While most companies in the UAE will not take any specific measures to compensate against the introduction of VAT, a new study shows that VAT will only have a minimal effect on people’s buying power.

Mercer, a global consulting leader in advancing health, wealth and careers, and a wholly owned subsidiary of Marsh & McLennan Companies has released its latest research on the impact of VAT on the purchasing power of the UAE workforce.

“While VAT is applied to most items that are purchased on a daily basis, such as food, clothing and personal care, the so-called ‘additional spend’, which is made up of items such as financial services, education and flights are non-taxable,” said Rob Thissen, Talent Mobility leader for Mercer in the Middle East.

“Along with housing, these are accounting for a large proportion of employees spending power which will not be impacted by VAT. However, VAT will not affect everyone in the same way. Different individuals and households will have different spending patterns.”

Mercer research shows that income level and family size can cause the impact of VAT to vary considerably. For example, lower salary households living on an income of Dh100,000 would typically spend 48.5 per cent of their income on taxable goods and services, meaning a 2.4 per cent loss in purchasing power, while higher salaried single individuals with an income of Dh500,000 would only spend 37.7 per cent of their pay on taxable goods and services, decreasing the impact of VAT on their purchasing power to only 1.5 per cent.At the same time, Mercer’s study forecasts that VAT will be offset by the expected salary increases.Ted Raffoul, Career Products leader at Mercer in the Middle East said:

“While the VAT implementation will have a measurable impact on purchasing power, we forecast the average salary increase in the UAE to be 4.3 per cent across all industries, which is considerably higher than the expected level of inflation.

According to the IMF, inflation for 2018 is forecasted at 2.9 per cent. Inflation statistics already account for the expected consumer price increases, and most companies incorporate this figure while budgeting for salary increases.

Therefore, most companies feel no need for any extraordinary measures, but will likely monitor the situation closely as it evolves.”Industries such as life sciences and technology expect an even higher increase close to 5 per cent, while the energy and financial services sectors project salary increases closer to 3.5 per cent. – TradeArabia News Service

Source: www.gdnonline.com/Details/316754/VAT-impact-on-UAE-workforce-seen-minimal

The Federal Tax Authority (FTA) has urged businesses to file their first VAT returns by no later than the last day of this month to avoid penalties.

The first tax reporting period since the January 1 rollout of a 5 per cent VAT in the UAE ended on Wednesday. VAT returns must be filed monthly by companies with annual turnover above Dh150 million, while businesses with revenue below that level must file quarterly.

“Taxable persons must comply with tax laws, submit tax returns, pay their due taxes within the specified time frames and keep records as required in tax legislation in order to avoid penalties,” said the FTA’s director general Khalid Al Bustani.

For some companies, exceptions have been made, “following requests from a large number of businesses subject to VAT”, said Mr Al Bustani.

The first tax period has been extended to three months in some cases, he said. The filing period will return to a monthly basis afterwards for these firms.

Businesses whose initial tax period was for the three months ending in March, have not been given any leeway, said the director general.

The UAE began implementing VAT along with Saudi Arabia as part of a planned GCC-wide levy as member countries seek new revenue streams amid lower oil prices.

DOCUMENTS TO BE FILED FOR THE VAT RETURN :

• Records of all supplies and imports of goods and services
• All tax invoices and tax credit notes
• Alternative documents related to receiving goods or services
• All tax invoices and tax credit notes
• Alternative documents issued

Source: www.thenational.ae/business/economy/vat-in-the-uae-first-tax-returns-must-be-submitted-no-later-than-february-28-1.701366

The Federal Tax Authority (FTA) in the UAE has issued a guide to file tax returns for companies and taxpayers.

The form requires taxpayers to report supplies zero-rated supplies, exempted supplies, etc separately and Standard rate supplies at 5 per cent for each emirate.

VAT return can be filed using form VAT 201 and Form 311 to claim input refund.

Girish Chand, director, MCA Management Consultants, said Nil return will have be filed by the companies and taxpayers in case no business transaction took place.

Pratik Shah, partner, WTS Dhruva Consultants, said taxpayers should ensure that transactions are appropriately classified in the following categories in the accounting system – emirate-wise (standard rated at 5 per cent), zero-rated, exempted or out of the scope of VAT.

In case the due date to file the VAT return is a weekend or a national holiday, Shah said a relaxation is given by FTA to submit the VAT return and making the payment on the succeeding business day.

Payment of VAT liability/ penalty can be done through an e-Dirham card or credit cards (Visa or Master card). Charges for payment via e-Dirham card would be Dh3 per transaction while payment via credit card will incur a charge between 2 and 3 per cent of the total payment amount.

The FTA on Saturday told UAE businesses, whose first tax period ended on January 31, to file their VAT returns before February 28 deadline.

Girish Chand said VAT returns must be submitted within the specified deadline, otherwise, a penalty of Dh1,000 will be imposed for the first time of occurrence of a delay. In case of repetitive non-compliance within 24 months, the penalty will be doubled to Dh2,000 for each offence.

The returns can be filed both in Arabic and English.

Source: www.khaleejtimes.com/business/local/No-business-transactions-in-UAE,-no-VAT-returns

On January first, a shopper at the Shaheen Supermarket in Abu Dhabi’s Khalidiya neighbourhood entered the store prepared for life with VAT: clenched within her hand was a mass of five and 10 fils coins.

The cashier, unfamiliar with the currency, refused to accept the unfamiliar coins. The customer geared up for a debate about legal tender and insisted that if her coins were not accepted, she would round down. The cashier simply shrugged his shoulders and agreed. She left the coins on the counter and there they sat, untouched by the unconcerned clerk.

Shoppers may have dreaded the 2018 arrival of VAT and the problems it could have caused, but one month on it has become a routine part of life.

In Abu Dhabi’s Hamdan Street souq, clerks say sales dropped long before the introduction of VAT due to the economic downtown. VAT has made little difference to their already slow sales.

“Business has been slow for three or four months,” said Abbas Ali, 33, an Iranian clerk at Al Shaqaiq Garments.

“There’s no work, business is down and it’s like this in the whole souq. Look at that shop, see how it’s closed?” he said, pointing to a shuttered storefront. “That was a gold shop. Two shops behind here have also closed. Look at the street, where are the people? They’re working and not buying. See my customers, they’re looking and not buying. Really I don’t know where the people are. Companies have cancelled everyone’s visa.”

Abu Dhabi’s Al Sharaiq Garments & Footwears. Victor Besa / The National

Al Shaqaiq sells low-priced gifts and ready-made clothing, like watches, prayer rugs, t-shirts and abayas. Tax is not charged for small purchases. “Why should I tax this man?” said Mr Ali when a customer bought a Dh10 T-shirt. “He’s my friend.”

Customers may be informed about the 5 per cent price increase, but this has not stopped them grumbling. “Customers are complaining too much,” said Haris Kallingalmoidu, a clerk at the Three Thirteen Baqala grocer. “Everyone’s complaining. Nag, nag, nag. Too much talking and questioning.”

Like many Baqala grocers, its prices are not listed. VAT is automatically calculated at the checkout and customers are not given receipts. They must trust.

Sales associates have attributed January’s slow sales to pre-VAT stockpiling. “Last month, people purchased all the things – gold, shoes, even grocery items,” said Deepesh Manjhani, a clerk at Silsila Trading, a textile shop. “They bought in quantities. Business was up last month and now it’s down, but it will be up in February.”

Haris Kalingalmoidu an Indian Baqala store owner. Victor Besa / The National

Bushra Rafiq, 35, a customer from Pakistan examining yards of cotton, said taxes have not caused her to change her spending. “We’re just thinking before we buy anything,” she said. “We just have to think before we buy.”

At Silsila, prices are negotiated by the metre with VAT added at the till. At this point, some customers refuse to pay and then, little can be done. At traditional markets like those on Hamdan Street, everything is considered negotiable and that includes tax. “It’s impossible,” said Mr Manjahni. “They say, ‘if you want it, give it to me’. We take the loss.”

In Fujairah, business owners and workers said that many customers still don’t understand the VAT and it has affected sales.

Abdulkareem Ibrahim, 32, from India, works at a local supermarket. He said sales had dropped by 30 per cent since the first of January due to the lack of understanding of VAT.

“People are afraid to buy and we noticed that recently. They don’t understand the tax and how its implemented on goods. Cigarette sales decreased by 40 per cent and soft drinks dropped by 30 per cent,” said Mr Ibrahim, who works at Jiyad supermarket in Fujairah. Cigarettes and fizzy drinks had already seen a rise in prices towards the end of last year due to the introduction of an excise tax.

Ahmad Tablis, a Syrian flower shop owner, said his sales dropped by 15 per cent this month.

“I don’t know exactly why there is a drop in our sales as the 5 per cent should not affect the prices that much, but it could be due to the confusion and not understanding the implementation of VAT. And the fact that some shops increased their prices more than 5 per cent without reason,” he said.

Mr Tablis said he himself still doesn’t know when he should pay VAT.

“I don’t know when we should pay the tax, but we are ready and the system in our shops has been modified accordingly.”

Mr G Khan, another flower shop owner, said he was unable to register his business for VAT as it was considered too small.

“I pay VAT to traders, but I still sell plants at regular prices without VAT. We sell a one dirham flower at the same price and that leaves us with very low profit and sometimes none,” he said.

“[The Friday] market has been affected with the low sales and the decreasing number of customers and we don’t know why.”

Fujairah residents said that some shops have used VAT as an excuse to raise prices, while others don’t give the correct change.

“I returned some meat I ordered from the butcher last week and refused to pay because he increased the prices by around 15 per cent. When I asked him why, he told me due to VAT,” said Noura Khalil, a 39-year-old Jordanian mother of five.

“He asked for Dh18 more for Dh120 worth meat,” she said.

Source: www.thenational.ae/uae/vat-in-the-uae-tax-now-a-routine-part-of-life-say-traders-1.700738