the first year.

“Therefore, in due course of time, we expect these teething problems faced in the first year of VAT implementation to get settled and all the businesses in the UAE with help of professional tax advisors, will become fully compliant in terms of correct interpretation and application of VAT,” Sawhney said.

In 2019, Al Bustani expects further improvement in tax compliance rates, promote registration among taxable businesses and combat tax evasion.

“The authority is currently working to launch new campaigns, most notably the tax invoice campaign, which is set to take place during the first quarter of 2019 and aims to ensure the use of tax invoices for all business operations,” he said.

Source:www.khaleejtimes.com/business/vat-in-uae/650000-vat-returns-submitted-in-first-year-of-tax-levy-

The UAE government has already implemented VAT on the supply of taxable goods and services starting from January 01, 2018. The companies that are required to pay taxes can be audited by the Federal Tax Authority (FTA) to determine their tax compliance. It’s time to get familiar with the terminology to keep up with the era of the tax system in the UAE.

What is a Tax Audit?

A tax audit is basically a government’s assessment of a company about their responsibility as a taxable entity. This kind of audit is conducted by the FTA to ensure that every liability is paid and every tax due is collected and given to the government within the timeframe given. The government also assesses a company whether they are following certain responsibilities that apply to their business as per the tax laws (VAT Law, Excise Tax Law, etc.).

Detailed procedure

The FTA authorities will check the returns and other details. There need not be a specific reason for the FTA to conduct an audit of a company. They can conduct it for any reason or whenever they want. A notice will be issued to the company, at least five days before the scheduled audit date. It will contain details, such as the audit schedule, place, involved parties, reason (if anything particular), etc. The auditor/s and the company will meet at the scheduled place at the scheduled time and the process will begin. The auditor may ask for business records, in original and/or copies, and take samples of goods and other assets as available at the place at the time.

Note: The audited party has the right to ask for the credentials, such as professional identification cards, from the tax auditors in order to determine their authority.

The tax audit is required to be conducted during the official FTA working hours, unless the Director-General decides to conduct the audit of a business outside regular hours, in an exceptional case. The Company subject to a tax audit, along with their legal representatives and tax agents, are required to provide full assistance to the auditors performing their task. If anything suspicious is found in the result of the audit that might impact the tax return, the authority may order a re-audit for further analysis. The audited person has the right to ask for the notification copy and related documents and be present during the auditing procedures that are conducted outside of the official places.

What Can You Do to Be Prepared for the Audit?

A tax consultant can help you to be always organised so that when your company is requested for an audit from FTA, you are all set up to face the tax audit that people seem to be worried about.

The list below shows the kinds of review that can be done in order to prepare you for an upcoming audit:

Review of the system

Since tax has been announced to commence in the UAE on the first day of 2018, companies have ensured that every department is ready to face a new era. One of the most important items to be updated is the accounting software. Same should comply with the laws regarding VAT accounting.

A review of the systems will ensure that there is no inconsistency with the recorded transactions.

Review of Calculations Tax

It is important that companies ensure that they are complying with the laws by checking that the calculation of both output and input taxes are correct. As a basic rule, the tax rate is at 5% only. Any goods or services that fall under zero-rated and exempted tax should be treated as it is with documents for support.

Review of VAT Returns

A tax consultant will review the VAT returns that need to be filed by companies to ensure that returns will be prepared in the correct manner with the values properly recorded in the right boxes and the needed information are filled in and also make sure that it is filed within the time frame provided by FTA.

Review of Payment of Tax Due

The correct amount of tax due should be paid on or before the due date. A tax consultant will ensure that you are not drawing any negative attention from FTA by missing the time frame of tax payment to the government.

Source:https://www.dmcc.ae/blog/tax-audit-uae-know-procedure-and-how-be-prepared-audit

Tax registered businesses in the UAE cannot recover value added tax (VAT) incurred on expenses associated with activities to entertain personnel, such as staff parties that are free to attend, the Federal Tax Authority (FTA) has clarified.

According to the federal law, VAT incurred on goods or services purchased to be given away to staff free of charge, in order to reward them for long service, should be blocked from recovery of the tax, the FTA said.

Examples of these gifts include: long service awards, retirement gifts, Eid gifts, or gifts for other festivals or special occasions, gifts given on the occasion of a wedding or birth of a child, employee of the month gifts, or a dinner to reward service.

In a recent press statement, the FTA clarified that entertainment services consist of “hospitality of any kind” including the provision of: accommodation; food and drinks which are not provided in a normal course of a meeting; and access to shows or events or trips provided for the purposes of pleasure or entertainment.

However, a ‘designated government entity’ is eligible to recover the input tax incurred on costs to provide entertainment services to anyone not employed by the entity.

The exception is applicable: during meetings with delegations from other countries where lunch or dinner is provided; during meetings with representatives from other government entities to discuss official business, where refreshments are provided; and during ceremonies held to mark significant political events, eg the signing of an international agreement, where entertainment is provided to the audience.

For VAT registrants who are not ‘designated government entities’, input tax cannot be recovered if it is incurred for entertainment services provided to non-employees including customers, potential customers, officials, or shareholders, or other owners or investors.

The FTA also clarified that if goods or services are purchased for use by employees for their personal benefit, including the provision of entertainment services, then the VAT incurred on the cost is not recoverable unless an exception applies.

This means that all companies, including ‘designated government entities’, which provide entertainment services to employees are prevented from recovering any VAT included on such costs.

The only circumstances in which a taxable person is entitled to recover VAT on such costs are: where it is a legal obligation to provide those services or goods to those employees; it is a contractual obligation or documented policy to provide those services or goods to those employees so that they may perform their role and it can be proven to be normal business practice; and where the provision of goods or services is a deemed supply under the provisions of the decree-law.

The authority also outlined certain circumstances where a taxable person will fund or reimburse an employee for certain costs incurred for business purposes.

These include cases where an employee is on a domestic business trip and requires overnight accommodation – in which case the VAT incurred on hotel costs would be recoverable; as well as input tax incurred on subsistence costs – food and drinks purchased by the employee for their own consumption during the trip.

But if the employee incurs costs which are related to entertaining a current or potential customer/supplier, then any associated input tax incurred will be non-recoverable.

The FTA issued the latest public clarification regarding ‘Non-Recoverable Input Tax – Entertainment Services’ on its website to raise awareness among tax payers about the technicalities of the system, a statement said.

FTA director general Khalid Ali Al Bustani said: “These clarifications are formulated after a thorough study of the tax laws, executive regulations, and the guides published on the Federal Tax Authority’s website.”

The UAE introduced the 5 per cent VAT on most goods and services from January 1 this year.

Source:http://gulfbusiness.com/vat-not-recoverable-staff-parties-uae-clarifies-regulator/

The Federal Tax Authority (FTA) has announced a new campaign to communicate directly with businesses.

The campaign kicks off on Sunday, August 12, 2018, in Ras Al Khaimah, before moving on to Fujairah and then the rest of the emirates for a duration of three months, where representatives from the Authority will be present at the Clinic to answer taxpayer queries regarding registration with the FTA and other tax obligations.

A team of experts from the FTA’s registration and taxpayer services will go on an extensive tour, the first stage of which will take place from August 12 to 14 in Ras Al Khaimah, moving on to Fujairah from August 26 to 28, then Um Al Quwain from September 2 to 4, and Ajman on September 9 to 11, 2018.

The campaign will be returning to Ras Al Khaimah on September 16 and 18, moving on to Sharjah on September 23 and 25, then Fujairah again on September 30 to October 2, Um Al Quwain from October 7 to 9, Ajman from October 14 to 16, back to Fujairah on October 21 to 23, before concluding with a third and final stop in Ras Al Khaimah on October 28-30.

Khalid Ali Al Bustani, director-general, FTA, said the experts conducting the Tax Clinic will address all tax concerns raised by representatives of taxable businesses, answer their queries and address the challenges that face them. They will provide guidance with regards to registering for VAT, preparing and submitting tax returns, paying due taxes and avoiding the most common mistakes or technical difficulties associated with these responsibilities.

The experts will also distribute educational and awareness publications issued by the Authority to explain systems and procedures and answer frequently asked questions.

Source: www.khaleejtimes.com/business/vat-in-uae/fta-to-hold-tax-clinics-to-promote-compliance