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
03 Mar
Assessment of VAT impact to take 3-5 years: UAE minister
It will take around three to five years to collect the required data for the assessment of the impact of the Value Added Tax (VAT) on the UAE’s Gross Domestic Product (GDP), according to a UAE minister.
Hamid Obaid Al Tayer, the Minister of State for Financial Affairs and Chairman of the Board of Directors of the Federal Tax Authority (FTA) told members of the Federal National Council (FNC) on Tuesday that it was too early for the government to evaluate the impact of VAT to the country’s economy because of insufficient data.
“It requires a period of three to five years to study the impact of VAT on the impact of the country’s economy,” said Al Tayer. “We need ample time to compile sufficient data to evaluate the effects of the tax. The only study that was conducted in 2018 in just not enough. It’s therefore too early to rely on such data to assess the impact of VAT.”
The minister was responding to a question from Hamad Al Rahoumi, first deputy speaker of the FNC and a member representing Dubai about the effects of VAT on the economy, the consumers and traders two years after its implementation.
A five per cent VAT was introduced in UAE from January 2018 and the impact of the tax is yet to be known.
“There have been many challenges, including the low oil prices, geopolitical factors, sanctions imposed on certain nations and now the coronavirus outbreak. All these factors have to be taken into account when assessing the impact of VAT,” said Al Tayer.
He noted that there was no plan to increase the amount of VAT being charged on goods and services as the International Monetary Fund (IMF) recently recommended.
Last year, the IMF suggested that the VAT should be doubled from five per cent to 10 per cent in Saudi Arabia in consultation with the other Gulf countries.
Al Rahoomi told Khaleej Times on the sidelines of the FNC meeting that he raised the issue following mixed reactions from people about VAT and that it was necessary that the concerned body come up with a comprehensive survey on the effects of this tax and its benefits to the nation.
“VAT and other government fees has led to businesses increase prices of various goods and services thereby affecting consumers,” said Al Rahoomi.
UAE’s GDP to increase in 2020
The state minister also noted that the country’s GDP is expected to increase to Dh1.50 trillion in 2020 from Dh1.46 trillion in 2019, an increase of nearly Dh37 billion.
“Last year, the inflation rate was 1.5 per cent. The GDP in 2018 was Dh1.44 trillion and inflation was 3.69 per cent,” said Al Tayer, adding that the country’s GDP in 2017 was Dh1.41 trillion and the inflation was 1.97 per cent.
In 2016, the GDP was Dh1.41 trillion and the inflation rate was 1.61 per cent.
Al Tayer said the UAE is currently witnessing an increase in investment opportunities, which was reflected in the increase in the number of companies registered under the tax system, which is 312,000 companies.
Source:https://www.khaleejtimes.com/business/banking-finance/assessment-of-vat-impact-to-take-3-5-years-uae-minister
11 Feb
VAT in UAE: Now get refunds at shopping malls, hotels
Kiosks allow tourists to process their requests to recover VAT.
The Value Added Tax (VAT) Recovery Self-Service Kiosks for Tourists scheme has been expanded to be available at major shopping malls and hotels, in addition to the existing ones at air, land and maritime entry and exit ports across the UAE, announced the Federal Tax Authority (FTA).
The expansion aims to provide additional services to tourists, enhancing the UAE’s status as a leading destination on the international tourism map. Planet – the company authorised by the FTA to operate the electronic system for the Tax Refunds for Tourists Scheme – debuted nine self-service kiosks in stage one of implementing the plan, setting them up at multiple shopping malls and hotels. The kiosks are equipped with state-of-the-art technology allowing them to fully process VAT refund requests for tourists.
In a statement issued on Monday, the authority explained that the kiosks allow tourists to process their requests to recover VAT from the convenience of their hotel or at major malls in a matter of minutes.
Applicants can scan their boarding pass to prove they will be leaving the UAE in the next 24 hours, as well as their original passport (or identity card for GCC nationals), and then follow the simple instructions displayed at the self-service kiosks. The FTA revealed that up to 55 new self-service kiosks will be deployed by the end of 2020 – 25 of which would be stationed in malls and 30 in hotels.
Khalid Ali Al Bustani, director-general of the FTA, said: “Our objective from expanding the self-service kiosk is to provide further facilities and additional options for tourists looking to recover taxes. Eligible tourists who meet the necessary criteria for reclaiming the VAT they incurred on their purchases in the UAE can process the refund applications from the convenience of their own hotels or from a list of major shopping malls around the country.”
The number of digital transactions under the Tourists Refunds Scheme grew to 3.2 million in the period between its launch in November 2018 and the end of 2019.
Tourists can submit their requests to recover the taxes they incurred on purchases in the UAE when they are about to depart from the country. Applicants must submit the tax invoices on their purchases, marked with ‘Tax-Free’ stickers issued by retail outlets registered in the system, along with their passport and credit card. No limit is placed on the maximum amount that can be recovered if said amount is transferred to the tourist’s credit card, however, in the event that the applicant requests a cash refund, then the maximum amount is set at Dh7,000 per day. This process can be carried out at self-service kiosks, as well as at tax refund offices located at ports of exit across the UAE.
Source:https://www.khaleejtimes.com/business/vat-in-uae/vat-in-uae-now-get-refunds-at-shopping-malls-hotels
18 Dec
Facebook announces 5% VAT on ad services in UAE
The notice was issued this week.
Facebook announced a tax on one of their services in UAE this week.
In a notice issued to users in UAE, the social media giant said that it was implementing value-added tax (VAT) on the sale of ads in UAE:
Due to an implementation of a value-added tax (VAT) in the United Arab Emirates, Facebook is now required to charge VAT on the sale of ads in UAE. All advertisers with a ‘sold to’ of United Arab Emirates that have not provided a tax registration number will be charged VAT at 5% on advertising services.
If you haven’t already, here is how to update your account:
Go to Account settings
Add or confirm your state
Add your 15-digit tax registration number
It is important that you provide a valid tax registration number. We are legally required to verify this number with the UAE tax authority. Invalid tax registration numbers will be disregarded and as a result, you will be charged a 5% VAT on the purchase of ads.For additional information, please visit our help content.
Thank you,The Facebook Business Team
Source:https://www.khaleejtimes.com/business/vat-in-uae/now-pay-5-tax-for-this-facebook-service-in-uae
