Tax Updates in the UAE – What you need to know?
Jay Krishan, Partner
HLB HAMT Partner Jay Krishnan has detailed some important updates on VAT applicability for real estate, medical equipment, ESR and excise tax in our latest edition of our Insight supplement.
Since the COVID-19 pandemic, there has been a huge surge and growth in E-commerce, with more and more consumers spending online and we now live in an on-demand digital economy. However, there have been some important changes made in relation to VAT when it comes to E-commerce. The VAT Guide on E-commerce was issued by the FTA in August 2020, and some of the changes include:
- Goods purchased online that are to be exported are eligible for zero rate VAT if certain conditions are fulfilled.
- Supply made by a non-resident to a non-registered person in UAE, the non-resident supplier is required to register for VAT and to account for VAT on supplies.
Real Estate – Owners Association & Management Entity:
The Real Estate market is a key component and cornerstone of the UAE economy – and there have been very important updates made in this industry in relation to VAT. Pursuant to the change in law concerning ownership of jointly owned properties in Dubai:
- All rights and obligations of OA will shift to Management Entity
- All OA should deregister from UAE VAT
- Non-compliance by OA will attract a penalty of AED 10,000
- Management entities must ensure compliance with UAE VAT regulations or else hefty penalties will be imposed.
Zero Rating of Certain Medical Equipment:
The COVID-19 pandemic triggered an exponential increase in the need for PPE, face masks, and other medical equipment. However, from February 28th, 2021 there will now be a 5% VAT on some medical imports.
- Supply or import of certain medical equipment during September 01, 2020, to February 28, 2021, will be zero-rated.
- Any supply or import outside the aforesaid period will be subject to 5% VAT.
- Medical face masks, Half-filtered face mask, Non-medical textile face mask, Single-use gloves, Certain categories of chemical disinfectants and antiseptics intended for use on human body is qualified for the above exemption.
FTA Administrative Update:
- FTA updated the VAT refund template.
- Refund claim for multiple tax periods can now be applied by VAT registrants through a single VAT refund template.
EXCISE: Excise Tax Obligations for Warehouse:
- Excise Taxpayers operating in a Designated Zone (DZ) must appoint a certified external auditor to audit opening stock on January 01, 2021.
- The taxpayer must fill Opening Stock Declaration (EX024) and submit the same with the auditor report no later than January 31, 2021.
- Non-compliance will set the stock held in DZ to zero and restrict the taxpayer from moving the stock out of DZ.
- If Warehouse keepers hold stock for owners who are not registered for Excise Tax with the FTA, they (the Warehouse Keepers) will need to complete the NonRegistered Excise Stock Movement Declaration form (EX204A).
- This is a one-off exercise to be completed during January 2021.
Economic Substance Regulation:
As per the Economic Substance Regulations (ESR), all Licensees are required to notify the Regulatory Authority (typically the license issuing authority) annually on the following aspects:
- Whether or not the Licensee is carrying on a Relevant Activity
- If the Licensee is carrying on a Relevant Activity, whether all or any part of the Licensee’s gross income in relation to the Relevant Activity is subject to tax in a jurisdiction outside the United Arab Emirates (UAE)
- The date of the end of the Licensee’s Financial Year (Accounting Reference Period)
- In August 2020, the UAE Cabinet issued updated economic substance regulations which revoked and replaced the previous economic substance regulations introduced in 2019.
- Appointment of FTA as the authority for the assessment of compliances by licensees, imposing penalties for non-compliance, hear on appeals filed by licensees.
- Licensees exclude natural persons, sole proprietors, trusts, and foundations.
- The deadline for filing an ESR report for a Licensee with a financial year commencing on or after January 01, 2019 and ending on or before December 31, 2019 is December 31, 2020.
- This deadline is extended to January 31, 2021.
Unless exempt under Beneficial Owner Procedures (the Regulations) companies licensed to carry on business in the UAE must maintain a register of partners or shareholders and a register of Ultimate Beneficial Owners (UBO) and submit UBO information to the relevant registrar or licensing authority (Registrar).
- Owns or controls 25% equity shares or voting right of at least 25% or
- The natural person who exercises control over the entity or
- The natural person who is responsible for the senior management of the entity.
Deadline for filing of register is October 27, 2020. Any changes to the information contained in the registers must be updated and notified to the Registrar within 15 days of such change. Regarding companies that are under dissolution or liquidation, the appointed liquidator has an obligation to provide a true copy of the updated UBO register to the Registrar within 30 days of the liquidator’s appointment.
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