16 Dec
How Audit Firms Can Help You to File ESR Notification & Report In Such a Short Notice?
The companies operating in the UAE (mainland, free zone & offshore) are once again facing a compulsion to meet the Economic Substance (ESR) filing requirements as the deadline is around the corner. The UAE-based companies that conduct the relevant activities need to demonstrate adequate economic substance and file the notifications and submit the reports before 31st December 2020.
Companies that have already filed the ESR notification must submit the notification again to the relevant regulatory authorities in sync with the Cabinet Resolution 57 of 2020 which updated several clauses in the previous law. Since the deadline is approaching fast, many companies are floundering to get prepared. Seeking expert assistance of reputed audit firms in Dubai, UAE is the most reliable route to ensure your business entity is complying with the ESR filing requirements. You also need to ensure that your company is aware of the following requirements to be on the right side of the law.
ESR Filing Deadlines
In the updated ESR scenario, businesses that fall within the scope of the regulation must execute the ESR filings through an online portal operated by the UAE Ministry of Finance. The companies with the financial year commencing on or after 1st January 2019 and ending on or before 30th June 2020 must consider the deadline as 31st December 2020. The deadline is the same for those companies with the financial year starting on or after 1st January 2019 and ending on or before 31st December 2019. Your trusted audit firms in Dubai have more clarity on the reporting period, and deadlines and they will ensure that your business abides with the obligations.
Insights on Updated Definitions
A significant area where you need to focus before sending the ESR notifications or returns is the change in the definitions of key terms. For example, a Licensee now means any corporate entity incorporated inside or outside the UAE or an unincorporated partnership in the UAE that conducts a Relevant Activity. Natural persons, sole proprietors, trusts and foundations that were earlier considered as Licensees under the ESR no longer meet the scope of ESR.
Updated Notification & Reporting Requirements
Companies that file the ESR notifications now need to furnish additional details such as the jurisdiction of the Parent Company, Ultimate Parent Company, and Ultimate Beneficial Owner (UBO) who claim to be tax resident. Apart from that, the licensees that are required to file the ESR Report must submit a copy of financial statements. Audit firm in Dubai provides services related to the UBO mainly assistance in maintaining the Real Beneficiary Register. Such assistance gives great leeway to the companies as they can easily submit the UBO details in the ESR reports.
Eases the ESR Filing Requirement for Companies
Article 8 of the Cabinet Resolution 57 of 2020 sheds light on the notification and reporting requirements that the entities must meet to comply with the ESR. It states that every Licensee is now required to file annual ESR notification to the relevant Regulatory Authority. Audit firms in Dubai will assist you in filling the notification with the following mandatory details :
1. Whether the business entity has carried out a relevant activity or not
2. Whether the company has generated any income from the relevant activity
The notification will be filed through the Ministry of Finance’s dedicated online portal. The notification will be processed between the regulatory authorities and the Federal Tax Authority (FTA), which is the National Assessing Authority for the ESR.
The FTA, in its capacity as a National Assessing Authority, will oversee compliance and control of the Updated ESR. FTA, among other things, will also assess if the Licensee has met the Economic Substance Test. It will also decide the necessary course of action to follow if your entity fails to meet the ESR test.
A Helping Hand to Avoid Penalties
Incurring penalties for ESR non-compliance is an undesirable scenario for the smooth functioning of your companies in the UAE. Availing the bespoke services of the UAE audit firms would save the businesses from the hefty penalties.
Here is the list of penalties as per the Cabinet Resolution 57 of 2020 :
1. Companies that fail to submit the annual notifications, or any other mandatory documents/ information will have to pay a penalty of AED 20,000
2. Filing inaccurate information on the notification or ESR Return attracts an administrative fine of AED 50,000.
3. Companies would face a penalty of AED 50,000 if they fail to file Economic Substance Returns or fail to meet the Economic Substance Test.
Penalties of this range could hurt the reputation of the companies apart from hitting them financially. Repeated violations would also lead to license cancellations which makes it necessary for the companies to file the ESR notifications on time.
Source:https://www.khaleejtimes.com/business/economy/how-audit-firms-can-help-you-to-file-esr-notification-and-report-in-such-a-short-notice
06 Nov
FTA to issue tax residency and commercial activities certificates
The authority will begin receiving applications for the issuance of Tax Residency and Commercial Activities Certificates via its e-services portal as of November 14, 2020.
The FTA explained that there are two categories of tax certificates which are issued to companies and individuals. The first category is for the ‘Tax Residency Certificate’, a certificate issued by the FTA upon request to enable applicants to benefit from Double Tax Avoidance Agreements (DTAA) signed between UAE and other countries.
The second is the Commercial Activities Certificate which is a certificate issued by the FTA to enable applicants to refund VAT paid in advance outside the UAE, whether or not DTAAs are applicable.
The authority emphasized that the new service provides advantages and ease for the issuance of certificates to those registered with the tax system, as all their data is available in the FTA database so they can apply for Tax Certificates through direct and quick digital procedures.
Khalid Ali Al Bustani, director-general of the FTA, confirmed that this step is part of an ongoing cooperation between the FTA and the Ministry of Finance as a strategic partner to the authority, noting that a joint working group from both entities have made the necessary arrangements to ensure a smooth transfer for the digital issuance of Tax Residency and Commercial Activities Certificates from the ministry to the authority.
“Both Tax Residency and Commercial Activities Certifi-cates allow investors in the UAE, including companies and individuals, to benefit from double taxation avoidance agreements to which the State is a party, with the aim of preventing duplication, in addition to recovering VAT imposed on Emirati businesses in various countries in the event they were registered with the Authority,” Khalid Al Bustani said.
The authority clarified that eligible individuals can easily issue Tax Residency and Commercial Activities Certificates through a simple registration process via the Federal Tax Authority’s official website. The process is completed by submitting the required supporting documents and paying the fees specified in the UAE Cabinet Decision No. 65 for 2020. These specified fees were set as a requirement to apply for the Tax Residency Certificate, as an application is reviewed for any normal or legal person that is not registered with the authority and providing a print copy of the digital Tax Residence Certificate.
The Cabinet Decision also set the fees required to apply for a Commercial Activi-ties Certificate for businesses registered with the Authority, and to review the ap-plication and issue a digital Commercial Activities Certificate and to provide a print copy for the certificate that was issued.
Source:https://www.khaleejtimes.com/business/local/fta-to-issue-tax-residency-and-commercial-activities-certificates
14 Aug
India launches ‘transparent taxation’
At present, only the tax department/officer of the city where the PAN of the taxpayer is registered can scrutinise the tax records.
Indian Prime Minister Narendra Modi on Thursday launched a ‘transparent taxation’ platform, among other schemes, aimed at carrying forward the journey of direct tax reforms.
The move brings into effect faceless assessment of taxpayers, faceless appeals and the Rights’ Charter for taxpayers who would not be harassed or treated with suspicion from here on.
Speaking at the launch of ‘Transparent Taxation Honouring the Honest’, Modi said that India is among a few countries giving such rights and dignity to taxpayers. He said that the charter has been introduced with defined rights and responsibilities. From here on, the income tax department cannot doubt anyone without basis, he added.
Modi believes the structural reforms will add a new dimension, adding that these should be policy-driven and holistic. He cited that technology has changed, allowing for the scrutiny process to be distributed randomly. Furthermore, he said that the tax scrutiny rate was reduced by a fourth in the last few years; in fiscal year, there was only 0.26 per cent scrutiny.
Speaking of the recent measures, he said that nearly 300,000 cases were resolved under the Vivaad Se Vishwas scheme. He also appealed to citizens, sayin that those who are capable of paying taxes but not in the tax net should also voluntarily pay dues.
Even though the new ‘taxpayer’s charter’ is aimed at residents, non-resident Indians (NRIs) also will benefit from this proposal. India now joins countries like the United States and Canada, which have fundamental rights enacted under their income tax laws.
“For NRIs, this means less hassles from the tax bureaucracy; now, the taxpayer will know what to expect from the department. The new tax regime has also expanded the scope of faceless assessment and has done away with territorial jurisdiction while substituting individual discretion with team-based assessment,” said Bal Krishen, chairman of Century Financial.
“Many NRIs face problems due to the arbitrary nature in which some income tax officers behave; the new system will prevent this harassment. Nonetheless, the new system does have some drawbacks. For example, if there are complex international financial transactions, it might be challenging for the taxpayer to explain the transaction in the absence of a face-to-face interaction. Only a qualified tax officer will be able to take a well-informed decision and hopefully the entire department will be trained on these aspects. For the NRI, from an overall perspective, the new system is certainly a step forward.”
Dixit Jain, managing director at The Tax Experts DMCC, said: “A lot of transparency will come as there will be faceless interaction with assessees, which will reduce harassment and fair judgement without any manipulation. It will increase confidence; also, more and more people will file tax returns to contribute to the country.”
Jain added that earlier, a lot of NRIs were afraid to file tax returns as they used to think that if they file, they will get notices from the income tax department and will then have to face unnecessary trouble while dealing with officers.
“The introduction of the ‘No Influence’ policy and no face-to-face interaction will encourage NRIs to happily declare their eligible income and pay taxes or claim refunds without any worry. It is a brilliant move by the Modi government to encourage more people to file tax returns so it can contribute to the Indian economy.”
The launch of the Transparent taxation – honouring the honest is based on easing compliance for all taxpayers, more specifically for NRI’s – and is a welcome initiative. Few reforms were already in practice with most of the notice and assessments being conducted under e-proceedings, says Dubai-based Kinjal Bagadia Mehta, chartered accountant and tax consultant.
This initiate will lead to the digitisation of the functioning of the Income Tax department which will eventually eradicate corruption, harassment of the taxpayers and reducing litigation. At present, only the tax department/officer of the city where the PAN of the taxpayer is registered can scrutinise the tax records. By launch of Transparent taxation system, this will change now and with technology, scrutiny will be assigned to tax officers randomly. This will keep changing constantly.
“The idea of honouring honest taxpayers through such a platform will encourage many NRIs to participate in development and growth of India. This will also go a long way in making the tax filing process smoother and easier. A NRI will now be assured of fair, courteous, and rational behaviour from taxman. This people centric and public friendly approach will ease being tax compliant in India ultimately giving confidence to NRIs to file the tax returns, pay tax and also invest in India,” said Mehta.
Source:https://www.khaleejtimes.com/business/global/india-launches-transparent-taxation
25 Jul
Saudi Arabia Explores Asset Sales, Income Tax to Boost Finances
Saudi Arabia is accelerating plans to sell off state assets and isn’t ruling out introducing income tax as the kingdom seeks to boost state coffers hit by the slump in oil prices.
The world’s biggest oil exporter could raise more than 50 billion riyals ($13.3 billion) over the next four to five years by privatizing assets in the education, health-care and water sectors, Finance Minister Mohammed Al Jadaan said Wednesday during a virtual forum organized by Bloomberg.
The government is “considering all options” to bolster its finances and while income tax isn’t “imminent” and “would require a lot of time” to prepare, the kingdom “isn’t ruling anything away for now,” he said.
The state-run Saudi Press Agency later reported citing an unidentified official source as saying that income tax had not been discussed in the cabinet or any of the government councils or committees.
Saudi Arabia has been taking steps to shore up its economy from the double whammy of the coronavirus and lower crude prices. The economy is set to shrink 6.8% this year, according to the International Monetary Fund, in what would be the deepest contraction in over 30 years.
The government has already taken unprecedented measures to support its finances, including tripling value-added tax, increasing import fees, and canceling some benefits for government workers. The kingdom has traditionally been tax-free for individuals, with oil revenue supporting a wide range of subsidies and benefits for citizens.
‘Not Austerity’
“Saudi Arabia is not in austerity and we are not getting into an austerity phase,” Al Jadaan said. While the government has “re-allocated some spending,” total spending in 2020 is likely to be more than a trillion riyals, as planned.
The kingdom is also likely to have to borrow about 100 billion riyals more than planned this year and plans to tap the global debt market at least one more time in 2020 after so far selling $12 billion in international bonds in 2020, Al Jadaan said.
Read More: Saudi Response to Fiscal Shock Centers on Record Debt Plan
As well as raising debt, the kingdom has already been selling state assets as part of efforts to diversify its economy away from oil after a slow start. In December, the government sold a $29 billion holding in energy giant Saudi Aramco through the largest initial public offering in history. It also recently sold a stake in two grain mills for $740 million.
Despite its efforts to contain costs, the government also transferred $40 billion from reserves held by the central bank to boost the financial firepower of its sovereign wealth fund for deals. The Public Investment Fund has already acquired stakes in companies including Citigroup Inc., Facebook Inc. and concert promoter Live Nation Entertainment Inc.
The sovereign fund will continue to boost its global investments, Al Jadaan said.
Source:https://www.bloomberg.com/news/articles/2020-07-22/saudi-arabia-could-raise-billions-of-riyals-from-asset-sales?utm_source=url_link
