Excise Tax in UAE

All about Excise Tax in UAE

According to Cabinet Decision No. 52 of 2019 on Excise Goods

What is excise tax?

Excise tax was introduced across the UAE in 2017. Excise tax is a form of indirect tax levied on specific goods which are typically harmful to human health or the environment. These goods are referred to as “excise goods”.

When considering whether a product is an excise good, the following definitions apply:

  • Carbonated drinks include any aerated beverage except for unflavoured aerated water. Also considered to be carbonated drinks are any concentrations, powder, gel, or extracts intended to be made into an aerated beverage.
  • Energy drinks include any beverages which are marketed, or sold as an energy drink, and containing stimulant substances that provide mental and physical stimulation, which includes without limitation: caffeine, taurine, ginseng and guarana. This also includes any substance that has an identical or similar effect as the aforementioned substances. Also considered to be energy drinks are any concentrations, powder, gel or extracts intended to be made into an energy enhancing drink.
  • Tobacco and tobacco products include all items listed within Schedule 24 of the GCC Common Customs Tariff.

 Rate of excise tax

The rates of excise tax in the UAE will be:

  • 50 per cent for carbonated drinks
  • 100 per cent for tobacco products
  • 100 per cent for energy drinks.

for more info on this topic, Visit the link below :

https://government.ae/en/information-and-services/finance-and-investment/taxation/excise-tax

VAT Refund from FTA

Federal Tax Authority Reaffirms: ‘Refunding Tax for Eligible Applicants a Direct Transaction Between Registrants and the FTA’

Federal Tax Authority Reaffirms: ‘Refunding Tax for Eligible Applicants a Direct Transaction Between Registrants and the FTA’

  • The Authority reiterated its call for maintaining strict confidentiality of registrants’ data.

Abu Dhabi, September 10, 2019 – The Federal Tax Authority (FTA) reaffirmed that refunding taxes for legally eligible applicants is a direct transaction between the registered business and the FTA, and does not call for any intermediaries.

The process is completed via advanced electronic systems, available on the FTA’s official website, which boasts impressive security features for financial transactions. It is done through official channels using the International Bank Account Number (IBAN), and via systems under the authority of – and electronically linked to – the UAE Central Bank.

In a press statement issued today, the Authority noted that all of these official systems involve dealing directly with the FTA using Tax Registration Numbers (TRNs). They stand out for their accuracy, confidentiality, and data security, in addition to being inaccessible via email or any other medium that may be prone to piracy and hacking.

The Authority issued the above statement in response to reports that certain bank customers received emails from unidentified sources impersonating banks and financial institutions, and asking recipients to provide personal data, including names, credit card numbers, and PIN codes, claiming that providing the information will allow them to recover Value Added Tax.

The FTA reiterated its warning to all registered businesses, calling on them to remain vigilant and maintain the confidentiality of their personal data. The Authority reaffirmed that all transactions – registration, submitting Tax Returns, refunding tax for eligible candidates, etc. – can be completed with a few simple steps via the e-Services portal, available 24/7 on the FTA website: www.tax.gov.ae, which was designed in accordance with international best practices to make it easier for Taxable Persons to meet their obligations.

Original Source of information , click below :

https://tax.gov.ae/press-releases/Federal-Tax-Authority-Reaffirms-Refunding-Tax-for-Eligible

 

 

Federal Tax Authority Implements Penalties on Violators of the ‘Marking Tobacco and Tobacco Products Scheme

Federal Tax Authority Implements Penalties on Violators of the ‘Marking Tobacco and Tobacco Products Scheme

Information Source : https://www.tax.gov.ae/en/press-releases/Federal-Tax-Authority-Implements-Penalties

 

  • objective of the fines is to protect consumers against low-quality products that harm their health and the environment.

 

Abu Dhabi, May 25, 2019 – The Federal Tax Authority “FTA” will begin implementing the Cabinet Decision regarding violations of the “Marking Tobacco and Tobacco Products Scheme”, which calls for applying Digital Tax Stamps on the packaging of said products before supplying them to local markets.

The Authority stressed that the penalties are meant to curb attempts at commercial fraud, and protect consumers from contraband, low-quality products, that do not conform with standards and harm their health and the environment. The FTA explained that mechanisms have been set to implement the new legislation, which clearly outlines the commitments of both the taxpayers and the Authority, and sets mechanisms to tighten controls in UAE markets and ensure governance and transparency.

The Federal Tax Authority clarified that penalties have been set for nine types of violations of the Digital Tax Stamp Scheme, in an effort to protect consumers, prevent contraband, low-quality products from entering local markets, and halt sales of smuggled goods in the UAE.

According to the penalties chart enclosed in the Decision, a person who possesses or handles Designated Excise Goods that do not carry a Mark (Digital Tax Stamp) incurs a penalty of AED50,000 and 50% of the Excise Tax due on the designated Excise Goods. If a person knowingly allows his premises to be used for the sale of unmarked Designated Excise Goods in the UAE, that person shall incur a penalty of AED25,000 for the first violation and AED50,000 in case of repetition.

If a person alters or prints over Digital Tax Stamps affixed to Designated Excise Goods, they would be subject to a penalty of AED50,000 and 50% of the Excise Tax due. Meanwhile, if a person fails to report the movement of Designated Excise Goods, they will incur a penalty of AED20,000 for each time the violation was committed. In the event where a person fails to comply with the requirements to securely store the Digital Tax Stamps as determined by the Authority, a fine of AED50,000 per incident would be applicable.

In case a person fails to comply with time limits for returning unused Marks to the Authority, the penalty is AED50,000 per incident, whereas failure to affix Digital Tax Stamps to Designated Excise Goods in the manner and location specified by the Authority exposes the person in question to an administrative penalty of AED25,000 for the first violation and AED50,000 in case of repetition.

Furthermore, the penalties’ chart indicates that if a person conducts unauthorised trading, swapping, selling, or otherwise supplying of Digital Tax Stamps, they incur fines of AED25,000 for the first violation and AED50,000 in case of repetition, in addition to 50% of the amount collected as tax. If a person re-uses Marks that had previously been used on a Designated Excise Good, they would be subject to a penalty of AED50,000 and 50% of the Excise Tax due.

As of May 1, 2019, the import of any type of cigarettes into the UAE not bearing the Digital Tax Stamps has been prohibited; meanwhile, the sale across UAE markets, or importation or production of all types of cigarettes not bearing Marks will be prohibited as of August 2019. This is part of the timeline for the “Marking Tobacco and Tobacco Products Scheme”, which went into effect on January 1, 2019, and allows for electronically tracking cigarette packs from production and until they reach the end consumers, to ensure full compliance with Excise Tax obligations.

The Federal Tax Authority asserted that the Scheme will be gradually expanded to cover all tobacco products and support the Authority’s efforts to collect taxes, combat commercial fraud, and protect consumers against low-quality, contraband products that harm their health and the environment. The Scheme also facilitates inspection and control at customs ports and markets to halt sales of contraband products.

UAE Cabinet approves VAT revenues distribution between federal and local governments

UAE Cabinet approves VAT revenues distribution between federal and local governments

UAE Cabinet approves VAT revenues distribution between federal and local governments

Published Friday, May 31, 2019

The UAE Cabinet has approved distribution of the value-added tax (VAT) revenues totalled approximately AED27 billion between the federal and local government.

According to the decision 30 percent of the revenue will go to the federal government, and 70 percent to the local governments.

The decision ensures the sustainability and the quality of government services. It also contributes to the development of economic and social projects and public services.

The VAT was introduced in the UAE on 1st January 2018. The rate of VAT is 5 percent. VAT provides the UAE with a new source of income which will be continued to be utilised to provide high-quality public services.

Information Source : https://www.tax.gov.ae/en/press-releases/UAE-Cabinet-approves-VAT-revenues

Tourists to receive VAT refunds from November 18

FTA said more than 4,000 retail outlets will participate

Tourists will be able to claim back Value Added Tax (VAT) on any purchases they make in the UAE from November 18, it was announced yesterday.

The Federal Tax Authority (FTA) said that the Tax Refund for Tourists Scheme would go into effect next month, allowing eligible tourists to request refunds of the five per cent VAT incurred on their purchases.

 The first phase will see the digital system of the Tax Refund for Tourists Scheme implemented at Abu Dhabi, Dubai and Sharjah International Airports, a statement from the FTA said.

As of mid-December, the system will be fully operational to include all airports and land and seaports in the UAE as stipulated in the Cabinet decision. The government says the move aims to strengthen the UAE’s position as a major global tourism destination.

The FTA explained that tax invoices issued starting from November 18, 2018, will qualify tourists who are eligible for a tax refund to reclaim taxes incurred on their purchases.

FTA Director-General Khalid Ali Al Bustani said in the statement that more than 4,000 retail outlets across the UAE will be connected electronically to the system, clarifying that only the invoices issued by retail outlets registered in the scheme and connected to the system are eligible for a refund.

These eligible outlets can be identified with posters displayed on their storefronts and visible to visitors, he said.

Source : https://gulfnews.com/business/economy/vat/tourists-to-receive-vat-refunds-from-november-18-1.2292670

VAT on entertaining staff ‘non-recoverable’: Tax authority

The Federal Tax Authority has clarified the law on gifts, parties

Entertainment services supplied to employees, such as staff parties and retirement gifts, should not be exempt from Value Added Tax (VAT), the Federal Tax Authority (FTA) has said.

The authority noted in a statement posted on its website Monday that according to the federal law on VAT, the five per cent tax incurred on goods or services purchased to be given away to staff free of charge, in order to reward them for long service, should be blocked from recovery.

 Examples of these gifts include long service awards, Eid gifts and gifts for other festivals and special occasions, or a dinner to reward service.

The clarification issued by the FTA is the latest in a number of statements regarding various technicalities surrounding the tax system.

In a recent press statement, the FTA clarified that entertainment services consist of “hospitality of any kind,” including the provision of accommodation, food and drinks which are not provided in a normal course of a meeting, access to shows or events, or trips provided for the purposes of pleasure or entertainment.

Meanwhile, the FTA added that for VAT registrants who are not designated government entities, input tax cannot be recovered if it is incurred providing entertainment services to customers, potential customers, officials, shareholders, or other owners or investors.

Khalid Ali Al BustaniFTA Director-General Khalid Ali Al Bustani said in a statement that if a designated government entity provides entertainment services to anyone not employed by the entity, it will be able to recover the input tax incurred on those costs.

This exception pertains only to entertainment services provided to non-employees, including meetings with delegations from other countries where lunch or dinner is provided, meetings with representatives from other government entities to discuss official business, where refreshments are provided, or ceremonies held to mark significant political events.

However, all companies, including designated government entities, which provide entertainment services to its employees, are prevented from recovering any VAT included on such costs.

There are a handful of circumstances in which a taxable person is entitled to recover VAT on such costs, including where it is a legal obligation to provide those services or goods to those employees.

As for employee expenses, the authority outlined certain circumstances where a taxable person will fund or reimburse an employee for certain costs that the employee incurs for business purposes, in the course of performing his/her role. These include cases where an employee is on a domestic business trip and requires overnight accommodation, the VAT incurred on hotel costs, for example, would be recoverable.

Information Source :https://gulfnews.com/business/economy/vat/vat-on-entertaining-staff-non-recoverable-tax-authority-1.2282116

VAT REFUND FOR NEW RESIDENCES

WHERE A UAE NATIONAL OWNS OR ACQUIRES LAND IN THE UAE ON WHICH THE PERSON BUILDS HIS / HER OWN RESIDENCE, HE / SHE SHALL BE ENTITLED TO MAKE A CLAIM TO THE FTA TO REFUND THE VAT ON THE EXPENSES OF CONSTRUCTING THE RESIDENCE

WHO IS ELIGIBLE TO CLAIM?

The claim may only be made by a natural person who is a UAE National

WHAT INFORMATION IS REQUIRED TO MAKE THE CLAIM ?

To support the refund claim, a series of documents is required, including for example:

  • documentary proof to support that the applicant owns the specific plot of land in the UAE;
  • documentary proof to support the date the building is certified as completed;
  • documentary proof of the total refundable VAT that has been paid, issued by any of the verification bodies which are authorized by the FTA for this purpose.

WHAT IS THE PROCESS?

  • Request the verification body to issue a verification report
  • Submit an application form to the FTA accessible via the FTA website

WHEN IS THE DEADLINE

The Refund Form must be lodged within 6 months from the date of completion of the newly built residence which is the earlier of the date:

• the residence becomes occupied; or,

• when it is certified as completed by a competent authority in the UAE, as stipulated by the FTA.

Please factor in the time it will take to apply for and receive a verification report.

Criteria relating to the usage of expenses

• Expenses must relate to a newly constructed building which is to be used solely as a residence of the applicant and / or his / her family.

Criteria relating to the nature of expenses

Services provided by contractors, including services of builders, architects, engineers, and other similar services necessary for the successful construction of residence.

Building materials, being goods of a type normally incorporated by builders in a residential building or its site, but not including furniture or electrical appliances

ARE THERE ANY FEES FOR THE REFUND CLAIM? The FTA will not charge any fee to process your refund application. However, may be incurred a service fee from the verification body.

VAT Tourist Refund | Now You Can Get Back the VAT You Paid in the UAE

When will VAT refund scheme for tourists be applicable in the UAE?

The Federal Tax Authority – Federal Tax Authority (FTA)  has declared that Tax Refund Scheme for tourists will be initiated from November 2018. In this scheme, tourists will be able to avail for the VAT refund if they shop from retailers who are registered for Tax Refund Scheme under tax refund scheme for tourists.

When can retailers register for VAT Refund Scheme for tourists?

Retailers registered for VAT under FTA  can start registering for Tax Refund Scheme for tourists from 10th September 2018. Briefing from the FTA related to the above will be held in Abu Dhabi on September 11th, 2018 and subsequently in Dubai.

What are the conditions to avail VAT Refund Scheme for Tourist?

  • Goods should be bought by the tourist in the UAE.
  • Tourist visiting the UAE must exit UAE within 90 days from the date of shopping along with the items bought.
  • In order to get the VAT Refund, tourists should be sure only to buy from registered businesses for tourist refund scheme in the UAE.
  • FTA will lay down the procedures to be followed to avail VAT refund to the tourists.

Where can tourists avail refund of the VAT they paid for their shopping?

The tourist can refund the tax they paid for their shopping only from the outlets and point of sales which are registered under the Tax Refund Scheme for tourists.

There will be designated places where the tourists will be able to avail their VAT refund scheme through an electronic system. A digital machine will be able to determine the taxes that are eligible for refund and then the tourists shall be paid accordingly.

How to treat the amount refunded to the tourist under Tax Refund Scheme for tourists in your VAT Form 201?

Under VAT Form 201, Box No. 2 you can find the column provided for Refunds of the tax you have paid to the tourists under the Tax Refunds Scheme for Tourists.

This box can be used only by retailers who are refunding tax to the tourists in the UAE, under the official tourists refund scheme. The box should include the figures of all the tax refunds given to the tourists under the tax refunds for tourist refund scheme. It will be always a negative figure which means it is a refund you are making from the FTA.

 

UAE VAT Law on Tourist Scheme. {Source ~ Federal Decree-Law No (8) of 2017 on Value Added Tax}

As per the Article 68 Clause 2 of Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax following conditions shall apply to the Tax Refunds Scheme for Tourists:

  1. The Goods which are subject to the Tax Refunds for Tourists Scheme must be supplied to an overseas tourist who is in the State during the purchase of the Goods from the supplier.
  2. At the Date of Supply, the overseas tourist intends to depart from the State within 90 days from that date, accompanied by the Goods.
  3. The relevant Goods are exported by the overseas tourist to a place outside the Implementing States within 3 months from the Date of Supply, subject to such conditions and verifications as may be imposed by the Authority.
  4. The phrase “overseas tourist” means any natural Person who is not resident in any of the Implementing States and who is not a crew member on a flight or aircraft leaving an Implementing State.
  5. The Authority may publish a list of Goods that shall not be subject to Tax Refunds for Tourists Scheme.

Refund of the excess recoverable tax amount – Form VAT 311.

There is a confusion in the market that the form VAT 311 available can be used for Tax Refund Scheme for Tourist, which is incorrect. If one has to refund to the tourist the tax amount they paid against their purchases, the retailer or the point of sale should be registered under Tax Refund Scheme for tourists. Then, the amount they pay back to the tourist can be claimed back through form 201 – Box No. 2.

After submitting the form 201, if the registered person is in a net recoverable position an option will be available in the VAT Return to request a refund for the excess recoverable tax amount.  If he selects “Yes” for the refund, he has to complete the VAT Refund Application Form VAT 311. This is done after submitting the VAT Return for the respective tax period. If he selects “No”, the excess recoverable tax amount will be carried forward to the subsequent Tax Periods. This can be used to offset against tax liability or penalty arising in future or can apply for refund later. Nowadays, there is a requirement to submit a bank account validation letter / certificate along with the form 311.

Labour Accommodation for VAT purposes

What is the treatment of Labour Accommodation for VAT purposes?

Labour Accommodation: Some of the labour accommodation will be treated as supply of residential property, and some of the labour accommodation will be treated as supply of serviced accommodation.

If the labour accommodation is considered as supply of residential property it will be treated as zero percentage or exempted. If additional services are given to a labour accommodation it will be treated as serviced accommodation and will be taxable at 5%.

However, the following basic services shall not be considered as part of serviced accommodation:

  • cleaning of communal areas
  • maintenance services required for the general upkeep of the property
  • pest control
  • garbage collection
  • security
  • utilities e.g. electricity, water, etc.