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UAE Freezones Biz News Updates
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UAE property firms must keep financial records for 15 years
The purchase and sale of goods within designated free zones will not be
subject to VAT, but all services provided by companies in designated zones
will be subject to VAT.
Other sectors are required to keep their financial book records
for five years
The Federal Tax Authority on Tuesday issued Executive Regulations for
value-added tax (VAT), which stated that real estate firms would have to
maintain their books for 15 years.
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime
Minister of the UAE and Ruler of Dubai, on Monday approved the Executive
Regulations for VAT, which offered more clarity on tax matters pertaining to
free zones.
"Any records related to a real estate required to be kept shall be held for
a period of 15 years after the end of the tax period to which they relate,"
state the Executive Regulations issued by the Federal Tax Authority (FTA).
Meanwhile, other sectors are required to keep their financial book records
for five years.
With regard to refunds for tourists and business visitors, the FTA may come
out with rules in due course. "Schemes and conditions to claim such refunds
are yet to be finalised," said Nirav Shah, director, Fame Advisory.
Shah said only the purchase and sale of goods within designated free zones
will not be subject to VAT, but all services provided by companies in
designated zones will be subject to VAT. All taxable persons based in a
designated zone will be considered to be located within the UAE.
Designated zones are categorised as those free zones which have a specific
fenced geographic area and security measures and customs controls in place
to monitor the entry and exit of individuals and movements of goods to and
from the area.
"Thus, all free zones which do not have such facility will not be regarded
as designated zones, e.g. DMCC, Tecom, Internet City, Silicon Oasis, etc.,"
he added.
He noted that any pharmaceutical products and medical equipment supplied
even by intermediaries or traders to hospitals will be zero-rated. Cosmetic
treatments will be subject to a standard five per cent rate of VAT.
The Executive Regulations specify that healthcare services would be
zero-rated if they relate to the well-being of a human being, according to
resident partner Pratik Shah and principal Sunny Kachalia from WTS Dhruva
Consultants.
They noted that as per the Executive Regulations, fee-based financial
services, which are provided in return for an explicit fee, discount,
commission, rebate, etc., would be subject to VAT.
Thomas Vanhee, founding partner, Aurifer Middle East Tax, said that a
missing piece of the puzzle is VAT returns. VAT return is an important
document for the set up of tax codes to automate reporting. Without knowing
where to report certain transactions, businesses cannot finish the set up of
their ERP systems.
He said one of the important elements in the law is the requirement to
mention the VAT number of the local business customer on the invoice. This
requires a lot of businesses to update their customer master database and
can be a lengthy administrative process, especially since very few companies
are registered at the moment.
Surandar Jesrani, partner and CEO, Morison MJS, said only a handful of goods
and services would be exempt under the UAE VAT regime.
"One such service is the supply of local passenger transport. Upon the
release of the final Executive Regulations, we understand that any local
passenger transportation service provided in a motor vehicle like taxi or
bus shall qualify for the aforesaid exemption. Taxis in the UAE would,
therefore, charge no VAT to its passengers. We need to see what will happen
to the VAT on cars which automotive companies will sell to taxi business."
Mayank Sawhney, director, MaxGrowth Consulting, said the long wait of all
UAE businesses and residents on getting some clarifications on a number of
grey areas of the VAT Decree Law seems to be over. However, there are still
a number of areas which need further clarification. Guidance is expected
from the Ministry of Finance and FTA over the coming days.
November 28, 2017 |
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Courtesy Khaleej Times.
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