UAE VAT: First Tax returns to be submitted no later than 28th of February
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
Nil VAT returns to be filed if no business transactions in UAE
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.
UAE VAT: Tax now like a routine part of life, say traders
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.
VAT on UAE shows of Bollywood, Hollywood Celebrities ?
Celebrities often come to UAE to attend events on the request of residents and citizens and are paid for this gesture.
Be it education, banking or entertainment, services industry is huge. Where there is no delivery of goods, that is characterised as service industry. And the recent application of VAT in the UAE covered both the categories with few exemptions.
When it comes to entertainment, Dubai is second home to dozens of celebrities – especially from Bollywood – who come here frequently to perform in front of thousands of fans and also in private parties invited by individuals. This entertainment sector is subject to five per cent value-added tax (VAT).
But the question arises whether all those Bollywood and Hollywood celebrities will also be subject to new tax for their services – read performances – provided in the UAE.
When asked tax experts, they said, as per UAE laws, Bollywood and Hollywood stars who want to continue performing here in the UAE will have to register with the Federal Tax Authority to obtain Tax Registration Number in order to pay VAT if the invitee is not registered with FTA.
As per UAE law, Naveen Sharma, chairman, The Institute of Chartered Accountants of India (Dubai Chapter), says every person, who does not have a place of residence in the UAE or any GCC country and who is not already register, shall register mandatorily if he makes supplies of goods and services in the UAE, and where no other person is obligated to pay the due tax on these supplies in the UAE.
“If a person is not a resident in the UAE and is required to register in accordance with the provisions of the Decree-Law, the Authority shall register him with effect from the date on which he or she started making supplies in the UAE, or from such earlier date as agreed between the Authority and the person, whether or not person notifies the authority of the liability to register for tax.
“Considering the above legislation of the law, it can be interpreted that, a person who is a Bollywood or a Hollywood celebrity, and not a resident in the UAE, comes to perform any service in the UAE will have to register mandatorily in case no other person is obligated to pay the VAT on the services performed by them in the UAE,” Sharma said.
The celebrities would have to register in his or her name as an individual with the Tax Authority by submitting the required details online on the FTA portal, he added.
Most – if not all – of the Bollywood celebrities of modern era have performed in the UAE and continue to perform. Even Hollywood stars are also invited time and again to perform in the UAE.
A PricewaterhouseCoopers report had forecast that the UAE’s leisure and entertainment market potential would reach 45 million visitors by 2021, with international tourists accounting for 30 million, while residents and friends and relatives of residents total a further 15 million.
Dilip Jain, Principal – VAT, Nimai Management Consultants, noted that in cases of celebrities performing in UAE, the organising event companies who bring celebrities are likely to be registered for VAT and would pay tax on the amount paid to celebrities.
“Where the performance of such services exceeds or is likely to exceed the threshold limit of Dh375,000 in 12 months, and the payment is received from an unregistered persons, then the celebrities will have to register for a Tax Registration Number with Federal Tax Authority and pay VAT. They can also appoint a legal representative to register on their behalf.”
According to Shailesh Khandelwal, CEO and founder, Shailesh Khandelwal Accounting & Book Keeping Services, the UAE VAT law states that if the taxable person imports concerned goods or services for the purpose of his business, then he shall be accounting for due tax in respect of these supplies.
But if celebrities or other service providers offer services to unregistered or non taxable persons in the UAE, they need to register themselves in the UAE. Otherwise, this will result in contravention of the UAE VAT law.
“Celebrities often come to UAE to attend various personal events on the request of residents and citizens of UAE and are paid for this gesture.”
However, the mandatory and voluntary threshold limits of Dh375,000 and Dh187,500, respectively, for registration under UAE VAT law are not applicable to non-resident suppliers of goods and services. Thereby, all non-resident suppliers supplying goods or services, where article 48 is not attracted, have to register and need to comply with UAE VAT law provisions even if the value is less than the threshold limits, Khandelwal added.