UAE Ministry of Finance Organizes a Workshop on the Launch of the Automated Reconciliation System
As part of its ongoing efforts to provide the best-integrated solutions that improve the levels of financial management systems, the Ministry of Finance (MoF) organized a workshop today on the launch of its automated reconciliation system specific to federal government revenue. The workshop, which was held in the Conrad Hotel in Dubai, witnessed the participation of representatives of various ministries.
The aim of the workshop was to familiarise entities linked to the e-Dirham system with the auto-reconciliation system, by demonstrating its purpose and unique benefits in terms of providing an integrated solution based on the latest technologies implemented in many financial institutions locally and internationally, in order to enhance the automatic matching processes.
He Saeed Rashid Al Yateem, Assistant Undersecretary of Resources and Budget Sector at MoF stressed the importance of the FIS cortex reconciliation system in terms of validating data among a number of sources, ensuring that all transactions are received and processed efficiently across two or more systems, as well as verifying the accuracy of the transaction. That, in addition to settling transactions, and verifying and reconciling balance sheet accounts.
He said: “The Ministry is committed to adopting the latest digital technologies to enhance principles of transparency and financial governance, and ensure public finance management is consistent with the highest global standards.”
The workshop discussed the system’s layout, as well as the security and control system that was adopted, which converts data received from various input channels to the main components of the system.
Now hiring: Banking and finance professionals back in demand, says recruiter
The improving fortunes of banks in the United Arab Emirates and Saudi Arabia, coupled with the introduction of value-added tax (VAT) in both markets, has led to an increase in demand from for finance professionals, according to a new survey.
Recruiter Robert Walters said that its Middle East Jobs Index recorded a 32 percent increase in demand for banking and financial services professionals in the UAE, and a 26 percent increase in demand for accounting and finance staff.
Saudi Arabia also witnessed a 26 percent increase in demand for accountancy and finance staff, plus a 55 percent increase in the number of legal posts advertised.
Overall, the number of advertised jobs climbed by 81 percent year-on-year in Saudi Arabia during the first quarter, the company said.
“The job index reflects the sentiment across the banking sector in both UAE & KSA,” James Grundy, country head at Robert Walters was quoted as saying in a press release announcing the results. Although many banks in the UAE were making headcount cuts as late as last year, Grundy said that that several banks in both markets had recently reported “double-digit growth” in quarterly results, and that several regional and international banks are looking to establish a presence in the Saudi market.
Demand in the accountancy and finance market had been driven by the introduction of VAT, the firm said, adding that it has created new roles both within major public practices firms and within companies.
“The most in-demand roles so far this year are tax managers, financial planning and analysis and controllers. Candidates who are qualified with good enterprise resource planning (ERP) experience and mergers and acquisitions exposure, will be in high demand in 2018,” Grundy added.
In Saudi Arabia, he added, jobs growth was being driven by Vision 2030 initiatives and the requirement for firms to hire more Saudi workers from both sexes.
“The main challenge for employers, both local and international companies, is to hire good quality Saudi talent,” Grundy said.
The company said that despite the forthcoming Ramadan and Eid holidays, improving market sentiment meant that growth was likely to continue in local jobs markets in the second quarter of the year.
Key points on VAT registration in UAE
The Federal Tax Authority (FTA) has stressed that all businesses subject to the implementation of value added tax (VAT) should be fully aware of key on registering for VAT.
Khalid Ali Al Bustani, Director-General of FTA, urged business sectors to learn and understand key information, which has been identified based on the first period of VAT implementation, with the new taxation system coming into effect from January 1, 2018.
He said that it was incumbent on all businesses to ensure that they are compliant and properly registered.
“This continuous follow-up is a commitment by the FTA to adopt the highest standards of transparency and accuracy in its efforts to achieve optimum implementation of tax systems locally and to avoid misconceptions that can lead to the arising of issues that can have a negative impact,” he said.
“This information is being added to the existing guidelines, laws and regulations available through the FTA’s website: www.tax.gov.ae, as well being made available in the form of infographics, short film presentations and induction workshops in the UAE. The messaging has been designed to guide community members and business sectors to the mechanisms of calculating VAT, to explain the steps and procedures related to it, and to outline the obligations of each party,” he added.
The FTA clarified that included in the information were seven essential pointers to ensure optimum VAT implementation, including:
Businesses whose supplies are less than Dh375,000 are not required to register for tax
Businesses must register for VAT if their taxable supplies exceed Dh375,000 over the previous 12 months, or expected to exceed the threshold in the next 30 days. Businesses with supplies less than voluntary registration of Dh187,500 cannot register with the Authority to obtain a tax number and are not required to have a tax registration number (TRN).
Natural persons are subject to VAT if their supplies exceed the mandatory threshold
A natural or legal person in business is required to register for VAT if their taxable supplies exceed the mandatory registration threshold of Dh375,000 000 over the previous 12 months, or expected to exceed the threshold in the next 30 days. They should register as soon as possible to avoid late penalties and the accumulation of payable tax duties.
The tax registration number (TRN) is sufficient to carry out all commercial activities.
Providing a TRN is sufficient to carry out any business or other economic activity, which can be verified using the service of the TRN verification through the FTA website at www.tax.gov.ae. Businesses do not need to wait for the completion of a VAT registration certificate in order to trade – a TRN is sufficient. This policy is in line with FTA’s continuous efforts to ensure there’s no negative economic impact on businesses that could result from not being permitted to trade.
Registration is continuous
Registration for VAT is continuous for either new business or businesses reaching the mandatory registration threshold or late registration cases for which the legal process will be applied upon registration.
Computation of the mandatory limit according to revenues.
The mandatory registration threshold shall be calculated on the basis of total business turnover relating to taxable supplies provided no explicit provision for exemption has been issued. The registration threshold is calculated on the value of imported goods and services and not based on profits.
Exemption from the late registration penalties only until the end of April.
The FTA’s decision to exempt late business sectors from VAT registration procedures applies only up until the end of April 2018. All taxable businesses are still required to settle all due taxes due from January 1, 2018.
Unregistered businesses are not entitled to impose tax
Unregistered businesses are not entitled to impose a tax on their customers and therefore cannot issue tax invoices. Such businesses will still have to pay tax on imported goods before they clear customs outlets. Violating parties will be required to pay an administrative penalty of Dh20,000.
IFRS 9 to redefine risk recognition and absorption by banks
Dubai: Ahead of the introduction of International Financial Reporting Standards 9 (IFRS 9), a game-changer for banks across the world, UAE lenders need to prepare themselves to change the processes of reporting credit impairments, according industry experts.
The new regulation strongly affects the way credit losses are recognised in the balance sheet and profit and loss (P&L) statement. While impairments are currently based on “incurred losses”, IFRS 9 introduces an approach based on future expectations, namely expected losses (EL).
The main impact on banks is the need to recognise expected losses for all financial products, and at individual and grouped-asset levels. Banks will have to update their calculation at each reporting date to reflect changes in the credit quality of their assets. This will significantly increase the number and frequency of impairment quantifications that must be undertaken and the amount of data that must be processed for such purpose.
“IFRS 9 is a change that will significantly impact banks across the globe, as well as here in the UAE. In fact, the biggest accounting development for banks today is likely to be IFRS 9, as it will significantly impact balance sheets, accounting systems and processes,” said Yousuf Hassan, Partner, Risk Consulting at KPMG.
The new standard on risk recognition revises guidance on the classification of financial assets, and supplements the new hedge accounting principles published in 2013.
Guidance on impairment — that is, provisions for loan losses — are significantly different from current practice.
IFRS 9 will require recognition of losses by provisions to cover both already-incurred losses and some future expected losses.
If a bank provides a home loan, any number of events could result in a non-performing loan, such as the customer losing his job or suffering a serious injury.
“Under the current incurred credit loss model, the bank provides for a loan loss when such an event occurs. However, under the expected credit loss model, the bank is expected to anticipate that such an event could occur and therefore provide for losses earlier than previously,” said Hassan.
Adopting the new principles will require a lot of time, effort and money. The new standard requires banks to provide for expected credit losses over the lifetime of the loan on the date the loan is first recognised, based on the level of default expected over the next 12 months.
Where credit risk is assumed to significantly increase, loan-loss provisioning must be recognised based on the level of defaults expected over the expected life of the loan. This should lead to higher provisions, more complexity and deeper risk management involvement.
IFRS 9 is going to be a genuine paradigm shift for banks, not just in the UAE but worldwide. This is not an issue that affects only the finance or risk functions. The ripple effect of IFRS 9 will be felt across the organisation. Higher provisioning will force banks to review their capital requirements. Product mixes and business models will also need to be evaluated.
With a significant surge in provisions and its impact on profit and loss account expected, it will also be a big challenge for banks to plan ahead. Banks will need to factor this into their capital planning.
“We see only limited possibilities to cushion profit and loss from the worsening asset quality, given the implementation of IFRS 9 by 2019, which forces the bank to provision on expected losses, rather than incurred losses,” Jaap Meijer, head of Research at Arqaam Capital .
On the operational side, systems, processes and other infrastructure will need to change.
“Although the standard is applicable to accounting periods beginning on or after January 1, 2018, the changes are so pervasive and far reaching that, institutions should start acting now to comply with their requirements. Many, if not most, banks will require all of the time left to prepare for the expected credit loss requirements,” said Hassan.