59A7D41EB44EABC4F2C2B68D88211BF4 U.A.E Visa Rules and Procedures-Law updates -free legal advice: August 2017

Monday, August 28, 2017

UAE President issued Federal Decree-Law for Value-Added Tax


VAT in UAE

President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued the Federal Decree-Law No. 8 of 2017 for Value-Added Tax, with one of the lowest rates in the world.

A preliminary step to implementing VAT in the UAE as of January 2018, the 5% tax is set to be imposed on the import and supply of goods and services at each stage of production and distribution, including what is deemed to be a supply.

"The Federal Decree-Law issued by H.H. Sheikh Khalifa bin Zayed is the bedrock of the UAE’s planned tax system, which was designed to meet the most stringent of standards and best practices," said H.H. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance and Chairman of the Federal Tax Authority.

"The Value-Added Tax, which is set to be implemented across all GCC countries over the next two years, will bring a new revenue stream for the national economy and GDP. This, in turn, will ensure consistency in the high quality of government services, to mirror the UAE’s advanced position on several global competitiveness indexes."

"The new tax system will provide extra support for the Government to implement the vision of the UAE leadership and build a diversified and productive knowledge economy," H.H. Sheikh Hamdan added.

"The newly introduced Value Added Tax that shall be implemented in the GCC depending on the readiness of each member State between 1 January 2018 and 1 January 2019 pertaining to the Common VAT Agreement of the States of the GCC, will have positive results on the economy, far exceeding its 5% rate, given that revenues will be redistributed to development projects that benefit society at large and accelerate progress until the UAE reaches the top of global rankings across all sectors."

The Decree-Law provides that all supplies of goods and services are subject to VAT at a standard rate of 5% with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-law. The tax imposed shall be the responsibility of a Taxable Person who makes taxable supplies or what is deemed to be a supply or on import.

According to the Decree-Law, a supply of goods includes the transfer of ownership of the goods or the right to use them as an owner from one Person to another and an entry into a contract between two parties triggering the transfer of goods at a later time. A supply of service is any supply that is not considered a supply of goods.

The Decree-Law made two exceptions as to what constitutes a supply: the issuance or sale of any Voucher unless the received Consideration exceeds its declared monetary value; and the transfer of the whole or an independent part of a Business from a Person to a Taxable Person for the purposes of continuing such Business that was transferred.

A Government entity is regarded as making a supply of the said entity was not performing activities in sovereign capacity or if its activities are in competition with the private sector. The Cabinet – upon the suggestion of the Minister – issues a decision determining specific Government entities whose activities are considered as "activities in sovereign capacity" and instances where these activities are considered not in competition with the private sector.

A supply is considered "Deemed" if the supply of goods or services was all or part of a taxable person’s assets, but no longer considered to be as such (provided the supply was made without consideration).

Similarly, the supply is Deemed if implemented through a transfer by a Taxable Person of Goods forming part of his business assets from the UAE to another VAT-implementing GCC state, or from the Taxable Person’s business in a VAT implementing GCC state to his business in the implementing state, unless, in either case, that transfer: is treated as temporary under the Customs Legislation; or is made as part of another Taxable Supply of these Goods.

The same applies to the supply of goods or services for which Input Tax may be recovered but was used, in part or whole, for purposes other than Business, but only to the extent of non-Business use, as well as for Goods in the ownership of the Taxable Person as at the date of Tax Deregistration.

Every person who has a place of residence in the UAE or in a VAT implementing GCC state must register for VAT according to the Decree-Law, if at the end of any month his taxable supplies for the previous 12 months exceeded the mandatory registration threshold or he expects to exceed the mandatory registration threshold in the next 30 days.

The Decree-Law stipulates that two or more Persons conducting business may apply for tax registration as a tax group if all of the following conditions are met: Each Person has a place of establishment or fixed establishment in the UAE; the relevant Persons are related parties, and one or more Persons are conducting business in a partnership that controls the others.

The legislation also includes provisions prohibiting any Person conducting business from having more than one tax registration number, TRN, unless otherwise decided by the Executive Regulation. If related parties do not apply for Tax Registration as a Tax Group, the Authority may assess their association based on their economic, financial and regulatory practices in business and register them as a Tax Group if the association has been proved according to the controls and conditions specified by the Executive Regulation. The Authority has the right to make changes to the Persons registered as a Tax Group by removing or adding Persons based on the instances mentioned in the Executive Regulation or as requested by the Taxable Person.

Any Person who is not obligated to apply for Tax Registration may apply if, at the end of any given month, the total value of taxable supplies or expenses which were subject to Tax incurred during the previous '12' month-period exceeded the Voluntary Registration Threshold. The same applies in the event where it is anticipated that the total value of taxable supplies to be made or expenses which were subject to Tax to be incurred will exceed the Voluntary Registration Threshold during the coming '30' day period.

A non-resident Person may not take the value of goods and services imported into the UAE for the purpose of calculating whether they are entitled to apply for tax registration if the charging of tax for such goods or services is the duty of the Importer, as defined in the Decree-Law.

To determine whether a Person has exceeded the mandatory registration threshold and the voluntary registration threshold, the total sum of the following is calculated: The value of Taxable Supplies made by the Person; the value of concerned goods and concerned services received by the Person; the value of the taxable supplies made by the acquired whole or part of the business, if a Person acquires a whole or part of another business; and the value of taxable supplies made by related parties.

A registrant must apply to the Authority for tax deregistration if he no longer makes taxable supplies; or if the value of the taxable supplies made over a period of 12 consecutive months is less than the voluntary registration threshold. They may also apply for tax deregistration if the value of taxable supplies during the past 12 months was less than the mandatory registration threshold.

Zero-rating applies when goods and services are being exported to outside a VAT-implementing GCC state, as well as to international transportation of passengers or goods including a transfer starting or ending in the UAE or passing through its territory. Air transfer of passengers in the UAE also incurs zero rates if it is considered an "international carriage" as per article (1) of the Warsaw International Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929.

Zero rating also applies to the supply of air, sea and land means of transport used to transport passengers and goods, as well as the supply of goods and services related to the supply of the means of transport, which are for operating, repairing, maintaining or converting them; the supply of aircraft or vessels designated for use in the assistance or rescue by air or sea; the supply of goods and services related to the transfer of goods or passengers aboard land, air or sea means of transport, designated for consumption on board; or anything consumed by means of transportation, any installations or addition thereto or any other uses during transportation.

The supply or import of investment-precious metals, as well as the first supply of residential buildings within (3) years of its completion, either through sale or lease in whole or in part, is equally subject to a zero-rate. The first supply of buildings specifically designed to be used by charities and buildings converted from nonresidential to residential shall also be taxable at the rate of zero.

Also subject to the zero rate is the supply of educational services and related goods and services for nurseries, preschool, elementary education, as well as higher educational institutions owned or funded by the Federal or local government, as specified in the Executive Regulation; and, finally, the supply of preventive and basic healthcare services and related goods and services, as specified in the Executive Regulation.

The Decree-Law outlines that certain supplies shall be exempt from tax, namely: the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

As per the Decree-Law, Payable Tax for any Tax period is calculated as the total Output Tax (i.e. the tax that the taxable person has charged on his supplies) during the said period less the total Input Tax recoverable by that Taxable Person over the same Tax Period (i.e. the tax that he has paid on supplies to him or imports by him).

The Taxable Person must submit a Tax Return to the Authority at the end of each Tax Period in accordance with the timeframes and procedures specified in the Executive Regulation of the Decree-Law declaring all supplies made and received which during that Tax Period.

The Executive Regulation of the Decree-Law shall specify the timeframes and procedures of payment of tax declared in the Tax Return as payable.

If a Taxable Person acquires or imports a Capital Asset, the Taxable Person must assess the period of use of that asset and make the necessary adjustments to the Input Tax paid pursuant to the Capital Assets Scheme.

Taxable Persons are mandated by the law to retain the records relating to Capital Assets for at least ten years. A registrant making a taxable or deemed supply shall issue an original tax invoice and deliver it to a recipient of goods or services or keep it in his records in the event of a lack of recipient. Any Person who receives an amount as Tax pursuant to any document issued by the Person must pay this amount to the Authority. A registrant shall issue a tax invoice within 14 days of the date of supply.

The Decree-Law specifies that the Executive Regulation shall include the information to be included in the Tax Invoice; conditions and procedures required to issue an electronic Tax Invoice; instances where the Registrant is not required to issue a Tax Invoice to the Recipient of Goods or Services; instances where other documents may be issued in place of the Tax Invoice, as well as their specifications and the information to be included therein; and instances where another Person may issue a Tax Invoice on behalf of the Registrant supplier.

Federal Decree-Law No. (8) of 2017 for Value-Added Tax (VAT) is available in full on www.mof.gov.ae and www.tax.gov.ae.

Saturday, August 26, 2017

U.A.E President Issues Federal Decree amending Emirates Identity Authority Establishment Federal Law

UA.E President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued Federal Decree No. 3 of 2017 to amend Federal Law-Decree No 2 of 2004 on the establishment of the Emirates Identity Authority.

Article 1 of the law stipulates that the term, "The Federal Authority for Identity and Nationality,"  shall replace the term "The Emirates Identity Authority," in the title of the decree of Federal Law No.2 (2004), as well as in any other article of this law or any other law.

According to Article No. 2, Article 6, Paragraph 3 of Article 8 and Article 11 of the decree of Federal Law No.2 (2004) shall be be substituted by the following text: The Authority shall be administered by a board composed of seven members, including the Board Chairman with Ministerial Capacity, and a Vice-President, and the members shall be appointed under a federal decree and shall represent all Entities concerned with the Authority’s competencies.

The Board shall have a renewable membership term of three-years, and whenever a member’s seat has become vacant, another member shall be appointed for the rest of the membership period, and the Vice-President shall replace the Chairman in his absence. The Chairman of the Board shall issue the Statutes and Internal Regulation of the Board after approval by other board members.

Paragraph 3 of Article 8 is to be substituted by the adoption and issuance of decisions and internal regulations related to the financial and technical affairs of the Authority, as well the approval of the new Organisational Structure and the Authority’s human resources department, after its submission to the Cabinet for approval and issuance.

Article 11 stipulates that a Director-General should be appointed by the Authority, with the rank of a Civil Servant Undersecretary or a Military Officer with a rank that should not be under Major General, to be appointed under a federal decree after the approval of the Cabinet, upon the nomination of the board.

According to Article 3 of Federal Law No.3 (2017), a new paragraph shall be added to Article 2 while new articles, 4 bis, 21 bis, 1 and 21 bis and 2, shall be added to Federal Law No.2 (2004).

The new paragraph shall also be added to Article 2: "The Authority is also concerned with naturalisation affairs, passports, and the entry and residence of expats in the country, and it shall be in charge of charting the related policies and ensuring their enforcement, according to the provisions of this decree, and current national laws and regulations."

According to Article 4 of the law, the decisions and regulations being implemented, which concern naturalisation affairs, passports and the entry and residence of expats, shall still be in force at the time of the issuance of this decree, as long as they do not contradict with its articles or until other regulations are issued to replace them.

Article 5 of the law states that relevant authorities are to undertake the necessary measures to implement what is included in this law according to their competencies and achieve such measures in a period that does not exceed six months as per a resolution of the cabinet of ministers

Wednesday, August 23, 2017

UAE Excise Tax Law effective October 1st 2017

The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, has issued a federal decree-law on excise tax, which will be imposed on selected products.

As per Federal Decree-Law No. 07 of 2017, excise tax rates that shall be imposed on the excise goods, which, along with the method of calculating the excise price, are subject to a decision by the council of ministers, upon the recommendation of the minister of finance, provided that the tax rates do not exceed 200 per cent of the excise price.

At its 37th meeting, in December 2016, the Supreme Council of the Gulf Cooperation Council, GCC, issued a resolution on excise goods list, which contains tobacco products, energy drinks and certain soft drinks.

"As President, His Highness Sheikh Khalifa issues Federal Decree-Law No. 07 of 2017 on excise tax, the UAE takes a great leap forward," Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance, said.

"We are making remarkable progress in our plans to establish a sound legislative infrastructure to support the UAE's tax system and make sure it meets and exceeds international best practices."

"The project diversifies the government's revenue streams and boosts its resources, which, in turn, will strengthen the economy and ensure its sustainability," Sheikh Hamdan bin Rashid added. "The excise tax, in particular, will help us build a healthier and safer society. This tax is set to discourage the consumption of products that negatively impact the environment and, more importantly, people's health, while the revenues it generates will go towards supporting advanced services for all members of society."

The new legislation requires excise tax to be imposed on certain activities around specific "excise goods", activities such as the production or importation of excise goods in to the UAE, as well as the stockpiling of excise goods in the UAE, where these activities occur in the course of doing business.

As per initial estimates, the tax is forecast to generate up to around AED7 billion in annual revenues for the Federal Budget.

The Decree-Law also determines the specific dates for accounting for the tax, namely: the date on which the Excise Goods are imported, the date on which the Excise Goods were acquired by the Stockholder, if after the Decree-Law came into effect, or the date it came into effect otherwise, and in all other cases the date on which the Excise Goods were released for consumption. The release for consumption shall further be clarified in the Executive Regulation of the Decree-Law

The due tax is, moreover, the responsibility of the person who conducts any of these activities, or, if said person fails to meet their obligations, a person involved in any of the activities. In the event that excise goods are released from a designated zone (and where payable tax has not been paid previously), the onus is on the warehouse keeper to pay the tax.