Dubai to allow unified licensing for free zones

Dubai’s ‘one free zone passport’ allows businesses to operate without multiple licensing

Dubai: Businesses can operate out of multiple free zones in Dubai through a single license under the “one free zone passport” scheme.

What this does is bring out significant cost savings in licensing fees for those businesses wanting to have a base in more than one free zone in the emirate. Meanwhile, there is also a proposal to allow free zone licenses entities to take up rental contracts from the current 25 years to 50 years.

The DFZ Council is also “developing a comprehensive geo-economic map of Dubai that seeks to position the emirate as a leading destination for investment and business set-up”.

“Greater coordination paves the way for sustainable development and presents exceptional opportunities to attract SMEs and international companies and empower entrepreneurs to realise their creative ideas,” said Sheikh Ahmed Bin Saeed Al Maktoum, Chairman of DFZ Council.

This ties in closely with another recent Dubai-wide initiative, whereby free zone based entities could operate freely in “onshore” Dubai as well as offshore. This again did away with multiple licensing requirements for such businesses.

Financial marketplace

The DFZ Council is also lending its weight to the “Free Zone 10X” platform, which would create a financial market exclusively for free zone enterprises to tap funding through IPO listings. A study is being held on the feasibility of such a marketplace, and is now researching the “legislative and logistical requirements for implementing” it.

“The coordinated efforts among the free zones in Dubai contribute to economic diversification — an essential pillar of the economy of the future,” said Sheikh Ahmed. “This creates a favourable environment to bring groundbreaking concepts to life.”

Updating rental agreements

In what could be a path-breaking move, the Council also discussed a draft law proposal to systemise rental agreements within Dubai free zones. If passed, this will be done in conjunction with Dubai Land Department and the various free zone enterprises.

The proposal aims at “providing a larger pool of real estate options for companies”. If passed, it would extend lease terms for free zone businesses from 25 years to 50.

Wide representation

The team working on updating the free zone concept in Dubai includes representatives of the Ministry of Economy, the Department of Economic Development, Dubai Chamber of Commerce and Industry, Dubai Development Authority, Jebel Ali Free Zone, the Dubai International Financial Centre, Dubai Customs, and Dubai Municipality.

“The initiatives of the DFZ Council, such as the geo-economic map, bring added value to the local economy,” said Sheikh Ahmed. “Developments on the economic front transcend geographical borders and support the implementation of innovative projects in line with the priorities articulated in the recent “Letter of the New Season” from His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.”

https://gulfnews.com/business/dubai-to-allow-unified-licensing-for-free-zones-1.67307087

Bahrain parliament approves VAT agreement

Dubai: Manama: Bahrain is set to become the third Gulf Cooperation Council (GCC) to implement the unified agreement on Value Added Tax (VAT) on goods and services.

On Sunday, the kingdom’s bicameral parliament, holding an extraordinary session upon a royal order issued last week, approved VAT at the rate of five per cent effective from January 1 next year.

The lower and upper chambers of the parliament also approved new pension rules for ministers and members of the Council of Representatives, the Shura Council and the Municipal Council.

VAT and changes to the pension system are part of efforts to fix public finances hit hard by the drop in oil prices which also pushed Bahrain’s dinar to its lowest in more than a decade.

In February, Bahraini Minister of Finance Shaikh Ahmad Bin Mohammad Al Khalifa said that Bahrain would introduce a VAT and would have everything set up by the end of 2018.

https://gulfnews.com/news/gulf/bahrain/bahrain-parliament-approves-vat-agreement-1.2287327

Foreign Currency Exchange Rate for VAT purpose

How to record currency Exchange Rates in your books of accounts?

Exchange Rates: Article 69 of Federal Decree-Law No. (8) of 2017 (“VAT Decree-Law”) requires that where a supply was made in a currency other than UAE Dirham that the amount stated on the issued tax invoice should be converted into the UAE Dirham according to the exchange rate approved by the UAE Central Bank at the date of supply.

The UAE Central Bank began publishing exchange rates on 17 May 2018. Businesses are required to use UAE Central Bank rate on any tax invoice issued in a currency other than the UAE Dirham from this date onwards.

Any tax invoices issued in a foreign currency prior to 17 May 2018 should have been converted to UAE Dirham using a reliable source for exchange rates such as Oanda, Thomson Reuters, UAE Bank Rates etc.

There will be no need to rework tax invoices issued prior to 17 May 2018, provided they used exchange rate from any of the reliable source consistently.

Voluntary Disclosure form 211 – When is required to be filled ?

When to use Voluntary Disclosure Form 211?

Voluntary Disclosure Form 211:  A Voluntary Disclosure is a form provided by the Federal Tax Authority if the Taxpayer notifies an error or omission in a Tax Return, Tax Assessment or Tax Refund application.

Voluntary Disclosure form need not be used if the underpaid tax amount is AED 10,000/- or less. It can be corrected through the Tax Return for the tax period in which the error has been discovered (i.e if the error occured in a particular quarter was found in subsequent quarter , the same can be rectified in the subsequent quarter when identified , no for required)

If the unpaid tax liability is more than AED 10,000/- it can be rectified using voluntary disclosure form 211.

 

Do you know that Director Services are Taxable ?

Taxability criteria for Director Services?

Director’s Services: The general rule is that directors provide a service for VAT purposes to their company. As such, if the fees for services (in addition to any other supplies that might be made by the person) exceed the VAT mandatory registration threshold, namely AED 375,000, then directors are liable to register for VAT and charge VAT on the director fees. Specifically, services provided by a director should be taxable if:

  • the director undertakes services on a regular, ongoing and independent basis (such as an individual who acts as an executive or non-executive director on a board or a number of different boards); and
  • the total value of taxable supplies and imports made by the director, including supplies of director services, exceed the mandatory registration threshold.

A director may also choose to voluntarily register for VAT where the value of taxable supplies (including director fees) exceed the voluntary registration threshold of AED 187,500.

Which are the expenses from which input tax are not recoverable?

Which are the expense from which input tax are not recoverable?

Non-Recoverable Input Tax –  VAT incurred on any costs which are used for a genuine business purpose, or which are incidental to a business purpose e.g. food and drink provided during a business meeting, shall be recoverable (subject to normal VAT recovery rules).

The food and drinks will become entertainment in nature if the purpose of attending the event is for food and drinks and hence, input tax paid on such expenses cannot be recovered.

Input tax can be claimed on hospitality expenses only if it includes the basic amenities provided to the employees. If hospitality is given for the purpose of attending events or entertainment purpose for Customers, Shareholders, Potential Customers, Officials, etc., such costs will be considered to be entertainment in nature and the VAT incurred shall not be recoverable.