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16th September 2019Dubai South HQ
By:Pankaj S JainAskPankaj DWC-LLC
About Us
Based in Dubai South
Team:• Chartered
Accountants• Lawyers• Masters Degree• U.K. Tax Experts
Experience:• 30+ years combined• Big Four: PwC, KPMG,
Deloitte• Industry: Kohler, Coca-
Cola, HDFC Bank, Choueiri Group
• Advisory & Tax Litigation• India, U.A.E. & Europe Clients:
Advising & assisting leading companies:
Dubai Abu Dhabi Ajman Sharjah
Fujairah
Proud to serve leading companies in U.A.E.
Agenda
• Are you required to register for VAT?
• Don’t forget to de-register on time, else face penalties
• To be or Not to be: Understanding the scope of VAT
• Understanding the 'zero' in zero-rated supplies
• The 'value' in Value Added Tax - not just your profits?
• The curious case of 'correct' tax invoices
• Are you really VAT-free in Free Zones?
• Now you know: your VAT liabilities on purchases
• VAT is not alone - Custom Laws and VAT
Session - 1
• Optimise your VAT costs: understanding input VAT credits
• How 'exempt' supplies impact your input VAT credits
• Expo 2020: the refundable VAT costs
• Business Visitors: Don't forget to claim the VAT refund
• Unexciting yet most important: Understanding VAT returns
• Oops! - Common VAT mistakes and how to correct them
• Be Alert - VAT Audits and compliances
Session - 2
Registration and Deregistration
Last 12 months – Rolling Period Today Next 30 days Not VAT Registered
Cannot Register
Optional to Register$
Mandatory Registration
Mandatory De-registration
Optional to De-register
Cannot De-register*
187,500
0
375,000
TU
RN
OV
ER
(AE
D)
187,500
0
375,000
VAT Registered
$ - Option to register also available where taxable expenses > 187,500 * - Mandatory De-registration if you stop making taxable supplies
Registration and Deregistration
T U R N O V E R ( A E D )
• Taxable Supplies• Includes Zero-rated Supplies/Exports• Option to seek exception from registration
(but still mandatory to apply for registration)
• Purchases subject to Reverse Charge Mechanism (import of goods and services)
• Supply of Capital Assets
• Outside the scope suppliesExcl
ud
esIn
clu
des
Effects of De-registration
• Goods and Services owned at thedate of Tax De-registration• Deemed Supply
• If input VAT credit was recoveredfor the related Goods and Services
• VAT needs to be paid on De-registration
• Need for detailed accounting andrecord keeping
• Cannot use the TRN• change of stationary
• accounting software
Scope of VAT
TRANSACTION
NOT A SUPPLY SUPPLY
TAXABLE
STANDARD RATED
ZERO RATEDDEEMED SUPPLY
EXEMPTOUTSIDE THE SCOPE OF VAT
Source: FTA Awareness Slides
Components of Supply
Source: FTA Awareness Slides
Components of Supply
Supply of Manpower
Group Co.A(TRN – 123)
Employee
Group Co.B(TRN – 678)
•Employee on Co.A visa•Salary paid
through Co.AWPS
- Co.Arecovers the salary cost from Co.B
• Co.A and Co.B are not in a same tax group
• Arrangement amounts to supply of manpower service by Co.A to Co.B
• Co.A is required to issue invoices to Co.B
• Tax Group is a solution?
• Salary re-charge
• VAT implications on the recovery from employees
• Phone
• Food subsidy
• Car rentals
• Insurance premium for employees’ family
Goods and Services
Outside the Scope of VAT - Vouchers
Etisalat
Consumer
Carrefour
Supply of Services
Supply of Vouchers by Carrefour is outside the scope of VAT
AED 200 is VAT Inclusive
Etisalat is required to issue Tax Invoice at the time of issuance or supply of the voucher
Kuwait
Saudi Arabia
BahrainQatar
Oman
United Arab Emirates(UAE)
U.A.E. Company
Physical Delivery
Invoice
Customer -France
Supplier –India
Outside the Scope of VAT - Goods
Outside the Scope of VAT
Outside the Scope of VAT
Kuwait
Saudi Arabia
BahrainQatar
Oman
United Arab Emirates(UAE)
U.A.E. Company
Physical Delivery
Invoice
Customer -France
Supplier –India
Outside the Scope of VAT - Services
Covered under RCM*
Export of Service*
*Certain exceptions apply
Deemed Supply - Free Samples & Commercial Gifts
No Scenario Description Tax Implication
1 Standard free samples of new
products for business promotion
The provision of AED 500 per recipient
and annual tax threshold of AED 2,000
as explained above will apply.
2 Price discounts during a
commercial negotiation process
Output VAT is payable on the price at
which the supply of goods is invoiced
3 Quantity discount wherein an
additional quantity maybe
added for the same price
Output VAT is payable on the price at
which the supply of goods is invoiced
4 Defective Goods Replacement Where the replacement is made on a
one to one basis, there should be no
further tax implication.
5 Defective goods replacement
with penalty in form of
additional quantity of cards
supplied
The tax treatment of the penalty paid in
form of additional cards will need to
examined.
Principle: VAT is payable even if Goods aresupplied without consideration.
Exception: No VAT payable when-• Input VAT credit not taken in respect of
goods which are subsequently suppliedfree of cost
• Goods supplied as samples/ commercialgifts and value of supply• for each recipient within 12-month
period does not exceed AED 500,and
• Total value of such supplies within12-month period does not exceedAED 40,000
However, any free supplies under awarranty obligation will not be subject tothe rules of free or deemed supply.
Based on the nature of business, following scenarios and VAT implications arise for free supply
Deemed Supply vis-à-vis Single Supply
Supermarket
Restaurants
Vehicles
Carry-bags
Cutlery
Tool-box
Deemed Supply (Art.11 of DL):• Supply of whole/part of assets without
consideration- VAT payable on market value- Certain Exceptions apply
Is VAT payable on carry-bags, cutlery etc?Can supplier take VAT credit on such items?
Single or Mixed Supply?• Single price• One principal component• Ancillary/incidental elements to better
enjoy the principal component
Zero Rated Supplies
Certain investment grade precious metals
Newly constructed residential properties, that are supplied for the first time within 3 years of their construction
Supplies of certain sea, air and land means of transportation (such as aircrafts and ships)
Exports of goods and services to outside the GCC
International transportation
Supply of certain education services, and supply of relevant goods and services
Supply of certain Healthcare services, and supply of relevant goods and services
Saudi Arabia
United Arab Emirates(UAE)
International Transportation – Zero rating1. Transport of goods or passengers
• from UAE to outside• From outside to UAE
2. Local transportation of goods or passengers• within UAE as part of
international transport in (1) above
3. Transport related services for (1)
4. Goods supplied for use/consumption/sale on an aircraft/ship
5. Services supplied during the transportation services (scope?)
6. Insurance or arranging of insurance
7. Arranging of transport
Transport-related Services: • shipment, • packaging and securing, • preparation of Customs documents, • container management, • loading, unloading, • storing and moving of Goods, or • any another closely related services
or • services that are necessary to
conduct the transportation services
Supplier
Physical Delivery/Service performed
Invoice
United Arab Emirates
(UAE)
Customer in Africa
(shown in Africa only as illustration; could be located anywhere
outside GCC)
KSA Customer
Oman Customer
Export of Goods outside U.A.E.• Supply of goods from mainland U.A.E. to customers outside U.A.E.• Physically exported or are put into a customs suspension regime - within 90
days of the date of the supply• Official and commercial evidence of Export (or customs suspension) is
obtained
VAT Not Applicable (Zero-rated)
• “Official evidence” means Export documents issued by the local Emirate Customs Department in respect of Goods leaving the State.
• “Commercial evidence” shall include any the following:
1) Airway bill2) Bill of lading3) Consignment note4) Certificate of shipment
Proof of Exports – “Official Evidence”
I. If the following conditions are met:
a) services are supplied to a Non-resident
recipient
b) the recipient is outside U.A.E. at the time
the services are performed
- scope of ‘outside the U.A.E.’?
c) the services are not supplied directly in
connection with
- real estate situated in U.A.E.
- moveable personal assets situated in
U.A.E. at the time the Services are
performed
Export of Services
II. Services are actually performed outside
U.A.E. – What is the Scope?
III. Services are of arranging of services that
are actually performed outside U.A.E.
IV. Supply consists of the facilitation of
outbound tour packages
Local Transportation – Goods and Passenger
Passenger Transport - Exempt
Train, Tram, Mono-rail
Ferry, Abra
Taxi, Bus
Helicopter, Airplane
Goods Transport – Not Exempt
Goods/Food Home-Delivery
Local transportation of goods
* Pleasure/Sightseeing trips excluded
Valuation
• ‘Taxable supply’ refers to a supply (except exempt supply) of goods/services for a consideration by a person conducting business in U.A.E.
• ‘Consideration’ includes • all that is received or • expected to be received • for the supply of goods/services, • whether in money or other acceptable forms of payment
• VAT needs to be accounted for on accrual basis
Taxable Value: Consideration
Retailer Consumer
Finance Co.
AED 1,000 paid as sale price for sale of goods
AED 150 commission paid for offering 0% EMI to consumer
Consideration:All that is
- received or- expected to be received
for the supply of Goods or Services,whether in
- money or- other acceptable forms of payment.
Payment to the Finance Co. cannot betreated as a discount or price reduction oroutside the purview of consideration
Transactions under E-Commerce
Seller ‘A’
Amazon
Customer
1 - Marketplace agreement
between Seller ‘A’ and Amazon2 - Customer places the order worth
AED 1,050 on ‘A’ (through Amazon)
Customer pays the money to Amazon
3- ‘A’ supplies the goods to the Customer
(transportation arranged by Amazon)
4 - Amazon remits the money say,
AED 945 to Seller ‘A’ after deducting its commission.
Amazon issues invoice on ‘A’ for its commission and charges worth AED 105
VAT Implications• Seller ‘A’ is required to issue a tax invoice for AED 1,050 (1000 + 5%)• Seller ‘A’ can claim VAT input credit of Amazon’s invoice of AED 105 (100 +5%)
Disbursement and Re-imbursement
• “Reimbursement” - the recovery of expenses that the supplier incurs as a principal
• “Disbursement” – the recovery of payments made on behalf of another person
Supply of Manpower
Co.A – Manpower Supply Company
(TRN – 123)
Employee
Client - Co.B(TRN – 678)
•Employee on Co.Avisa•AED 50,000 salary
paid through Co.AWPS
- Co.A recovers the salary cost from Co.B
- AED 50,000 + AED 5,000 service fee
• Arrangement amounts to supply of manpower service by Co.A to Co.B
• Co.A is required to issue tax invoices to Co.Band charge VAT
• Should VAT be charged on 55,000 or 5,000?
Bad Debt reliefConditions
• Consideration was not paid in full/in-part for over 6 months
• Supplier has written off the value in the books of account
Tax Treatment
• The Supplier can reduce its output VAT liability in the tax period of write-off
• A notice to be sent to the Recipient of the consideration being written off
• The Recipient has to reverse the input tax credit taken earlier
Example:
Original Supply in Jan’18Amount AED 1000VAT @ 5% AED 50Total AED 1050
VAT ReturnO/P VAT AED 50
Nov’18 : VAT ReturnO/P VAT AED 3000(-) Adjustment AED (50)
AED 2950
BAD DEBT
Date of Supply
Earliest of the three
Earliest of the three
Earliest of the three
Earliest of the three – to the extent of 20%
For balance 80%
Pay VAT for Qtr(Jan-Mar) by 28th
April
Pay VAT for Qtr(Apr-Jun) by 28th Jul
Pay VAT for Qtr(Apr-Jun) by 28th Jul
- Pay VAT for Qtr(Jan-Mar) by 28th Apr- Pay VAT for Qtr(Apr-Jun) by 28th Jul
Date of Supply
Earliest of the three
Earliest of the three
Earliest of the three
Earliest of the three – to the extent of 20%
For balance 80%
Pay VAT for Qtr(Jan-Mar) by 28th
April
Pay VAT for Qtr(Apr-Jun) by 28th Jul
Pay VAT for Qtr(Apr-Jun) by 28th Jul
- Pay VAT for Qtr(Jan-Mar) by 28th Apr- Pay VAT for Qtr(Apr-Jun) by 28th Jul
• For any contract that includes periodic payments or consecutive invoices, the Date ofSupply is the earliest of the following dates:
a. issuance of any Tax Invoice
b. payment is due as per the Tax Invoice
c. receipt of payment
*provided that it does not exceed one year from supply of Goods/Services
Time/Date of Supply – Special Rule
Tax Invoice (Art.59 of Executive Regulations)
1) “Tax Invoice” clearly displayed on the invoice
2) Name, address, and TRN of the supplier
3) Name, address (complete, or at least POBox), and TRN of the Recipient
4) A sequential Tax Invoice number or a uniquenumber
5) Date of issue of invoice
6) Date of supply, if different from date of issueof invoice
7) Description of the Goods or Services
8) For each Good or Service, the unit price, thequantity or volume supplied, the rate of Taxand the amount payable expressed in AED
9) Amount of any discount offered
10) Pre-tax amount payable in AED
11) Tax amount payable in AED
12) The rate of exchange, if othercurrency used
13) Statement on reverse charge by therecipient
Simplified Tax Invoice (only items marked with are required• Recipient is not registered; or• Invoice value is not exceeding AED
10,000
Tax
Invo
ice
Fo
rmat
Invo
ice
Val
ue
mo
re t
han
AED
10
,00
0 InvoiceTax
Sl No. Description UnitRate
Qty./Units
Discount (AED)
Value (AED)
1 Item - XXX - 1 1,000 100 10,000.00 90,000.00
2 Item - XXX - 2 500 50 - 25,000.00
VATRate
Total
3 Item - XXX - 3 2,000 150 21,275.25 278,872.75
393,872.75 19,693.64 413,566.39
5%
(AED)Value (AED)
100,000
25,000
300,000
5%
5%
VAT(AED)
4,500.00
1,250.00
13,943.64
94,500.00
26,250.00
292,816.39
Terms & Conditions:
Recipient DetailsNameAddress
PO BoxEmiratesTRN
Invoice No.Date of InvoiceDate of Supply
Other Details:LPO NumberLPO DateDelivery TermsSales Person
Supplier DetailsNameAddress
PO BoxEmiratesTRN
10
1. Invoice must be titled as Tax Invoice
2. Complete Supplier’s Details
3. Complete Recipient’s Details including address and Emirates
4. Invoice Number
5. Date of Invoice
6. Date of Supply, if different from Date of Invoice
7. Description
8. Quantity
9. Rate/Unit
10.Pre-VAT value
11.VAT Rate
12.VAT Amount
13.Total VAT
14.Total VAT inclusive value
Optional
1. Total Pre-VAT value2. Line-wise VAT inclusive
amount or Discount
13 14
8 9 11 127
1
2 3456
PenaltiesS.No Description of Violation Penalty (AED)
1 Failure to keep the required records and other information• 10,000 for the first time• 50,000 in case of repetition
2 Failure to submit a deregistration application within the timeframe • 10,000
3 Failure to inform FTA of any circumstance that requires the amendment of the information pertaining to tax records
• 5,000 for the first time• 15,000 in case of repetition
4 Failure to issue - the Tax invoice or an alternative document when making any
supply- a Tax Credit Note or an alternative document
• 5,000 for each tax invoice / tax credit note / alternative document
5 Failure to submit the Tax Return within the timeframe • 1,000 for the first time• 2,000 in case of repetition within (24)
month
6 Failure to pay tax within the timeframe • 2% - immediate• 4% - 7 days to one calendar month• 1% daily - after one calendar month
Questions & Answers
Thank You!
info@AskPankaj.com / +971 50 243 0536
AskPankaj DWC-LLC / P S Jain Tax Consultants [Tax Agency]
Dubai South Business Center
Building A3, 3rd Floor
Dubai World Central
PO BOX 390667, Dubai, U.A.E.
DISCLAIMERThis material and the information contained herein is intended to provide general information on a particular subject(s) and is not an exhaustive treatment of such subject(s).It is not intended to constitute professional advice or services. You are requested to seek professional opinion in the context of your business.AskPankaj DWC-LLC shall not be responsible for any loss whatsoever sustained by any person who relies on this material as a professional advice.
©2019 AskPankaj DWC-LLC
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