21 Aug
New Indian income tax rule: PAN card now mandatory for certain cash deposits, withdrawals
Dubai: After the Indian government amended cash limit rules earlier this year, it also made PAN or Aadhaar number mandatory for certain cash deposits and withdrawals. But does this apply to NRIs?
India’s Central Board of Direct Taxes (CBDT) issued a notification that cash deposits and withdrawals in a financial year of over Rs2 million (Dh93,041) when opening of current account or cash credit account with a bank, requires all Indians to furnish PAN or Aadhaar.
(A Permanent Account Number or PAN card, issued by the Indian Income Tax Department, and an Aadhar, a government-issued 12 digit identification number, are two ID documents assigned to each Indian citizen who either resides or looks to reside in India, while transacting amounts in Indian rupees.)
What does the statement mean and what has changed?
As per the notification, ‘every person, at the time of entering into a transaction [must] quote his permanent account number (PAN) or Aadhaar number and every person, who receives such documents, shall ensure that the said number has been duly quoted and authenticated’.
What this means is that prior to this government alert, your bank was already required to ensure that such transactions have PAN. But now your bank will be required to keep the PAN in the bank’s records and inform the same to the Income tax department regarding such financial transactions.
Earlier, as per income tax norms, PAN was mandatorily required in case of cash deposit exceeding Rs50,000 (Dh2,325) in a single day, but no annual aggregate limit for cash deposits was given before. While there was no limit for cash withdrawal, which has been prescribed now.
What if one does not furnish or have PAN? Are there fines?
The notification specifies how ‘every person’ making a cash deposit and withdrawal aggregating to Rs2 million (Dh93,041) or more in the financial year in one or more bank accounts are to reveal their PAN.
If not, he or she would not be able to perform such transactions. Paying or receiving cash above the limits set is also punishable by a steep penalty of up to 100 per cent of the amount paid or received.
Individuals who do not have a PAN need to apply for a PAN at least seven days before entering any transaction of above Rs50,000 (Dh2,325) a day or above Rs2 million (Dh93,041) a financial year.
Why did the changes come into effect? Are there more changes?
The Income Tax department, along with other central government departments, has been updating and amending rules to reduce the risk of financial fraud, illicit money transactions and other money crimes over the past few years, and tax experts suggest this move in line with this.
“The government also monitors receiving cash worth more than Rs200,000 (Dh9,303) to restrict the use of cash in high-value transactions. So, a person cannot accept more than Rs200,000 (Dh9,303) in cash, not even from close family,” said an independent tax consultant Brijesh Meti based in India.
Since the rules are applicable since May 26, experts also opine how authorities may need to clarify whether the transactions are undertaken prior to May 26, shall be considered for computing the aggregate value of Rs2 million (Dh93,041) for this financial year or not.
Does this apply to Non-Resident Indian (NRI) transactions?
While PAN may be required, this rule doesn’t apply to NRIs when it comes to having Aadhar, clarified Dixit Jain, Managing Director at The Tax Experts DMCC.
“It is not mandatory for NRIs, as NRIs are not mandatorily required to have an Aadhar card, even though they can easily apply for one when they come to India,” Dixit Jain added. “However, PAN may be required.”
In other words, more than this rule change impacting NRIs who would have already added PAN details to their bank accounts, as initially required by banks, it is aimed at getting banks to keep the PAN on record, and not seek PAN with each transaction, and officially declare any withdrawals over Rs2 million.
“India’s income tax laws prohibit cash transactions above Rs200,000 (Dh9,303), which is also the limit when accepting donations from a single person on a single occasion,” Meti added. “Those who accept hard cash over this amount violating this clause may face a penalty equivalent to the amount received.”
“In a property transaction, the maximum hard cash allowed is also Rs20,000 (about Dh1,000). The limit remains the same even if a property seller accepts an advance.”
Source:https://gulfnews.com/your-money/taxation/new-indian-income-tax-rule-pan-card-now-mandatory-for-certain-cash-deposits-withdrawals-1.1660917543823
01 Aug
Large groups can set up a tax group to minimise their compliance cost
As required by International Financial Reporting Standards (IFRS), groups are required to prepare consolidated financial statements where inter companies’ transactions are eliminated, and losses of one entity are adjusted against the profits of the other entities
Large businesses are structured as a group for better management and reporting purposes. Moreover, companies wanted to enjoy the tax benefits and reliefs which are generally available to the groups, so this is another reason that large businesses are organized in the form of groups. Tax planning and minimising the compliance cost are other critical factors for which large entities assemble themselves as a group.
As required by International Financial Reporting Standards (IFRS), groups are required to prepare consolidated financial statements where inter companies’ transactions are eliminated, and losses of one entity are adjusted against the profits of the other entities. The net profits of the groups are adjusted to arrive at the taxable profits of the group.
Keeping in view the above factors, tax grouping has been proposed in the Corporate Tax Public Consultation Document, which suggests that eligible businesses would be able to create the tax groups and transfer their losses between group companies that are seventy-five per cent or more commonly owned.
It has been proposed in the document that the group of companies which are residents of the UAE and whose ninety-five per cent shares and voting rights are held by the parent company can form a tax group. In addition, a subsidiary can also be part of the tax group if it is owned indirectly by the parent company and other subsidiaries own at least ninety-five per cent of its shares. The branch of a parent company or group subsidiary company can also be a part of the tax group.
To form a tax group, it is compulsory that neither the parent company nor any of the subsidiaries can be an exempt person or a free zone person that benefits from the zero per cent corporate rate, and all group members must use the same financial year.
Based on the above-proposed requirements, the following businesses cannot be part of the tax group:
• Non-resident companies
• Companies which are in the free zones and enjoying zero per cent corporate tax
• Entities in which the parent company or other group companies are not holding at least ninety-five per cent shares and voting rights.
• The companies which have different financial years.
The group will be formed with the mutual consent of all entities, and the entities that want to be part of the tax group will submit a notice signed by all relevant entities to the Federal Tax Authority (FTA). The FTA will review the application and, upon satisfaction of the criteria, will process the application by issuing one tax number to the tax group.
The tax group will be considered a single entity for corporate tax purposes, and the parent entity will be liable to prepare consolidated financial statements. While consolidating the financials, the transactions between the group entities will be eliminated, and the losses of one entity will be adjusted against the profits of other group entities/entities.
The group entities that do not meet ninety-five per cent ownership criteria or the entities that meet the criteria but do not want to be part of the tax group, such entities can still transfer their losses from one group company to another group company, provided certain conditions are met. As discussed in our previous article, the tax losses of one group company can be adjusted against the seventy-five per cent of taxable income of other group companies that would be receiving the losses. Moreover, the group companies that are exempt or subject to a zero per cent corporate tax regime, would not be allowed to transfer their losses against the profits of other group companies.
The parent entity would be responsible for the administration and the payment of corporate tax on behalf of the tax group, and where the parent defaults, then each member of the tax group will be jointly and severally responsible for the payment of corporate tax. This joint and several liabilities can be limited to the specific members of the group with the approval of the FTA.
The large groups should check the ownership of the group entities and the status of their tax residency. If the entities are eligible to be elected to the tax group, then business owners should align their tax years so that the entities can be added to the tax group to minimise the tax impact and reduce the administration cost. Where the businesses are finding any difficulties in assessing the eligibility of the entities to be added in the tax groups, they should take professional advice for better planning.
Source:https://www.khaleejtimes.com/business/large-groups-can-set-up-a-tax-group-to-minimise-their-compliance-cost
31 Jul
UAE trademarks law a key pillar to ensure safe IP environment
The new laws allow greater flexibility to accommodate unconventional trademark patterns and provide them with legal protection, in light of the advanced technologies used in building companies’ trademarks
The UAE has been taking significant efforts in promoting the system of intellectual property (IP) and copyrights, with trademarks as a key pillar, Abdulaziz Alnuaimi, assistant undersecretary of the Commercial Affairs Regulation Sector at the Ministry of Economy, said on Thursday.
He noted that the UAE has therefore issued a set of legislations and laws to support trademark owners to ensure their growth and prosperity within a secure and safe environment. The new laws, introduced in 2021 as part of the “Year of the 50th” celebrating the fiftieth anniversary of the foundation of UAE, and made effective as of 2 January 2022, are intended to keep pace with the developmental achievements of the UAE and reflect the country’s aspiration as an R&D and innovation hub.
The laws, which establish major rules for trademark owners within a barrier-free environment that promotes creativity and innovation, raised certain fines up to Dh1 million in order to put a stop to trademark infringement.
“These efforts emphasize the significant role of this sector in encouraging creativity and its contribution to building the country’s new economic model based on knowledge and innovation, and in line with the goals and principles of the 50 and the UAE Centennial 2071,” Alnuaimi said at a media briefing.
He said the new regulation reflects an exceptional integration of efforts between the ministry and its local and federal partners, as well as global entities concerned with the IP sector.
“The collaboration guarantees the country’s adherence to international best practices in this regard, thereby stimulating FDI flows and attracting international companies to relocate to the UAE by guaranteeing a highly conducive working environment. This, in turn, strengthens the UAE’s position as a favored destination for innovators and creators, thus promoting its leadership in global competitiveness indexes for IP protection,” Alnuaimi said.
He pointed out that the new laws allow greater flexibility to accommodate unconventional trademark patterns and provide them with legal protection, in light of the advanced technologies used in building companies’ trademarks.
“This shows how the UAE is keeping pace with international developments in the field, consolidating its position among the countries with advanced, innovative trademark protection.”
According to experts, fines have been increased to between Dh100,000 and Dh1 million for the following offences: forgery or counterfeiting; knowingly using a forged or counterfeit trademark; using in bad faith a trademark owned by another; possession of material for the imitation or counterfeit of a registered trademark; and importing or exporting of counterfeit products. A reduced fine of Dh50,000 — Dh200,000 applies to the sale or possession of counterfeit products and the use of an unregistered trademark in a manner to suggest that it has been registered. This is a stark contrast from the Repealed Trademark Law which set minimum fines at Dh5,000, according to experts.
“Article 39 of the amended copy rights law increases the potential fines for copyright infringement from a maximum of Dh50,000 to Dh100,000 (previous penalty was Dh10,000 – Dh50,000 under the Repealed Copyright Law). Article 40 also introduces new more severe penalties for (a) manufacturing or importing counterfeit works; (b) disrupting or impairing electronic data aiming at managing copyrights; and (c) downloading or storing computer programmes, applications or databases without a licence from the author or rightsholder. Such offences now carry a minimum imprisonment of 6 months and/or a fine of between Dh100,000 — Dh700,000 (previous penalty was minimum three months imprisonment and fine of Dh 50,000 — Dh 500,000 under the Repealed Copyright Law,” say experts.
Higher penalties apply to reoffenders, copyrights law experts pointed out. The increased penalty for downloading computer programmes without a licence is something that, in particular, enterprise software users should be aware of. Interpreted literally, businesses who exceed their licence permissions/metrics in software licence agreements are potentially committing a crime under the Copyright Law and could face significant fines or imprisonment (without prejudice to other contractual remedies that the software licensor may wish to pursue). Enterprise software licences can be complicated to negotiate and interpret and it is important that businesses procuring software licences understand their usage entitlements and obtain sufficient legal and technical advice, according to legal experts.
30 Jul
UAE to see increased demand for BNPL services
Online shoppers increasingly opting for Buy Now Pay Later (BNPL) services when purchasing various products and services
Consumer appeal, accessibility, and the assurance of no interest or fees – as long as payments are made on time – have been the main driving forces behind the growth of Buy Now Pay Later (BNPL) services across the UAE and MENA region, experts have said.
Nick Curran, head of Endava in the Middle East, and North Africa, says that BNPL has become one of the most prominent retail trends due to the effects of the Covid-19 pandemic and the exponential growth of e-commerce.
Consumer appeal, accessibility, and the assurance of no interest or fees – as long as payments are made on time – have been the main driving forces behind the growth of Buy Now Pay Later (BNPL) services across the UAE and MENA region, experts have said.
Nick Curran, head of Endava in the Middle East, and North Africa, says that BNPL has become one of the most prominent retail trends due to the effects of the Covid-19 pandemic and the exponential growth of e-commerce.
Curran says that BNPL is well-liked among all demographics for many reasons, but it is particularly well-liked among millennial and Gen Z customers as a tool for financial empowerment. “Customers benefit from rapid gratification, a flexible return policy, easy access to credit, and the ability to manage their finances by spreading the cost of purchases over a predetermined time frame.”
For retailers, he noted that BNPL boosts sales, adds stickiness, and lowers basket abandonment without risk. BNPL providers pay retailers upfront and lend money to customers while taking on all of the program’s administrative costs and credit risk. “Aside from the fact that embracing BNPL can improve sales, the appeal is that it can be used for much more than just payments. BNPL firms have vast amounts of data that retailers can use to enhance customer loyalty by offering more targeted products.”
Looking ahead, he said that BNPL will continue to grow across various industries, including banking, luxury retail, travel, hospitality, insurance, trading, and healthcare. This is because the ecosystem is becoming more saturated with big banks, payment schemes, and new entrants vying for a market share. The introduction of banks into the BNPL market is another trend poised to disrupt the industry. BNPL lenders are stealing a portion of banks’ credit card and consumer loan revenue.
“The time is right for banks to enter the BNPL market; nevertheless, having the correct market entry strategy and business model is critical to succeeding,” Curran noted. “Banks are experienced in regulatory compliance and credit underwriting and have the data and client base to compete in this market. Banks are also well-positioned to ascertain affordability and can tailor BNPL offers based on a customer’s risk profile using financial data. However, they must move quickly or risk missing the boat.”
Furthermore, as BNPL players scale and enhance engagement, Curran says that consumers can expect to see super apps that combine retail, financing, payments, and banking offerings. Globally, Klarna, Affirm, and PayPal have already jumped in with their super apps. Super apps distinguish themselves by providing an integrated, fluid, and efficient experience without the need to transition between applications. As competition intensifies, these solutions will become a significant differentiator in the BNPL market.
Security has to be ‘top of agenda’
Saeed Ahmad, managing director, Middle East and North Africa, Callsign, cautioned that as the BNPL industry grows and providers increase their capabilities, it is expected to become a more attractive target for fraudsters.
“While the financial repercussions are troubling, the long-term consequences are far more concerning,” he said. “Fraud undermines consumer trust and, as a result, the long-term potential of the BNPL ecosystem. The most prevalent way users have been victimized by fraud is through the creation of a false BNPL account using stolen card information and identities. Due to the fact that consumers are not invoiced billed immediately, it may take a while for the victim to realise they’ve been targeted.”
Another tactic frequently used by fraudsters are account takeovers, in which they hack into a legitimate user’s account to order items. The dangers are heightened for retailers and BNPL as they are typically held accountable for BNPL fraud consequences. Retailers and BNPL providers are often left to bear the consequences of fraud and repossession, while the fraudsters receive items they have not paid for. Furthermore, because BNPL providers have partnered with various mainstream retailers, consumers often open multiple BNPL accounts. This broadens the field for fraudsters. Account takeover or credential theft is a common precursor to BNPL fraud.
Ahmad says that cconsumers should be cautious of responding to SMS text messages or emails claiming to be from their favourite stores, as they may contain links that lure them to disclose personal information.
“These ‘Phishing’ attacks are frequently the first tool in a fraudster’s toolbox when conducting BNPL and other forms of fraud,” he said. “Consumers who use the same password for all their BNPL accounts are more vulnerable to BNPL fraud. As a result, to decrease the possibility of ATO fraud, consumers should use different passwords for their BNPL services.”
“Along with raising customer awareness of security best practices, BNPL providers need to improve their knowledge of each user interaction’s associated identification and how much trust can be placed in it,” he added. “Layering in approaches such as device fingerprinting, behavioral biometrics, and location analysis helps to build a more comprehensive understanding of the risk level associated with each user. BNPL providers can make more informed and precise decisions throughout onboarding, login, and payment by having a better grasp of users’ digital identities. Apart from preventing fraud, this can also help reduce false decline rates.”
Source: https://www.khaleejtimes.com/tech/uae-to-see-increased-demand-for-bnpl-services?_refresh=true
