12 May
UAE, Bahrain unlikely to follow Saudi in hiking VAT: Experts
In a surprise move on Monday, Saudi Arabia increased VAT threefold to 15 per cent and also suspended the cost of living allowance to increase revenues.
The UAE and Bahrain are unlikely to follow Saudi Arabia in increasing value-added tax (VAT), says tax experts.
In a surprise move on Monday, Saudi Arabia increased VAT threefold to 15 per cent and also suspended the cost of living allowance to increase revenues.
“Cost of living allowance will be suspended as of June 1, and VAT will be increased to 15 per cent from 5 per cent as of July 1,” the Kingdom’s state news agency said on Monday.
Mayank Sawhney, managing director at MaxGrowth Consultancy, said the Kingdom’s move will prompt a discussion in the UAE and other neighbouring countries to increase the VAT rate in their respective countries.
“However, any such move could be detrimental to businesses and consumers in these countries, who have already been adversely impacted by coronavirus. Therefore, it is unlikely that the authorities in UAE and Bahrain will increase the VAT rates at this stage,” said Sawhney.
An official response from the UAE’s Ministry of Finance was awaited at the time of publishing this report online. The UAE had previously announced that it will not increase VAT for the next few years.
Sources and industry executive said that contrary to the Saudi move, the UAE was mulling dropping VAT temporarily until the situation surrounding Covid-19 is stabilised and economy returns back on track.
In fact, many European and Asian countries are turning to emergency tax breaks to support their economies against the Covid-19 threat. India, China, Finland, South Africa, Bulgaria, the US and the EU have announced some form of relief for their businesses and consumers in taxes to cope with the virus.
Anurag Chaturvedi, CEO, Chartered House Tax Consultancy, says considering current situation surrounding the pandemic and its impact, it will not be favourable decision to increase taxes.
“GCC governments are providing stimulus to support businesses against Covid-19 and any increase in taxes will reverse the effect and may result in deeper recession with increased inflation. KSA has more internal demand and can sustain the increased taxes whereas other GCC countries are more dependent on sectors like tourism, global trade and logistics etc. which will become unattractive by increasing tax,” added Chaturvedi, who is also secretary for ICAI – Dubai chapter.
Thomas Vanhee, partner at Aurifer Middle East Tax Consultancy, believes that the UAE and Bahrain could follow KSA given the similarities in their economic conditions but the UAE has different dynamics as compared to other countries.
“Given the similarity and the interdependency of the KSA economy with the UAE and Bahrain, it is not inconceivable that these countries will follow suit. The situation of the UAE may be slightly different since it is a confederation and not a unitary state. The dynamics between the Emirates may play out differently,” said Vanhee.
Impact of increasing VAT
Vanhee added that a hike in the VAT rate will impact consumer confidence.
“From a business perspective, those businesses which may have cared less about a mere 5 per cent VAT, will now increasingly turn their attention to transactions subject to VAT to ensure compliance and, more importantly, no VAT leakage. The economy is currently in a fragile state, therefore, this measure will be carefully weighed.”
Sawhney of MaxGrowth Consultancy noted that the increase in VAT rates in UAE in the current environment is going to have a significant adverse impact on businesses and consumers in the country.
“It could prompt exodus of more people from UAE, as such move will increase the cost of living while many people struggle to cope up with given their reduced income in the current environment on account of Covid-19,” said Mayank.
Anurag Chaturvedi noted that the impact of hiking VAT will depend on the size of the increase.
“Any increase in tax will tend to discourage activity and output. Increase in VAT may distort the choices made by households, businesses, and the foreign sector in some way.”
Source:https://www.khaleejtimes.com/coronavirus-pandemic/uae-bahrain-unlikely-to-follow-saudi-in-hiking-vat-experts
27 Mar
Penalty Reconsideration in UAE VAT
Penalty Reconsideration – UAE VAT
Reconsideration is the way to approach authority if you are not satisfied with the penalty decision issued by the authority. It is a request application that can be submitted by a Registrant/Non-registrant or tax agent after preparing a proper case study that produces evidence justifying the reason.
The authority appoints a represented member to review each application if there is any additional documents/clarification required from the applicant. The appointed member will approach the applicant by communication channels i.e. email/phone.
Based on our experience, for the last 2 years we have submitted more than 100 applications, we observed and learned that if the application is properly explained and submitted with additional supporting documents(Only in Arabic). The authority is reviewing the application and providing a waiver of penalties.
Who can submit a reconsideration application?
The application can be submitted by a Registrant/ Non-registrant and Tax Agent, who are not satisfied with the authority penalty decision. The application can submit by using an online FTA portal.
When do we need to submit a reconsideration application?
As per Article-27 of Federal Law No. (7) Of 2017 on Tax Procedures, the application must be submitted within 20 business days from the applicant being notified of the decision.
How does submit an application?
The application can be submitted by using an online FTA portal. The application is only acceptable in the Arabic language.
What are the reasons where authority will not look into your application?
As per Article-26 clause (4) of Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures. There are mainly 2 reasons:-
- Insufficiency of Funds
- Reliance on another person
In the above two cases, the authority will not look into your application.
What are the documents required to submit the application?
There are the following documents require:-
- Authorized Signatory Passport copy
- Authorized signatory Emirates ID Copy
- Authorization proof i.e. MOA/POA etc.
- A case study letter with supporting documents
How authority will approach after submission of reconsideration?
The Authority shall review a request for reconsideration if it has fulfilled the requirements and issue. Its justified decision within 20 business days from receipt of such application. The Authority shall inform the applicant of its decision within five business days as of the issuance thereof.
What if the authority approves the application?
In the case of application is approved by the authority, the penalty amount will be reverse on applicant FTA “VAT Transaction” ledger and the applicant will receive a confirmation email from authority.
What if the authority rejects the application?
If authority is not satisfied with your request application. The applicant can approach to “Tax Disputes Resolution Committee”.
What if the Tax Committee rejects the application?
If the Tax Committee is rejected the application. The applicant can approach the Court.
Source:https://www.gccfintax.com/articles/penalty-reconsideration-in-uae-vat-1254.asp
13 Feb
Simplification of tax system will help India economy on long-term basis: Analysts
Dubai – India’s 2020-21 budget was quite balanced and simplification of tax regime announced in the latest budget will help the economy on a long-term basis, say analysts.
While addressing the Indian Union Budget 2020 conference held in Dubai on Monday, they said markets and investors should look at the Indian economy over the long-term basis – five to 10 years or beyond.
Tushar Pradhan, chief investment officer at HSBC Global Asset Management in India, said the budget set direction towards simplified tax regime which is in line with the country’s bid to be a $5 trillion economy.
“Every individual or corporate should be part of the tax net and that is going to propel economy. Simplification is a big step. Some have argued that alternative tax regime is more confusing then before but we have to take it with a pinch of salt,” he said while addressing the forum, which was organized by The Indian Institute of Chartered Accountants (ICAI) – Dubai chapter.
He noted that divestment target of Rs2,100 billion is too ambitious and the next year will be really tough one to meet fiscal deficit to match.
Paras Shahdadpuri, chairman of Nikai Group, said the market was expecting some sops for the industries but it was missing in the budget.
“There was a lot of expectations built around the budget, expecting some big bang and fireworks. But it didn’t happen. Therefore, industry was disappointed. But, overall, budget is good as it did provide some stimulus,” he added.
Anish Mehta, chairman of ICAI’s Dubai chapter, said the government aimed to give more disposable income in the hands of individuals by introducing new tax slab under simplified regime in the budget.
“People, now, can choose between old and new tax slab depending on their savings appetite or not claiming various exemptions. However, this will discourage forced savings by individuals which is essential for sound financial position in times of crisis. Another measure which will impact the tax is taxing dividend distribution in the hands of the recipient rather than corporate. This may be beneficial to some but disadvantageous to tax payers who are in higher income group,” he added.
He said people were expecting some relaxation on exemption of tax on long-term capital gains which could not find place in the budget 2020. “This could have boosted investments in capital market.”
Anurag Chaturvedi, secretary of ICAI’s Dubai chapter, sees it as a balanced budget with respect to an individual increased slab-based rates and options to opt new scheme of tax.
“Abolition of dividend distribution tax is bigger reform by the government. However, capitalists will have to bear burden of increased tax slab rates, additionally bringing stateless persons in to tax net and introduction of deemed residency provisions will impact NRI in general. It will force them to choose a tax domicile (Tax Resident of any country) outside India to avoid taxing global income in India,” Chaturvedi said.
Source:https://www.khaleejtimes.com/simplification-of-tax-system-will-help-india-economy-on-long-term-basis-analysts
03 Feb
NRIs in UAE are not subjected to Income Tax
The budget proposals announced by the Indian Finance Minister have sent shock waves to non-resident Indians.
Question: The budget proposals announced on Saturday by the Indian Finance Minister have sent shock waves to non-resident Indians. Will they have to pay tax in India since they don’t pay tax in the UAE? Please explain urgently.
Answer: The proposed amendment is meant to cover individuals who are constantly on the move and spend weeks in different countries in order to avoid tax liability in any country of the world. Typically such persons spend less than three months in each country every year so that they do not fall within the ambit of the tax laws of such country. Therefore, a provision is sought to be introduced in the Finance Bill, 2020, which will be applicable from the financial year beginning on 1st April, 2020, relevant to the assessment year 2021-22, to provide that an Indian citizen who is not liable to tax in any country in the world would be deemed to be a resident of India for tax purposes.
Under the UAE tax law, residents may be liable to tax; certain corporations having specified income are taxable. However, individuals and others are exempt from tax. As and when such exemption is removed, the liability to pay tax will arise. Hence, such persons employed in the UAE or carrying on a business or profession with a valid visa, though technically covered under the UAE tax law, are not subjected to Income Tax. The words “liable to tax” are crucial in this context.
In fact, the amendment is not meant to cover persons who are resident in any country. Under Article 4.1(b) of the Indo-UAE Double Tax Avoidance Agreement, an individual who has spent in the aggregate at least 183 days in a calendar year in the UAE is deemed to be a resident. Hence, Indians working in the UAE will not be covered by this amendment. It is further proposed in the Budget that a person who visits India and spends less than 120 days will retain his non resident status under Indian tax laws; otherwise he will lose it. This proposal will prevent investments from flowing into India and will be opposed. If this amendment goes through, an Indian must ensure that he spends less than 120 days in India in a financial year.
Q: I have invested in shares and debentures of several listed companies. Some of these companies have delayed or defaulted in repaying loans taken by them from banks and financial institutions. As an investor, I am greatly concerned that this information of delay or default is not readily available. If investors are aware of these defaults, they would immediately take remedial action and pull out their investments before the share prices drop substantially. Is there any means of getting this information? I am taking full advantage of the portfolio management scheme.
A: The regulator, Securities & Exchange Board of India, has recently tightened the guidelines for listed companies on disclosure of loan defaults. As per the new norms, when a default is committed by a listed company in repaying the principal amount on schedule, the company has to disclose the fact of such default to the stock exchanges. This requirement is applicable where the delay in repayment of the principal amount and interest is beyond thirty days from the agreed payment date. The notice of such delay or default is required to be given within 24 hours from such thirtieth day.
This will provide transparency and protect the interest of investors so that they can act appropriately in the shortest possible time. These disclosure norms have been formulated by SEBI in consultation with the Reserve Bank of India. Since you are availing of the portfolio management scheme, you may note that SEBI has decided to increase the net worth requirement of portfolio managers from Rs20 million to Rs50 million. This will ensure that the managers have a stronger financial base.
Q: I have served on the board of several companies in the Gulf during the past fifteen years. On returning to India for good, I would like to serve as an independent director on the board of reputed companies if invited to do so, as I believe that there is a substantial shortage of independent directors. What are the consequences of taking up such assignments?
A: Independent directors perform functions which are critical to good corporate governance. However, the liability framework governing such directors casts an onerous burden and the liability-related risks faced by independent directors are disproportionate to the remuneration which they may earn. The Companies Act, 2013 seeks to limit the liability of non-executive directors by providing for certain safe harbour rules designed specially for them. However, the directors have to initially face investigative or legal proceedings before they are exonerated.
Further, you need to know that all independent directors with less than ten years experience of acting as such, will have to take an online proficiency self assessment test before they can be appointed on boards of companies. The test will be conducted by the Indian Institute of Corporate Affairs. This Institute will create and maintain a data bank with names, addresses and qualifications of people who are eligible to be appointed as independent directors. Boards of companies will have to disclose the results of these tests in their annual report.
Source:https://www.khaleejtimes.com/business/global/nris-in-uae-are-not-subjected-to-income-tax-
