Regional Economic Groupings
The Finance Ministry of the United Arab Emirates (UAE) on 10th of May 2017 arranged a briefing session in respect of the new Excise Tax Law. Implementation of the UAE Excise Tax Law follows the Gulf Cooperation Council (GCC) Ministers of Finance approval in principle, of a unified agreement, in June 2016. In accordance with agreement, excise duty will be introduced in the UAE by the fourth quarter of 2017. The other GCC Member States also have a plan to implement the excise tax by the end of 2017. The 5 per cent excise tax is to be implemented across the GCC countries by 2018. The UAE government has proposed a 50 per cent excise tax on carbonated drinks, and a 100 per cent tax on energy drinks, tobacco and tobacco products. The importer will need to pay the accurate amount of excise tax to the tax authority before discharging the goods from the designated storage area. The final excise tax law is expected to be published before the end of June.
The Finance Ministry (MoF) presented a value added tax (VAT) briefing session for advisors on 21st March 2017. The session expected to send a message to the market that VAT is approaching and businesses must start to prepare immediately. The following new information was confirmed:
- Some unnamed other Gulf Cooperation Council (GCC) Member States and the UAE is still on way to VAT implementation from 1st January 2018 and it assumes to release its domestic VAT Law before the end of the first half of 2017, with detailed Executive Regulations to follow shortly after. In accordance with the GCC VAT Framework Agreement, Member States who do not inaugurate on 1st January 2018 will have up to one year for introducing VAT
- Despite no yet approved by the GCC, medicine lists and medical equipment will also be zero per cent
- A zero per cent VAT will be applied to both healthcare and education services
- Fee-based financial services will generally be subject to the standard VAT rate
- Supplies of plain land will be exempt from VAT
- Supplies of commercial property (sales and leases) will be subject to standard VAT rate, whereas supplies of residential property (sales and leases) will be exempt from VAT, with the exception of the first sale of new residential property
- Though VAT is a federal tax, taxpayers will be need to report sales and purchases on an Emirate level basis on their UAE VAT returns.
- Investment gold, silver and platinum will be zero per cent rate and Supplies of local transport, such as taxis, buses, trains, etc. will be exempt from VAT
- Businesses will not have to physically pay VAT at the point of import into UAE
- At a GCC level, a list of basic food items have been settled to be subject to the zero per cent VAT rate
- The standard VAT rate across the GCC will be 5%.
- Records, including tax invoices, must be retained for 5 years and there will be a three-tier appeal process.
- Imports of goods into other GCC Member States, transshipped through the UAE will not be appropriate for the reverse charge.
- Businesses will not have to actually pay VAT at the point of import into UAE.
- The VAT treatment of supplies made within free zones and by free zone entities is still under final consideration and be will confirmed within the UAE VAT law and the Executive Regulations
- Supplies to the government and government bodies will be subject to standard VAT rate.
- The compulsory registration threshold will be US$100,000 and the voluntary threshold will be US$50,000. Registration will open towards the end of Q3 2017. There will be quarterly returns with filing and payments due within a month after the quarter.
- Tax invoices will be required to be issued within 14 days and up to 12 items will be specified as required on a Tax invoice. Tax invoices will need to be issued within 14 days and up to 12 items will be listed as required on a tax invoice
- The VAT treatment of supplies made within free zones and by free zone entities is still under final consideration and be will confirmed within the UAE VAT law and the Executive Regulations.
- Registration, filing and payments will all be conducted electronically, with detailed specifications to follow later in the year.
- Audits will generally be done only after 5 days advance notice, except where fraud is suspected. Where fraud is suspected a business may be closed down for 72 hours and penalties of up to 500% may be applied on top of the primary VAT owing.
The Finance Ministry has prepared the draft law in accordance with the GCC unified agreement for selective tax, and the GCC Supreme Council decision recently issued in the 37th session held in the Kingdom of Bahrain. The decision specifies the imposition of selective tax uniformly between the GCC countries according to the schedule of goods and percentages set in that resolution. The Qatar Government has accepted a draft law to charge a tax on selective goods and beverages. The selective tax is different from the 5% value-added tax (VAT) that is to be implemented across the GCC countries in 2018.
According to the provision of the draft law, the selective tax will be imposed on goods harmful to human health and the environment, and the luxury goods produced domestically or imported and set forth in the table attached to the law, and in accordance with the tax rates specific to it. The draft law contains provisions concerning application dates for the selective tax, circumstances where selective goods are presented for consumption, persons in charge of application, registration for tax purposes, maintenance of books and records for recording the movement of selective goods, tax assessment on the basis of the tax recognition and installed data, cases of suspension of tax and its recovery and exemption and confidential information and financial sanctions.
During the World Government Summit Ministry of Finance officials from the United Arab Emirates (UAE) announced they are to implement VAT by 1st January 2018. Also, the Finance Undersecretary has reiterated the Gulf Cooperation Council (GCC) Member States’ intention to apply VAT across the GCC by 1st January, 2018. Businesses should therefore begin adopting VAT and Excise Tax compliant policies to ensure a smooth transition by the starting date. A 5% VAT rate will be used on most goods and services, with certain areas potentially benefiting from special VAT treatment. Businesses should note that special VAT treatment may apply to healthcare, education, transport and technology. Also a new excise tax is planned to be introduced during this year in UAE, with specific goods considered injurious to the human health to be subject to the tax including soft drinks, energy drinks and tobacco products.
The Gulf Cooperation Council (GCC) VAT Framework Agreement has been signed by the Bahraini Finance Minister on 1st February 2017. This agreement imposes 5% VAT on the supply of in the GCC region. But this rate will be not applicable on particular basic food stuffs, medicines and medical equipment. It is expected that these items will be zero rated rather than exempted. Each of the GCC member states need to be ratify a domestic VAT law for implementing the announced VAT 2018. The agreement will become in effect only after being enacted and published in the official gazette and the mechanism of ratification is deposited with the GCC Secretariat.
The Gulf Cooperation Council (GCC) Excise Taxes Framework Agreement has been signed by the Bahraini Finance Minister on 1st February 2017. Bahrain is planning to introduce Excise Tax by mid-2017. The excise levies will be 50% on soft drinks and a 100% tax on cigarettes and energy drinks. Other goods may become subject to the tax. The agreement will become in effect after the completion of all constitutional and legal procedures along with the issuance of the necessary legislation by the legislative authority.
On October 4, 2015, Ministers of the 12 Trans-Pacific Partnership (TPP) countries – Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam – announced conclusion of their negotiations.
The result is a high-standard, ambitious, comprehensive, and balanced agreement that will promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty; and promote transparency, good governance, and enhanced labor and environmental protections.
All envision conclusion of this agreement, with its new and high standards for trade and investment in the Asia Pacific, as an important step toward their ultimate goal of open trade and regional integration across the region.