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

As many as 21 public sector banks and three major private sector lenders collected a whopping Rs 5,000 crore (Rs 50 billion) from customers for non-maintenance of minimum balance in their accounts in 2017-18, according to banking data.

India’s largest lender State Bank of India, which suffered a staggering net loss of Rs 6,547 crore during 2017-18, led the pack in penalising its customers for not maintaining minimum account balance. The government-owned SBI, which re-introduced the penalty on deposits going below monthly average balance basis from April 2017, collected nearly half the amount raised by the 24 banks put together (Rs 4,989.55 crore).

But for the additional income of Rs 2,433.87 crore under this head, SBI’s losses would have soared further.

After SBI, the largest amount of charges for not maintaining minimum balance during 2017-18 was collected by HDFC Bank. It charged its customers Rs 590.84 crore, which is lower than Rs 619.39 crore in 2016-17, the data revealed.

Axis Bank collected Rs 530.12 crore in the last fiscal while ICICI Bank charged Rs 317.6 crore.

SBI was charging the penalty on failure to maintain monthly average balance requirement till 2012 and again re-introduced it from April 1, 2017.

Following the criticism, SBI reduced charges with effect from October 1, 2017.

According to the RBI norms, banks are permitted to levy service/miscellaneous charges.

Customers opening accounts under Basic Savings Bank Deposit (BSBD) scheme as well as Pradhan Mantri Jan Dhan Yojna are not required to maintain any minimum balance.

Source: www.khaleejtimes.com/business/banking-finance/banks-fined-depositors-dh27b-for-not-maintaining-minimum-account-balance

Since the launch of value-added tax (VAT), more than 20,000 small businesses in the UAE have shifted from manual to digital accounting following the mandate issued by UAE government to submit tax returns online, said a top official.

Digital accounting has become imperative for countries worldwide. It not only facilitates operational and cost efficiencies, but also ensures better security, speed and reduced errors. Making VAT digital makes way for a modern and fast service which help businesses get their compliance right, reduces the tax gap, as well as plummets the cost, uncertainty and worry that businesses face while filing returns,” said Vikas Panchal, business head at Tally Solutions in the Middle East.

The UAE recently implemented value-added tax (VAT) beginning January 1, 2018. Tally Solutions – a leading international accounting and compliance software provider help businesses comply with the new law by creating awareness on the importance of maintaining proper accounting records as well as facilitating the ease of filing returns through its automated software Tally.ERP 9 Release 6.4. Trusted by more than 1.2 million businesses globally, Tally Solutions already includes a list of 50,000 satisfied clients across GCC, a company statement said.

“Ever since VAT was introduced in the UAE, companies have moved from pen and paper and scaled up their computing processes to be able to match up to UAE’s digital processes. Digitalisation has helped businesses to manage timely and accurate record-keeping, whilst preventing errors associated with manual processes. While digital accounting facilitates regulation it also allows businesses to access tax information in a single place, file returns online from any place and deliver improvements in business process,” added Panchal.

While automated accounting will have a significant impact on the way authorities collect, administer and enforce tax, it also helps resolve issues faster, making the tax system more sophisticated than ever before.

Source: www.tradearabia.com/news/IT_343099.html