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TechVista Systems implements VAT for Twenty-Two organizations

TechVista Systems, a global provider of IT solutions, has successfully assisted Twenty-Two organizations with ensuring compliance with new value-added tax (VAT) regulations. VAT implementation was performed for clients that use Microsoft Dynamics 365, AX 2012, NAV 5, NAV 2013, GP 2013, and GP 2018.

TechVista’s team implemented VAT ledgers, standard VAT inquiries, and reports, and updated vendor and customer master data with tax IDs. VAT codes were implemented for 5%, 0%, and exempt status, using all applicable jurisdictions, as well as VAT groups (reverse charge, standard rated, inter-company, exempted, zero-rated supplies, etc.). The team performed SQL collation for Arabic data, and also set up an FTA audit file and VAT return report according to UAE VAT requirements.

“Over the past two months, we have partnered with several organizations in the UAE to make sure that their implementation of all VAT rules and regulations takes place smoothly and efficiently,” said Adeel Edhi, Vice President at TechVista Systems. “Our technical experts have successfully assisted our esteemed clients with full VAT compliance by updating their enterprise systems to automatically apply VAT and maintain multi-year tax records as required by the FTA.”

The clients for whom VAT implementation was completed successfully include Albuainain Group KSA, ENOC, Dubai Autodrome, Fortes Holdings, Jumeirah International Nursery, Motor City, Sunmarke School, Tribe Fitness, Union Properties, and Uptown Mirdiff.

With over 100 successful Enterprise and Corporate implementations and regional offices in the UAE, Oman, and Qatar, TechVista Systems brings value to companies of all sizes through its solutions and professional services.

About TechVista Systems

TechVista Systems is a Microsoft Gold partner delivering innovative business solutions in customer relationship management (CRM), enterprise resource planning (ERP) and digital marketing. As a leading technology provider with more than 3,000 employees around the world, we help our local and international customers maximize their IT investments that drive business results. We leverage our deep technical skills, accelerators, frameworks, products, best practices, and Microsoft domain expertise in provision of these solutions to help our customers achieve their business goals by gaining a competitive edge regardless of their local environment. Visit us on our website www.techvistasystems.com or email us at info@techvistasystems.com.

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Value Added Tax (VAT) guidance for Retailers – VAT in UAE

Value Added Tax (VAT) guidance for Retailers published on Federal Tax Authority website www.tax.gov.ae.

Do I have to register for VAT?If your taxable turnover – the value of the taxable goods and services that you sell and any imports – exceeds AED 375,000 in a 12-month period, or if you expect your taxable turnover to exceed AED 375,000 in the next 30 days, you are required to register for VAT.If your taxable turnover is less than AED 375,000, but more than AED 187,500, you can register for VAT voluntarily.I have several shops: do I need to register them separately?No. All the business operations carried on by you as a taxable person can be dealt with under a single VAT registration.Can I form a Tax Group?Related businesses that share economic, financial and regulatory ties (either in law, shareholding or voting rights) may be able to register as a Tax Group if they have an establishment in the UAE and are legal persons under common control. Transactions between the group members are disregarded and one member of the group called a ‘representative member’, will file a consolidated VAT return covering the activities of the group.How do I account for VAT on my sales?All VAT registered businesses in the UAE are required to issue tax invoices when they sell goods or services. As a retailer, most – possibly all – of your sales will be to consumers, rather than to other businesses.Hence, you may issue a simplified tax invoice showing the following:

The words “Tax Invoice”.

Your name, address, and Tax Registration Number.

The date of issuing the Tax Invoice.

A description of the Goods or Services supplied.

The total Consideration and the Tax amount charged.

The sum of the tax amounts charged on all your invoices issued during a VAT accounting period will be the output tax that has to be declared on the tax return covering that period.Can I reclaim the VAT I pay on business purchases?Yes. As long as you have a Tax Invoice showing the VAT charged by your suppliers, and have paid for the goods or services concerned, you can reclaim the VAT on most of the goods and services you buy for your business.The sum of the tax amounts charged to you during a VAT accounting period will be the input tax that is declared on the tax return covering that period.Is there any input tax that I cannot reclaim?Yes. The VAT incurred on entertainment expenses, motor vehicles used for personal purposes and employee-related expenses cannot be reclaimed.What records will I need to keep?Records need to be kept for at least 5 years. You will have to keep:

records of all supplies and imports of goods and services;

all tax invoices and tax credit notes and alternative documents received;

all tax invoices and tax credit notes and alternative documents issued;

records of goods and services that have been disposed of or used for matters not related to the business, detailing the VAT paid on those goods and services;

records of goods and services purchased for which the input tax was not deducted;

records of exported goods and services; and

records of adjustments or corrections made to accounts or tax invoices.

In addition, you will need to keep a VAT record or account which shows:

output tax due on taxable supplies;

output tax due on taxable supplies accounted for under the reverse charge mechanism;

output tax due after the correction of any errors or adjustments;

input tax recoverable on supplies or imports; and

Input tax recoverable after the correction of any errors or adjustments.

Moreover, like all businesses, you will have to keep accounting records and documents that relate to your business activities. Such records and documents, include:

balance sheet and profit and loss accounts;

records of wages and salaries;

records of fixed assets;

inventory records and statements (including quantities and values) at the end of any relevant tax period and all records of stock-counts related to inventory statements.

When and how will I file returns?You will normally be allocated a quarterly or monthly tax period according to your annual turnover, but the FTA may allow a shorter or longer tax period if it considers that to be appropriate. You will be required to file the tax return for each tax period by the 28th day of the month following the end of it (or on the next working day if the normal due date falls on a national holiday or weekend).Tax returns will be filed electronically through the FTA portal.When will I have to pay any tax due?You will be required to pay any tax due by the due date for each return –i.e. by the 28th day of the month following the end of each Tax Period (or on the next working day if the normal due date falls on a national holiday or weekend).When will I receive any repayment that I claim?Where you are in a repayment position, the FTA will inform you that any repayment claim that you make has been approved or rejected within 20 working days. On occasion, however, the FTA may inform you that consideration of the claim will take longer than that.What is the taxable amount?In relation to any given transaction, the amount that is subject to VAT is called the taxable amount. The taxable amount plus the tax is normally equivalent to the consideration for the supply i.e. the total amount received by the seller in return for supplying goods or services. The consideration will normally be in the form of money but in some cases the consideration may be partly or wholly non-monetary e.g. a voucher that has monetary value is one example of non-monetary consideration.How do I account for VAT on returned goods and refunds?If a customer returns an item and the retailer provides a refund then the retailer needs to issue a tax credit note and can reduce the output tax payable by reference to the amount of the refund. The output tax reduction should be made in the VAT accounting periods in which the refund is given.Do discounts and promotional offers alter the taxable amount?If a retailer offers a discount on the normal selling price of an item, or reduces prices in a seasonal sale for example, or perhaps offers “Buy One Get One Free”, then the reduced price actually paid by the customer is the consideration.How do I calculate the tax included in the consideration received from the customer?The VAT included in any price is equivalent to the consideration divided by 21.

Source: https://www.tax.gov.ae/pdf/vat-retailers.pdf

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Guidance on Zero-Rated and exempt supplies

Value-Added Tax or VAT is a tax on the consumption or use of goods and services levied at the point of sale. VAT is a form of indirect tax and is used in more than 180 countries around the world.

The government of UAE published guidance on zero-rated and exempt supplies on their website (government.ae).

Q.1: Do suppliers of zero-rated and exempt supplies charge VAT?

Suppliers do not charge tax on a zero-rated or exempt supply.

Q.2: What is the zero rate?

If you make supplies at the zero rate, this means that the goods are still VAT taxable but the rate of VAT is 0%. You will need to record any zero-rated supplies in your VAT account and report them on your tax return.

Q.3: If I make zero-rated supplies, do I need to register?

As a supplier, you must register for VAT if your taxable turnover (which includes zero-rated supplies) exceeds AED 375,000 in a 12-month period, or if you expect your taxable turnover (which includes zero-rated supplies) to exceed AED 375,000 in the next 30 days.However, you can ask for an exception from registration if, and only if, you do not make any other supplies which are taxable at the standard rate of 5%. If exception from registration is granted, then you will not submit regular tax returns and you will not be able to recover input tax incurred.

Q.4: Do I need to file returns if I only supply zero-rated supplies?

If you do not qualify for an exception from registration, then you must file tax returns with the FTA. You will also be entitled to recover input tax incurred on business purchases subject to the normal conditions.

Q.5: What are zero-rated supplies?

Supplies subject to the zero rate are listed in Article 45 of the Federal Decree-Law no. (8) of 2017 on Value Added Tax, such as:

Exports of goods and services.

International transport of goods and passengers.

Certain means of transport, such as trains, trams, vessels, airplanes.

First sale/rent of residential buildings.

Aircraft or vessels designated for rescue and assistance by air or sea.

Certain investment precious metals.

Certain health care services and related goods and services.

Certain educational services and related goods and services.

Q.6: Who are suppliers of zero-rated supplies?

Registrants who could be suppliers of zero-rated services and goods include exporters, real estate developers, airlines, schools, clinics, hospitals, etc.

Q.7: What is exempt?

Exempt supplies are not taxable supplies for VAT purposes. VAT is not charged on exempt supplies and the supplier cannot recover any VAT on expenses incurred in making those exempt supplies. Exemptions will also be strictly applied as they are an exception to the normal rule that VAT should be charged.

Q.8: If I make exempt supplies, do I need to register?

If all the supplies you make are exempt, you do not have to register for VAT. In such a case, you cannot recover tax incurred on business purchases. Examples of such would be owners of property who rent their properties for residential purposes.

Q.9: What are Exempt Supplies?

Exempt supplies are listed in Article 46 of the Federal Decree-Law no. (8) of 2017 on Value Added Tax, such as:

Financial services including life insurance and reinsurance of life insurance as well as financial services that are not conducted for an explicit fee, discount, commission, rebate or similar type of consideration.

Residential buildings, other than the residential buildings which are specifically zero-rated.

Bare land.

Local passenger transport.

Source:  https://government.ae/-/media/Information-and-services/Finance-and-Investment/VAt-guidelines/Zero-VAT-rated-supplies-En.ashx?la=en

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Frequently asked questions on Value Added Tax (VAT) in UAE

Ministry of Finance (MoF) UAE has published VAT information on their website(www.mof.gov.ae). The new piece of information has published in the format of frequently asked questions (FAQ’s) and is designed for the awareness of VAT system in UAE.

General Questions

Q.1.1- What is Tax?

Tax is the means by which governments raise revenue to pay for public services. Government revenues from taxation are generally used to pay for things such public hospitals, schools and universities, defence and other important aspects of daily life.

There are many different types of taxes:

A direct tax is collected by government from the person on whom it is imposed (e.g., income tax, corporate tax).

An indirect tax is collected for government by an intermediary (e.g. a retail store) from the person that ultimately pays the tax (e.g., VAT, Sales Tax).

Q.1.2- What is VAT?

Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.

VAT is one of the most common types of consumption tax found around the world. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia.

VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.

A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain. To explain how VAT works we have provided a simple, illustrative example below (based on a VAT rate of 5%):

Q.1.3- What is the difference between VAT and Sales Tax?

A sales tax is also a consumption tax, just like VAT. For the general public, there may be no observable difference between how the two types of taxes work, but there are some key differences. In many countries, sales taxes are only imposed on transactions involving goods. In addition, sales tax is only imposed on the final sale to the consumer. This contrasts with VAT which is imposed on goods and services and is charged throughout the supply chain, including on the final sale. VAT is also imposed on imports of goods and services so as to ensure that a level playing field is maintained for domestic providers of those same goods and services.

Many countries prefer a VAT over sales taxes for a range of reasons. Importantly, VAT is considered a more sophisticated approach to taxation as it makes businesses serve as tax collectors on behalf of the government and cuts down on misreporting and tax evasion.

Q.1.4- Why is the UAE implementing VAT?

The UAE Federal and Emirate governments provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services. These services are paid for from the government budgets. VAT will provide our country with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Q.1.5- Why does the UAE need to coordinate VAT implementation with other GCC countries?

The UAE is part of a group of countries which are closely connected through “The Economic Agreement Between the GCC States” and “The GCC Customs Union”. The GCC group of nations have historically worked together in designing and implementing new public policies as we recognize that such a collaborative approach is best for the region.

Q.1.6- When will the VAT go into effect and what will be the rates?

VAT will be introduced across the UAE on 1 January 2018 at a standard rate of 5%.

Q.1.7- How will the government collect VAT?

Businesses will be responsible for carefully documenting their business income and costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods/services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.

Q.1.8- Will VAT cover all products and services?

VAT, as a general consumption tax, will apply to the majority of transactions of goods and services unless specifically exempted or excepted by law.

Q.1.9- Will the cost of living increase?

The cost of living is likely to increase slightly, but this will vary depending on the individual’s lifestyle and spending behaviour. If your spending is mainly on those things which are relieved from VAT, you are unlikely to see any significant increase.

Q.1.10- What measures will the government take to ensure that businesses don’t use the VAT implementation as an excuse to increase prices?

VAT is intended to help improve the economic base of the country. Therefore, we will include rules that require businesses to be clear about how much VAT you are paying for each transaction. You will have the required information to decide whether to buy something or not.

Q.1.11- How can one object to the decisions of the Authority?Any person will be able to object a decision of the Federal Tax Authority.

As a first step, the person shall request the FTA to reconsider its decision. Such request of re-consideration has to be made within 20 business days from the date the person was notified of the original decision of the FTA, and the FTA will have 20 business days from receipt of such application to provide its revised decision.

If the person is not satisfied with the revised decision of the FTA, it will be able to object to the Tax Disputes Resolution Committee which will be set up for these purposes. Objections to the Committee will need to be submitted within 20 business days from the date the person was notified of the FTA’s revised decision, and the person must pay all taxes and penalties subject of objection before objecting to the Committee. The Committee will typically be required to give its decision regarding the objection within 20 business days from its receipt.

As a final step, if the person is not satisfied with the decision of the Committee, the person may challenge its decision before the competent court. The appeal must be made within 20 business days from the date of the appellant being notified of the Committee’s decision.

VAT for Businesses

Q.2.1- Who can or will be able to register for VAT?

A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.

Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.

Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

Q.2.2- What are the VAT-related responsibilities of businesses?

All businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case we need to establish whether they should be registered.

VAT-registered businesses generally:

must charge VAT on taxable goods or services they supply;

may reclaim any VAT they’ve paid on business-related goods or services;

keep a range of business records which will allow the government to check that they have got things right

If you’re a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online.

If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.

Q.2.3- What does a business need to do to prepare for VAT?

Concerned businesses will have time to prepare before VAT will come into effect in January 2018. During that time, businesses will need to meet requirements to fulfill their tax obligations. Businesses could start now so that they will be ready later. To fully comply with VAT, We believe that businesses may need to make some changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g., accountants and tax advisors). It is essential that businesses try to understand the implications of VAT now and once the legislation is issued make every effort to align their business model to government reporting and compliance requirements. We will provide businesses with guidance on how to fully comply with VAT once the legislation is issued. The final responsibility and accountability to comply with law is on the business.

Q.2.4- When are businesses supposed to start registering for VAT?

VAT will come into force on 1 January 2018. Any business that is required to be registered for VAT and charge VAT from 1 January 2018 must be registered prior to that date.

To enable businesses to prepare for introduction of VAT and comply with this registration obligation in time, the electronic registrations will be open for VAT from the third quarter of 2017 on a voluntary basis and a compulsory basis from the final quarter of 2017 for those that choose not to register earlier. This will ensure that there is no last minute rush from businesses to register for VAT before the deadline.Q.2.5- When are registered businesses required to file VAT returns?Taxpayers must file VAT returns with the FTA on a regular basis (quarterly or for a shorter period, should the FTA decide so) within 28 days from the end of the tax period in accordance with the procedures specified in the VAT legislation. The Tax returns shall be filed online using eServices.Q.2.6- What kind of records are businesses required to maintain, and for how long?Businesses will be required to keep records which will enable the Federal Tax Authority to identify the details of the business activities and review transactions. The specifics regarding the documents which will be required and the time period for keeping them will be stated in the relevant legislation.

Q.2.7- How long must a taxable person retain VAT invoices for?

Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.

Q.2.8- How should a business determine the place of supply?

The place of supply will determine whether a supply is made within the UAE (in which case the UAE VAT law will apply), or outside the UAE for VAT purposes.

For a supply of goods, the place of supply should be the location of goods when the supply takes place with special rules for certain categories of supplies (e.g. water and energy, cross-border supplies).

For the supply of services, the place of supply should be where the supplier is established with special rules for certain categories of supplies (e.g. cross-border supplies between businesses).

Q.2.9- Can businesses offset customs duty against VAT payments?

The cost of living is likely to increase slightly, but this will vary depending on the individual’s lifestyle and spending behavior. If your spending is mainly on those things which are relieved from VAT, you are unlikely to see any significant increase.

Q.2.10- How will real estate be treated?

The VAT treatment of real estate will depend on whether it is a commercial or residential property.

Supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate (i.e 5%).

On the other hand, supplies of residential properties will generally be exempt from VAT. This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties. In order to ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties within 3 years from their completion will be zero-rated.

Q.2.11- What sectors will be zero-rated?

VAT will be charged at 0% in respect of the following main categories of supplies:

International transportation, and related supplies;

Supplies of certain sea, air and land means of transportation (such as aircrafts and ships);

Certain investment grade precious metals (e.g. gold, silver, of 99% purity);

Newly constructed residential properties, that are supplied for the first time within 3 years of their construction ;

Supply of certain education services, and supply of relevant goods and services;

Supply of certain Healthcare services, and supply of relevant goods and services.

Q.2.12- What sectors will be exempt?

The following categories of supplies will be exempt from VAT:

The supply of some financial services (clarified in VAT legislation);

Residential properties;

Bare land; and

Local passenger transport

Q.2.13- Will there be VAT grouping?

Businesses that satisfy certain requirements covered under the Legislation (such as being resident in the UAE and being related/associated parties) will be able to register as a VAT group. For some businesses, VAT grouping will be a useful tool that would simplify accounting for VAT.

Q.2.14- Will there be bad debt relief?

VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. The legislation will include the conditions and limitations concerning the use of this relief.

Q.2.15- Will there be a margin scheme?

To avoid double taxation where second hand goods are acquired by a registered person from an unregistered person for the purpose of resale, the VAT-registered person will be able to account for VAT on sales of second hand goods with reference to the difference between the purchase price of the goods and the selling price of the goods (that is, the profit margin). The VAT which must be accounted for by the registered person will be included in the profit margin. The legislation will include the details of the conditions to be met in order to apply this mechanism.

Q.2.16- How will partial exemption work?

Where a VAT registered person incurs input tax on its business expenses, this input tax can be recovered in full if it relates to a taxable supply made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), the registered person may not recover the input tax paid.

In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable (exempt) supplies.

Businesses will be expected to use input tax (ratio of recoverable to total) as a basis for apportionment in the first instance although there will be the facility to use other methods where they are fair and agreed with the Federal Tax Authority.

Q.2.17- What are the cases that would lead to the imposition of penalties?Penalties will be imposed for non-compliance.

Examples of actions and omissions that may give raise to penalties include:

A person failing to register when required to do so;

A person failing to submit a tax return or make a payment within the required period;

A person failing to keep the records required under the issued tax legislation;

Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

Q.2.18- Will there be any special schemes for SMEs?

No special rules are planned for small or medium sized enterprises. However, the FTA will provide materials and resources available for these entities to assist them in their enquiries.

Q.2.19- Will there be transitional rules?

Special rules will be provided to deal with various situations that may arise in respect of supplies that span the introduction of VAT. For example:

Where a payment is received in respect of a supply of goods before the introduction of VAT but the goods are actually delivered after the introduction of VAT, this means that VAT will have to be charged on such supplies. Likewise, special rules will apply with regards to supplies of services spanning the introduction of VAT.

Where a contract is concluded prior to the introduction of VAT in respect of a supply which is wholly or partly made after the introduction of VAT, and the contract does not contain clauses relating to the VAT treatment of the supply, then consideration for the supply will be treated as inclusive of VAT. There will, however, be special provisions to allow suppliers to charge VAT in situations where their recipient is able to recover their VAT but where there is no VAT clause.

Q.2.20- How will insurance be treated?

Generally, insurance (vehicle, medical, etc) will be taxable. Life insurance, however, will be treated as an exempt financial service.

Q.2.21- How will financial services be treated?

It is expected that fee-based financial services will be taxed but margin based products are likely to be exempt.

Q.2.22- How will Islamic finance be treated?

Islamic finance products are consistent with the principles of sharia and therefore often operate differently from financial products that are common internationally.

To ensure that there are no inconsistencies between the VAT treatment of standard financial services and Islamic finance products, the treatment of Islamic finance products will be aligned with the treatment of similar standard financial services.

Q.2.23- Can UAE nationals claim VAT?

A scheme will be introduced to allow a UAE national who is not registered for VAT to reclaim VAT paid on goods and services relating to constructing a new residence which will be privately used by the person and his family. This will allow the recovery of VAT on such expenses as contractor’s services and building materials.

Q.2.24- How quickly will refunds be released?

Refunds will be made after the receipt of the application and subject to verification checks, with a particular focus on avoiding fraud.

Q.2.25- Will FTA issue rulings or provide tax advice?

In the course of its interaction with taxpayers, the FTA may provide its views on various matters in the law. Taxpayers may choose to challenge these views. It should be noted that penalties may be imposed on taxpayers who are found to violate any tax laws and regulations.Q.2.26- Will it be possible to issue cash receipts instead of VAT invoices?A supplier registered or required to be registered for VAT must issue a valid VAT invoice for the supply. To be considered as a valid VAT invoice, the document must follow a specific format as mentioned in the legislation. In certain situations, the supplier may be able to issue a simplified VAT invoice. The conditions for the VAT invoice and the simplified VAT invoice are mentioned legislation.

Q.2.7- Will there be any VAT that businesses are not allowed to claim?

VAT will not be deductible in respect of expenses incurred for making non-taxable supplies. Furthermore, input tax cannot be deducted if it is incurred in respect of specific expenses such as entertainment expenses e.g. employee entertainment.

Q.2.28- Under which conditions will businesses be allowed to claim VAT incurred on expenses?

VAT on expenses that were incurred by a business can be deducted in the following circumstances:

The business must be a taxable person (the end consumer cannot claim any input tax refund).

VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).

The business must hold documentation showing the VAT paid (e.g. valid tax invoice).

The goods or services acquired are used or intended to be used for making taxable supplies.

VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.

Q.2.29- Will non-residents be required to register for VAT?

Non-residents that make taxable supplies in the UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies. This exclusion may apply, for example, where a UAE business is required to account for VAT under a reverse charge mechanism in respect of a purchase from a non-resident.

Q.2.30- Will VAT be paid on imports?

VAT is due on the goods and services purchased from abroad.

In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.

In case the recipient in the State is a non-registered person for VAT purposes, VAT would be paid on import of goods from a place outside the GCC. Such VAT will typically be required to be paid before the goods are released to the person.

Q.2.31- How will Government Entities be treated for VAT purposes?

Supplies made by government entities will typically be subject to VAT. This will ensure that government entities are not unfairly advantaged as compared to private businesses.

Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. It is likely certain government entities will be entitled to VAT refunds – this is designed to avoid budgeting issues and provide a level playing field between outsourced and insourced activities.

For the supplies provided for government entities, the treatment of such supplies shall depend on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard tax rate, the treatment would remain the same even if it is provided to a government entity.

Q.2.32- Will Businesses have to report on their business in each of the Emirates?

It is expected that businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate. Guidance will be provided to businesses with regards to this.

It is expected that the rules will be relatively straightforward for most businesses and will be based, for example, for B2C transactions, on the location of the transaction (e.g. in a retail environment, the location of the shop).

Q.2.33- Will the goods exempt from customs duties also be exempt from VAT?

Not necessarily. Some goods that are imported may be exempt from customs duties but subject to VAT.

VAT for Tourists and Visitors

Q.3.1- Will tourists also pay VAT?

Yes, tourists are a significant source of revenue for the UAE and will pay VAT at the point of sale. Nevertheless, we have set the VAT rate deliberately low so that VAT is a limited burden on all consumers.

Q.3.2- Will visiting businesses be able to reclaim VAT?

It is intended that we will allow foreign businesses to recover the VAT they incur when visiting the UAE. This is important as it encourages them to do business and also, because a lot of other countries have VAT systems, it protects the ability of UAE businesses to recover VAT when visiting other countries (where the rates are a lot higher).

UAE VAT Frequently Asked Questions (FAQs)

Q.4.1- How can someone access UAE Tax Law?

Tax Laws and the related Executive Regulations will be published as soon as issued

Other Questions

Q.5.1- What other taxes is the UAE considering?

As per global best practice, the UAE is exploring other tax options as well. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes, however.

Q.5.2- Will this impact economic growth of the UAE?

Our analysis suggests that it will help the country strengthen its economy by diversifying revenues away from oil and will allow us to fund many public services. This is a sign of a maturing economy.

Q.5.3- Where can I learn more about the UAE’s plan to implement VAT?

The government has launched an awareness and education campaigns to educate UAE residents, businesses, and other impacted groups. Our aim is to help everyone understand what VAT is, how it works, and what businesses will need to do to comply with the law.

As part of its awareness campaign, the Ministry of Finance has launched the first phase of the awareness sessions during the period from March till May 2017. These sessions were held in the different Emirates.

We will also set up a website where you can find information to understand the new tax in detail.

A telephone hotline has been set up so that you can call and speak to one of our employees directly on 600599994.

Q.5.4- Changing my business systems for VAT reporting will cost money. Can the government help?

When VAT is introduced, the government will provide information and education to businesses to help them make the transition. The government will not pay for businesses to buy new technologies or hire tax specialists and accountants. That is the responsibility of each business. We will, however, provide guidance and information to assist you and we are giving businesses time to prepare.

Q.5.5- What are the penalties for not complying with a business’s VAT responsibilities?

Everyone is urged to fully comply with their VAT responsibilities. The government is currently in the process of defining the exact fees and penalties for non-compliance.

Administrative penalties for violations will be decided by Cabinet and announced after issuance. There will be further penalties decided by Courts in the case of tax evasion.

Source:

https://www.mof.gov.ae/En/budget/Pages/VATQuestions.aspx

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VAT in UAE: What is exempt and what is not

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT

The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax). These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a Decision to identify the government bodies and non-profit organisations that are not subject to VAT. The below table outlines all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies

Source: http://gulfnews.com/business/economy/vat/vat-in-uae-what-is-exempt-and-what-is-not-1.2135983

[retailerpsolutions-blog]

Is it time for your business to implement an ERP platform?

Business owners, executives, and other decision makers in every industry understand that adopting newer technologies like enterprise resource planning(ERP) is inherently beneficial, but such adoption will also require substantial investment. It is critical for businesses to clearly determine whether the benefits of ERP implementation outweigh the associated costs. Generally speaking, the larger and busier an organization is, the more worthwhile ERP adoption will be. But that just begs the question: how do you know your company is large and busy enough?

The question posed in the title of this article can be taken in two different ways. First, would the net benefit of implementing ERP now be sufficiently desirable? And second (if the answer to the first question is yes), at what specific time should ERP be implemented? Let’s take a closer look at both questions.

To determine whether your business need is great enough, quickly evaluate your operations by asking yourself these questions:

Do you encounter order processing backlogs?

Have operational delays impacted customer satisfaction or resulted in lost opportunities?

Does it take too long to perform accounting tasks?

Are your sales forecasts based on weeks-old data or guesswork?

Do routine tasks require employees to work overtime?

If you answered “yes” to one or more of these questions, there you are almost certainly losing revenue to inefficiencies that an ERP system can prevent. If that doesn’t convince you, here are a couple more questions:

How quickly can you check stock levels or look up business information?

How many separate software systems do you use for business processes?

If it takes more than two minutes to find the information you need, or if you use (and maintain) two or more information systems to perform business tasks, a well-integrated ERP platform is a worthy investment.

Now let’s move on the second question: when is the right time to implement an ERP platform? While some experts suggest that organizations should wait for a period of stability (not during a hiring campaign, not while starting a new line of business, not during busy season, etc.), I don’t think that’s the right approach. If you decide to wait for ideal conditions, you’ll just keep on waiting forever.

Here’s a better idea. Contact ERP implementation partners and find out how long it would take them to complete an implementation for you, along with how much it would cost. Then, compare this investment to the amount you are losing each year to inefficiency, late fees, lost opportunities, and so on. You will get a clear picture of how urgent your need is, how large a return on investment to expect from the ERP platform over the years, and how long it will take to recoup the cost of implementation.

While some well-known ERP solutions take years to implement and cost millions or tens of millions of dollars, Microsoft Dynamics AX and the cloud-based Microsoft Dynamics 365 for Operations deploy more quickly for a fraction of the cost. In a recent study on ERP implementations in Saudi Arabia (Parveen & Maimani, 2014), Microsoft ERP solutions required the lowest levels of investment and resulted in the least operational disruption time during implementation. The authors also observed that Microsoft Dynamics was highly customizable, flexible, user-friendly, and open to integration. These characteristics make Microsoft Dynamics ERP solutions highly attractive for companies that want to improve efficiency without spending millions of dollars.

Arguably the most important factors in reducing implementation time and remaining within budget are the industry-specific experience and technical competence of your ERP implementation partner. As a Microsoft Dynamics partner in Dubai, TechVista Systems possesses experience in implementing Microsoft Dynamics technologies on a large scale in many industries in the Middle East. Our client base includes major businesses in the public sector, banking, oil and gas, telecom, education, consumer goods, and other industries in the UAE and beyond. Please contact TechVista Systems to schedule a complimentary consultation and learn more about how we can help you improve efficiency and gain a competitive advantage with Microsoft Dynamics ERP solutions.

References

Parveen, M., & Maimani, K. (2014). A Comparative Study between the Different Sectors Using the ERP Software in Jeddah Region-KSA. Life Sci. J, 11, 40-45.

Source: https://www.techvistasystems.com/blog/it-time-your-business-implement-erp-platform

[retailerpsolutions-blog]

TechVista Systems on 2018 strategies

Khurram Majeed, general manager, TechVista Systems, shares details on its partnership with regional VAD Gulf Software Distribution and strategies for 2018.

TechVista Systems, a subsidiary of Systems Limited, headquartered out of Pakistan, began its UAE business in 2014. With operations in UAE, Qatar and Australia, the software services provider has been working with the regional value-added distributor, Gulf Software Distribution (GSD) since its inception in 2016.

Khurram Majeed, general manager, TechVista Systems, says, “Before partnering with GSD, we were working with GBM for IBM technologies. However, we were still growing our footprint in these areas. We used to work excessively with IBM in Pakistan. Over the last year, we have aggressively started working with GSD and non-IBM platforms.”

As a software services company, the reseller also has a huge presence in the US with Fortune 500 companies as customers. The firm decided to bring in the same portfolio of offerings into the region to replicate the success.

“We were working with IBM platforms and specific technologies in IBM, which are mainly towards business process automation, end-to-end integration with different systems, newer areas such as Robotic Process Automation (RPA) and machine learning,” he says. “We are mainly involved in business process automation, re-engineering and optimisation part of the technology. We are also working with other principles such as Microsoft and MicroStrategy on different enterprise agreements and providing services on those platforms.”

Majority of the reseller’s customers are from the government and retail verticals.

“We provide end-to-end retail solutions based on different technologies. We are not bound to a single vendor and have varied skillsets where we offer services on different technology areas for our customer.”

According to Majeed, as the technologies they dealt with were emerging and as they were new to the region, the biggest advantage of partnering with GSD was that the distributor helped them penetrate the market.

“GSD assists us to create our value proposition around these products. They work as a bridge between IBM and our firm. They also help us in developing our expertise, expanding our footprint, generating leads and marketing our portfolio,” Majeed adds.

Philippe de Mazieres, general manager, Gulf Software Distribution, says, “TechVista’s solutions are more specific to enterprise and high-value. It is more about presenting the solutions as a value proposition rather than mass marketing. TechVista brings the expertise and experience in this domain and they bring that value to the customers.”

Over the next few years, we will see the reseller increasing its focus on RPA solutions. Through artificial intelligence and machine learning capabilities, the software is able to carry out high-volume tasks that used to involve a human to complete it.

“This technology is coming up and will make business processes much more efficient. We will be focusing on RPA in the future. This year, we are majorly focused on business process automation and building middleware solutions for big enterprises. And this year we have just begun our footprint with IBM and GSD,” Majeed says. “Next year we want to capitalise on that and extend our capabilities on the new things that are coming to the market. We will look at investing into these technologies and expand our footprint and our partnership with GSD and IBM with the new technologies.”

Mazieres adds, “We will continue to invest in our channel to support them to bring the right value to the customers.”

Source: http://www.tahawultech.com/resellerme/features/techvista-systems-2018-strategies/

[retailerpsolutions-blog]

Is it an end of the beginning or beginning after an end??

“Service which is rendered without joy helps neither the servant nor the served. But all the other pleasures and possessions pale into nothingness before service which is rendered in a spirit of joy” – Mahatma Gandhi

Goodbyes are always very difficult and when it is not done in the right way, we end up in a puddle of trouble. Each one of us expects to conclude the service or rather called as the relationship with the employer in a smooth manner. Every employee must be aware about the facts of the benefits that one is entitled to; during the time of ending ones services.

If you reside and work in UAE or run your own business here, then you must make yourself beaten by the Labour Laws present here. This helps you to get familiar with your rights and secure them. Before getting into the intense part of end of service benefits, let us have an understanding of the severance payment in UAE. According to UAE laws, end of service benefits otherwise known as gratuity, is defined as the sum of money that an employer is lawfully required to pay to its employees upon the conclusion of the employment relationship, subject to the employee fulfilling certain criteria set out in UAE Labour Laws. From past 40 years it has always been an important subject for the labour rights of the employees who are entitled to receive after rendering their services to their employers for number of years. The Federal law no 8 of 1980 of UAE focuses on the provisions regarding the end of service gratuity.

So many questions pops up in the mind while calculating the gratuity for an employee -has the employee completed more than a year of its services, whether his contract is a limited contract or unlimited contract; if the employee has any debt with the employer, whether the employer has terminated the employee or the employee has resigned. Hence we have to take so many aspects into consideration in order to provide proper rights to an employee before we bid adieu.

Basis on which gratuity is calculated: Without prejudice to what is stipulated by the policies, gratuity is calculated according to the employee’s last received basic wage before the employee was terminated. The gratuity calculation depends upon two main aspects A) in case if the employee resigns and B) in case if the employer terminates the employee’s employment. The provisions relating to the end of service benefits are stipulated in Articles 132 to 141 of the UAE Federal Law no 8 of 1980. The gratuity is calculated as A) 21 days wages for each year of the first five years B) 30 days wages for each additional year on condition that the total of the gratuity does not exceed the wages of two years. Days of absence from work without pay are not taken into consideration in calculating the length of service.

How is gratuity calculated? Gratuity is calculated on an annual basis or part thereof provided that the employee has actually completed one year of employment or more with the employer. However, it is subject to certain exceptions based on the type of contract (limited or unlimited contract) and in the event the employment contract has been terminated by the employer or the employee has violated his obligations under the Law.

Gratuity Calculation:

If an employee resigns or is terminated within a period of less than one year then the employee is not entitled for any end of service gratuity. Article 132, Section 2 stipulates the End of service remuneration of the UAE Labour Law. This is applicable on both the types of contracts whether it is limited or unlimited. In order to have a clear picture, let us go through the gratuity calculation for each contract separately.

Unlimited Contract:

More than a year and less than three years of service in case of resignation: If an employee who has resigned with his service of more than a year and less than three years; is entitled for 1/3 of 21 days basic salary for each year of his service.

More than three years but less than five years in case of resignation: If an employee who has resigned with his service of more than three years and less than five years; is entitled for 2/3 of 21 days basic salary for each year of his service.

More than five years: If an employee who has resigned with his service of more than five years; is entitled for 21 days basic salary for each year of his service and 30 days basic salary for all the years worked thereafter.

More than a year and less than three years of service in case of termination: If an employee has been terminated from the employment with the service period more than a year but less than three years, then the employee is eligible for 21 days basic salary for each year worked.

More than three years and less than five years of service in case of termination: If an employee has been terminated from the employment with the service period more than three years but less than five years, then the employee is eligible for 21 days basic salary for each year worked.

More than five years: If an employee who has been terminated with his service of more than five years; is entitled for 21 days basic salary for each year of his service and 30 days basic salary for all the years worked thereafter.

Benefits of being fired: This ends your agony about whether to stay or go; the company has decided for you. Even if you have been thinking to surcease, getting fired can be traumatic; especially when it has never happened to you before. It is like getting a hard kick which affects your steady income. Suddenly you are jobless with the infamy entails. Also one needs to be mentally prepared to answer the question of the HRs as why were we fired. However, this is a better option when you need the severance pay to prop up your financial pillow. UAE Labour Laws have some provisions to provide benefits to the employee when being terminated.

Payments analogue to accrued but unutilised leave or any part thereof;

Payments for overtime or any wage due and not yet paid;

A notice period or payment in lieu of the notice period which is mentioned in the employment contract;

The compensation for disobliging dismissal if the contract was terminated by the employer for unreasonable cause (generally to a maximum of three months)

Source: https://www.techvistasystems.com/blog/it-end-beginning-or-beginning-after-end