13 Feb
Simplification of tax system will help India economy on long-term basis: Analysts
Dubai – India’s 2020-21 budget was quite balanced and simplification of tax regime announced in the latest budget will help the economy on a long-term basis, say analysts.
While addressing the Indian Union Budget 2020 conference held in Dubai on Monday, they said markets and investors should look at the Indian economy over the long-term basis – five to 10 years or beyond.
Tushar Pradhan, chief investment officer at HSBC Global Asset Management in India, said the budget set direction towards simplified tax regime which is in line with the country’s bid to be a $5 trillion economy.
“Every individual or corporate should be part of the tax net and that is going to propel economy. Simplification is a big step. Some have argued that alternative tax regime is more confusing then before but we have to take it with a pinch of salt,” he said while addressing the forum, which was organized by The Indian Institute of Chartered Accountants (ICAI) – Dubai chapter.
He noted that divestment target of Rs2,100 billion is too ambitious and the next year will be really tough one to meet fiscal deficit to match.
Paras Shahdadpuri, chairman of Nikai Group, said the market was expecting some sops for the industries but it was missing in the budget.
“There was a lot of expectations built around the budget, expecting some big bang and fireworks. But it didn’t happen. Therefore, industry was disappointed. But, overall, budget is good as it did provide some stimulus,” he added.
Anish Mehta, chairman of ICAI’s Dubai chapter, said the government aimed to give more disposable income in the hands of individuals by introducing new tax slab under simplified regime in the budget.
“People, now, can choose between old and new tax slab depending on their savings appetite or not claiming various exemptions. However, this will discourage forced savings by individuals which is essential for sound financial position in times of crisis. Another measure which will impact the tax is taxing dividend distribution in the hands of the recipient rather than corporate. This may be beneficial to some but disadvantageous to tax payers who are in higher income group,” he added.
He said people were expecting some relaxation on exemption of tax on long-term capital gains which could not find place in the budget 2020. “This could have boosted investments in capital market.”
Anurag Chaturvedi, secretary of ICAI’s Dubai chapter, sees it as a balanced budget with respect to an individual increased slab-based rates and options to opt new scheme of tax.
“Abolition of dividend distribution tax is bigger reform by the government. However, capitalists will have to bear burden of increased tax slab rates, additionally bringing stateless persons in to tax net and introduction of deemed residency provisions will impact NRI in general. It will force them to choose a tax domicile (Tax Resident of any country) outside India to avoid taxing global income in India,” Chaturvedi said.
Source:https://www.khaleejtimes.com/simplification-of-tax-system-will-help-india-economy-on-long-term-basis-analysts
03 Feb
NRIs in UAE are not subjected to Income Tax
The budget proposals announced by the Indian Finance Minister have sent shock waves to non-resident Indians.
Question: The budget proposals announced on Saturday by the Indian Finance Minister have sent shock waves to non-resident Indians. Will they have to pay tax in India since they don’t pay tax in the UAE? Please explain urgently.
Answer: The proposed amendment is meant to cover individuals who are constantly on the move and spend weeks in different countries in order to avoid tax liability in any country of the world. Typically such persons spend less than three months in each country every year so that they do not fall within the ambit of the tax laws of such country. Therefore, a provision is sought to be introduced in the Finance Bill, 2020, which will be applicable from the financial year beginning on 1st April, 2020, relevant to the assessment year 2021-22, to provide that an Indian citizen who is not liable to tax in any country in the world would be deemed to be a resident of India for tax purposes.
Under the UAE tax law, residents may be liable to tax; certain corporations having specified income are taxable. However, individuals and others are exempt from tax. As and when such exemption is removed, the liability to pay tax will arise. Hence, such persons employed in the UAE or carrying on a business or profession with a valid visa, though technically covered under the UAE tax law, are not subjected to Income Tax. The words “liable to tax” are crucial in this context.
In fact, the amendment is not meant to cover persons who are resident in any country. Under Article 4.1(b) of the Indo-UAE Double Tax Avoidance Agreement, an individual who has spent in the aggregate at least 183 days in a calendar year in the UAE is deemed to be a resident. Hence, Indians working in the UAE will not be covered by this amendment. It is further proposed in the Budget that a person who visits India and spends less than 120 days will retain his non resident status under Indian tax laws; otherwise he will lose it. This proposal will prevent investments from flowing into India and will be opposed. If this amendment goes through, an Indian must ensure that he spends less than 120 days in India in a financial year.
Q: I have invested in shares and debentures of several listed companies. Some of these companies have delayed or defaulted in repaying loans taken by them from banks and financial institutions. As an investor, I am greatly concerned that this information of delay or default is not readily available. If investors are aware of these defaults, they would immediately take remedial action and pull out their investments before the share prices drop substantially. Is there any means of getting this information? I am taking full advantage of the portfolio management scheme.
A: The regulator, Securities & Exchange Board of India, has recently tightened the guidelines for listed companies on disclosure of loan defaults. As per the new norms, when a default is committed by a listed company in repaying the principal amount on schedule, the company has to disclose the fact of such default to the stock exchanges. This requirement is applicable where the delay in repayment of the principal amount and interest is beyond thirty days from the agreed payment date. The notice of such delay or default is required to be given within 24 hours from such thirtieth day.
This will provide transparency and protect the interest of investors so that they can act appropriately in the shortest possible time. These disclosure norms have been formulated by SEBI in consultation with the Reserve Bank of India. Since you are availing of the portfolio management scheme, you may note that SEBI has decided to increase the net worth requirement of portfolio managers from Rs20 million to Rs50 million. This will ensure that the managers have a stronger financial base.
Q: I have served on the board of several companies in the Gulf during the past fifteen years. On returning to India for good, I would like to serve as an independent director on the board of reputed companies if invited to do so, as I believe that there is a substantial shortage of independent directors. What are the consequences of taking up such assignments?
A: Independent directors perform functions which are critical to good corporate governance. However, the liability framework governing such directors casts an onerous burden and the liability-related risks faced by independent directors are disproportionate to the remuneration which they may earn. The Companies Act, 2013 seeks to limit the liability of non-executive directors by providing for certain safe harbour rules designed specially for them. However, the directors have to initially face investigative or legal proceedings before they are exonerated.
Further, you need to know that all independent directors with less than ten years experience of acting as such, will have to take an online proficiency self assessment test before they can be appointed on boards of companies. The test will be conducted by the Indian Institute of Corporate Affairs. This Institute will create and maintain a data bank with names, addresses and qualifications of people who are eligible to be appointed as independent directors. Boards of companies will have to disclose the results of these tests in their annual report.
Source:https://www.khaleejtimes.com/business/global/nris-in-uae-are-not-subjected-to-income-tax-
07 Apr
UAE-Saudi double tax avoidance agreement to lift trade, investment
The Avoidance of Double Taxation Agreement between the UAE and Saudi Arabia, which is expected to facilitate the two-way investment flow, boost bilateral trade and further bolster economic ties, has come into effect at the beginning of April after nearly a year the landmark pact was signed.
The two countries signed the double income tax treaty, the first such agreement between two members of the GCC, in May 2018. The agreement seeks to strengthen cooperation frameworks in tax matters and consolidate financial, economic and investment relations as well as encourage free movement of capital and service exchange between the two nations, tax experts.
Tax experts said the treaty would benefit individuals and corporates in the two countries. An international tax framework provides important protections and benefits for UAE companies and expatriates. For expatriates, the agreement come into play when they have a second residency outside the UAE. For companies, agreements can result in exemptions and reduced withholding tax rates on dividends, interest and royalties. If a UAE company has international shareholders, it is not subject to the tax of the jurisdiction of the shareholders, according to experts.
Double taxation avoidance agreements allocate taxing rights and ensure individuals and businesses are only taxed once. They clarify how certain types of income, such as dividends, property income and pensions, should be taxed, and lay out rules on non-discrimination to prevent different treatment based on factors such as nationality or residency, according to analysts.
Younis Haji Al Khoori, under-secretary of the Ministry of Finance, said the agreement is an important step in enhancing bilateral relations between the two countries, especially in financial and economic spheres. “This agreement will contribute to a more flexible investment climate that will underscore the country’s position as a key destination for Saudi investments. This agreement represents a qualitative leap forward in terms of the framework of financial, economic and tax cooperation between GCC countries,” he added.
The Ministry of Finance aims to expand the network of bilateral double taxation avoidance agreements with various countries around the world to fulfil the vision of the wise leadership of the state in diversifying sources of income and advancing the development objectives of the state, said Al Khoori.
“These agreements contribute to the elimination of double taxation, facilitate cross-border trade and investment flows, and provide protection to taxpayers from direct and indirect double taxation. This in turn enhances the country’s investment climate and makes it more attractive as a destination for foreign investment,” said Al Khoori.
Investments of Saudi citizens and banks in the UAE were valued at Dh17.08 billion in 2017, whereas the number of business licences issued to Saudi citizens in the UAE reached 12,451 by end of 2017.
Official data shows that the volume of trade between Saudi Arabia and the UAE reached Dh32.93 billion in 2017, and the number of Saudi shareholders in the UAE joint stock companies reached 118,8708.
The value of real estate transactions for Saudi nationals in the UAE was Dh59 billion in 2017, while the total number of property owners in the UAE was estimated at 4,989 by end of 2017.
Source:https://www.khaleejtimes.com/uae-saudi-double-tax-avoidance-agreement-to-lift-trade-investment
