With only 35 business days left for the implementation of the new levy, businesses across are being urged to register for value-added tax.
Khalid Al Bustani, director-general of the Federal Tax Authority (FTA) said businesses have been given considerable time to be ready for VAT and fulfill their registration requirements.
The online registration for 5 per cent VAT began last month. The FTA registration portal is available to all businesses around the clock. The agency has urged all businesses to adhere to a timeline for registration. Businesses with an annual turnover of more than Dh375,000 should apply for registration on or before December 4, 2017. Those with an annual turnover exceeding Dh150 million should register before October 31, 2017, and those with an annual turnover exceeding Dh10 million should register before November 30, 2017. Businesses with taxable supplies and imports from abroad that are less than the mandatory registration threshold and exceed the voluntary registration limit of Dh187,500 annually can optionally register for VAT.
All businesses that must be registered by January 1, 2018, should submit their applications before December 4, 2017, to minimize the risk of not being registered in time for the beginning of 2018.
“The FTA is tasked with providing an outstanding tax system that adhere to best international practices,” Bustani said.
In another development, the UAE Ministry of Finance has announced the executive regulation for the Federal Decree-Law No. (8) of 2017 on VAT at a Cabinet meeting on the 7th of November.
The regulation defines VAT as the 5 per cent tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the decree-law.
Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance, said the release of the Executive Regulation of Federal Law No. (8) of 2017 on VAT is a new stage in the implementation of an effective tax system in the UAE — one that measures up to the highest international standards.
“We extend our hand in partnership to all concerned parties, inviting them to work together for the advancement, progress and prosperity of the UAE.”
As of the 1st of January All types of food in the UAE, including staples such as bread and rice, will be taxed, said the FTA on the 8th of November.
The public has long-expected certain food staples to be zero-rated, or exempt, from the 5 per cent tax increase. Zero-rated refers to the preferential status the government gives some essential goods and services, meaning their sale is not taxed.
Al Bustani at a media event on Wednesday said: “The law in the GCC agreement said that any food items would be under the sovereign right of the government to include it [as a zero-rated item]. The law that has been issued did not include it.”
The list Al Bustani referred to was issued at the end of August, and included goods and services such as public transport, commercial airlines, investment-grade precious metals, the supply of crude and natural gas, and education and health care.
Many of these goods aren’t taxed because they provide beneficial services to society, whilst others avoid tax simply because they are too complicated, such as financial services.
When asked if food would be zero-rated, Al Bustani responded: “No.”
“In the UAE, all food will be subject to standard rate [of 5 per cent], and we don’t expect that to change in the next couple of months,” said Deloitte tax expert Ewelina Maka. “The GCC treaty provides member states with the option to choose whether to tax food, and the UAE and Saudi Arabia decided to tax food,” Maka added.
She said that the move didn’t surprise her, as it was the simplest approach the FTA could have adopted. “Here in the UAE, the legislation and taxes are a new thing. So from the perspective of applying such taxes, the government has decided to apply taxes across all food,” she said.
The regulation applies to gold as well. The VAT on gold jewellery will likely apply to the entire piece, which effectively means an additional payout of Dh7-Dh8 a gram at today’s prices, according to industry sources. But on gold bars, deemed as investible assets, no such tax will apply. There will also be no duty on loose diamonds.
The decision to include gold jewellery under VAT will be spelt out in the Executive Regulation governing the application of value-added tax in the UAE. A draft version of the document was released of the 7th of November.
Until the very last moment of the VAT notification, market sources were hopeful that VAT on gold jewellery would remain exempt or only applied on the value-added piece. This they felt was necessary to keep Dubai’s “City of Gold” status intact. And solidify the impression that when it comes to gold and gold jewellery, the best deals anywhere are in Dubai.
They maintained that this was absolutely vital in getting tourists to keep hitting the gold souqs, especially the Indian, Pakistani and Chinese buyers.
“Before VAT, buying a gram of gold in India and from here comes with an immediate 15 per cent price advantage,” said a market source. “That advantage reduces a bit when VAT comes in.”
Representatives of the Dubai Gold & Jewellery Group had approached government entities to press their case for some sort of benefits. They had provided detailed studies backing up their case. But none of this turned fruitful.
According to Cyriac Varghese of Sky Jewellery, “If we take another Dh10-1Dh15 in making charges, the VAT at 5 per cent would average about Dh7-Dh8 a gram. At the current price range of Dh140 a gram to Dh150, consumers are relatively comfortable with buying. Even with the additional VAT costs, it shouldn’t prove such a burden on the consumer.”
Joy Alukkas Chairman said: “There is nothing extraordinary in this — it’s how VAT is assessed on gold jewellery in other markets. There might be a slight hesitation on the part of gold consumers when VAT is effected, but that will soon pass. “Malaysia had the same experience two years ago (in April 2015) and gold demand weakened considerably after VAT. But consumers soon started getting back into stores.”
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