GCC Indirect Tax Weekly Digest
April 23, 2018
FTA releases guide on Director’s Services
The Federal Tax Authority (FTA) has published a VAT guide on Director’s Services. The guide discusses the VAT treatment of fees received by directors for their services to companies. The key points addressed in the guide are:
- that both executive and non-executive directorship may qualify as a supply of services for VAT purposes where their services are not an outcome of an standard employment contract;
- directors will be liable to VAT register if the value of their supplies in UAE exceeds AED 375,000 in the preceding 12 months;
- place of supply rules will apply (see below for details); and
- input tax attributable to taxable supplies would be recoverable (subject to certain exceptions).
The default place of supply of services will be where the director has their place of residence. However, where the customer has a place of residence and is VAT registered in another GCC state, then the place of supply will be that GCC state. Where the customer is in business and has a place of residence in UAE, the place of supply will be UAE – even if the director does not have a place of residence there.
The guide also covers the VAT treatment in special scenarios including where director services are provided overseas, where director services are provided to overseas companies and supplies of directors by businesses.
UAE: grace period on late VAT registration penalties ends on 30 April
The FTA previously announced a temporary waiver on late registration penalties but this is now coming to an end.
Anyone who is obliged to VAT register but fails to do so by 30 April will be liable to pay AED 20,000 for late registration and there could be potential further penalties for late payment of tax due, failure to submit.
FTA roadshow to help businesses register for VAT
The FTA is running a roadshow across the UAE until 24 April to help businesses who have not VAT registered to submit their applications before 30 April in order to avoid late registration penalties.
The roadshow will comprise of FTA tax experts, analysts and representatives from the tax registration department delivering interactive seminars and workshops to demonstrate the simple VAT registration process. It will also be a forum through which businesses can share the difficulties and obstacles they have experienced which have prevented them from registering for VAT.
The roadshow has visited Ras Al Khaimah, Abu Dhabi, Dubai, Ajman and Sharjah. The remaining dates scheduled are as follows:
- Umm Al Quwain – 22 and 23 April
- Fujairah – 24 April
If you wish to attend, please contact the FTA for more details. tax returns and even tax evasion. As such, liability to VAT register is something that all directors now need to consider as a matter of urgency.
Dubai gold market drops: industry lobbies for change to VAT application
The vice chairman of gold industry association the Dubai Gold & Jewellery Group - Chandu Siroya, has stated that wholesale supplies of gold jewellery fell by 50% to 60% in Dubai in the first quarter of this year compared to the same period last year. The drop is said to be due to the introduction of VAT from 1 Jan 2018 deterring wholesale purchases by foreign jewellers.
Key players in the industry are now in discussion with government sources to seek a relief by charging VAT only on the labour cost rather than the jewellery itself. It is hoped that this would reduce the cost of gold jewellery sufficiently to increase demand again in the country.
Indications are, anecdotally, that the preference would be to treat the supply of the gold as exempt, while charging VAT on the design and fabrication costs. This could prove to be complex from a recording perspective as well as allowing purchasers to identify those charges, which may be commercially problematic.
GAZT reviews first 100 days of VAT
The General Authority of Zakat and Tax (GAZT) has released a statement confirming that it has issued 4,794 violations to businesses in KSA during 12,578 field inspections carried out in the first 100 days of VAT implementation.
The majority of violations concerned failure to register for VAT, failure to pay the tax due at the correct time, missed VAT return submission deadlines, issuance of non-compliant tax invoices and illegal collection of more than the 5% tax rate.