Corporate Tax And VAT Consultancy

1. A value-added tax (VAT), often referred to as a goods and services tax (GST) in some nations, is a sort of tax that is levied in stages. At every stage of manufacture, distribution, or sale to the final customer, it is added to the cost of a good or service
2. Value Added Tax was introduced in UAE from 2018 based on the GCC Common VAT agreement signed by all the GCC members. Most goods and services are subject to the 5% general VAT rate, however some are entitled to a 0% rate or a VAT exemption (subject to specific conditions being met)
3. Companies face serious difficulties while implementing Value-Added Tax (VAT) in a strictly regulated setting. The procedures and laws governing the VAT Compliance process need to be updated, and your workers need to receive the proper training. Any mistake in how VAT is applied can have negative effects on your company. AKW aids you in navigating these treacherous seas by giving your VAT Compliance processes vision and direction
4. With our vast experience and subject matter expertise, We assist you in locating high-risk regions and offer recommendations on how to streamline your operations while reducing these risks. Additionally, we can act as your legal counsel by communicating with the FTA on your behalf. All of your VAT Compliance obligations can be addressed by our qualified specialists and advisers
5. How can AKW help?
   
   1. VAT Implementation
      
      1. VAT implementation is important for newly set up businesses and those who are approaching the minimum voluntary and mandatory taxable supplies threshold of USD 50,000 and USD 100,000, respectively
      2. We offer support to businesses in implementing VAT across all the emirates considering the business model of the company and complying with the UAE VAT Law and the acceptable accounting practices followed
6. The implementation service includes half day training to the accounting and tax staff at clients to familiarize them with the system and the aspects of the law
7. VAT Health Check, Tax Due Diligence & Tax Process Audits
   
   1. Federal tax Authority (FTA) has become active in conducting remote and physical Tax Audits in order to verify and make sure that the UAE VAT Law is being properly complied by the businesses
   2. Our Team have professionals with diversified industry experiences in conducting VAT Health Check, Tax Due Diligence and Tax Process Audit of various businesses to ensure that the companies are following proper UAE VAT Law procedures. We issue a detailed report with our findings and recommendations guiding the businesses to ensure adherence to Law and its Executive Regulations along with the latest issued Public Guidance. The Tax Due Diligence can be performed on the target company on behalf of our clients during mergers and acquisitions
8. VAT Compliance – Preparation, Review and Filing Returns with the FTA
   
   1. We assist clients by acting as an outsourced VAT Return review firm and prepare and file VAT returns for the clients. The review is conducted either on a monthly or quarterly basis based on the volume of transactions. Our experts are FTA qualified GCC Tax Specialists who have extensive experience to ensure that the chances of error is minimised and any non-compliance is identified and rectified during the review
   2. The output from our review includes documentation of tax returns with supporting working files as required by the UAE VAT Law and noting observations identified during the review and how these were successfully resolved
9. Reclaiming VAT Refund for UAE Companies and Individuals
   
   1. Refund of VAT is a scenario where input tax amount is higher than output tax amount as per the tax return filed with the FTA. All refund claims are scrutinised by the tax authority before sanctioning the refund claim. We assist in preparation of refund application and assistance in submission (including review of refund related documents) and acting on behalf of the clients to address any queries received from the FTA with relation to the review conducted by the FTA audit team prior to sanctioning the refund
10. Tax De-Registration
    
    1. We deliver suitable advice to our customers when it comes to Tax Deregistration. This process is required at the time of cancelling the trade licence or liquidation process or when the shares are transferred from one party to another
    2. The penalty for not following the proper Tax Deregistration process is AED 10,000 and we help clients to ensure that they are fully compliant and do not get fined by the FTA for non-compliance
11. Assistance in Tax Audits
    
    1. FTA has been conducting remote and physical Tax Audits of companies in the UAE. Such audits are conducted to check whether the tax liability is paid within the due date or whether such liabilities are properly calculated as per the provisions of the UAE VAT Laws. All refund claims result in a Tax Audit conducted by the FTA
    2. Our Tax experts guide and support the businesses in the UAE to comply with the tax requirements so that the businesses are ready to front the tax audit conducted by the FTA
12. During the announcement of Tax Audit, our experts can assist with fronting the FTA appointed tax auditor to address their queries, provide appropriate responses to the questions raised by the FTA and attend any calls or meetings with the FTA auditors. Our team has an extensive experience of dealing with FTA auditors and will ensure that the audit requirements are successfully met with no penalties or observations
13. VAT Impact Assessment & Advisory
    
    1. Our team specialises in providing Tax advisory and opinion on specific transactions and queries related to the implication of VAT on the businesses. The consultancy services includes a session with a qualified and experienced tax expert and supported by written opinion on critical matters
    2. Prior to engaging in a transaction, we can conduct a complete VAT impact assessment on behalf of the company and provide industry specific opinion so that the right decision can be taken by businesses
14. Designing Standard Operating Procedures & Accounting System Review
    
    1. Most large and medium sized organisations use an accounting software system for maintaining the accounts and producing computations for VAT returns. If a Tax Audit is announced by the FTA, the UAE company will have 5 working days to respond to their requirements. Most of the required reports must be generated from the accounting software or ERP solutions. Further, all supporting documents and records must be furnished to the tax authority within the stipulated 5 working days
    2. Our team helps design the standard operating procedures and assessment of the IT and accounting software framework to ensure that any gaps are identified both at master data level and transaction level. We conduct process walkthrough and review generated reports to ensure that the required output can be obtained accurately and within reasonable timeframe. The flow of transactions from the general ledger to the relevant VAT output and input ledgers is also reconciled to ensure completeness and accuracy of the inflow of data into the systems
15. Filing Reconsiderations & Voluntary Disclosures with the FTA
    
    1. Drafting and filing reconsideration requests to waive any penalties levied by the FTA. A business case is prepared and the submission is made online to the FTA with the request. Our team follows up with the FTA and ensures that the case is reviewed within a reasonable time period and advise the client on solutions that will help ongoing penalties to cease immediately
    2. Filing clarifications with the FTA for any specific transaction related query where the UAE VAT Law is silent or not clear or where there is a difference of opinion between two parties
16. Filing Voluntary disclosures if in case there is an incorrect filing done in the past

1. The UAE Ministry of Finance published a public consultation document on Corporate Tax in May 2022 outlining the plans for the law and requesting opinions from the stakeholders on any enhancements or modifications. UAE Ministry of Finance will introduce a Corporate Tax on business profits on financial years starting on or after 1st June 2023. The Ministry also confirmed that there will be no tax on profits of up to AED 375,000 in a move that will help small businesses. No Corporate Tax will apply on personal income from employment, real estate and other investments, or any other income earned by individuals that do not arise from business or other forms of commercial activity, licenced or otherwise
2. Highlights of UAE Corporate Tax:
   1. Corporate Tax will be applicable for financial years starting on or after 1st June 2023
   2. Corporate Tax rates are expected to be as follows:
      1. 0% for taxable income not exceeding AED 375,000
      2. 9% for taxable income exceeding AED 375,000
3. A different tax rate for large multinationals (with consolidated turnover exceeding AED 3.15 billion) that meet specific criteria set with reference to the Global Anti-Base Erosion Model Rules (Pillar Two) of the OECD Erosion and Profit Shifting project
4. Corporate Tax regime will honour the tax incentives currently being offered to Free zones. A clarification as to whether the passive income and sale of goods exclusions also apply to intergroup transactions is required
5. Entities will be allowed to utilise prior period losses (from the effective date onwards) to offset up to a maximum of 75% of the taxable income
6. Dividends and Capital Gains earned from ‘qualifying shareholdings” (UAE shareholder must own at least 5% of the shares in the subsidiary company) will be exempt from Corporate Tax in the UAE
7. Corporate Tax will not be levied on a foreign investor’s income from dividends, capital gains, interest, royalties, and other investment returns
8. Corporate Tax regulations will allow group of companies to form a tax group and file a single tax return for the entire group. The possibility of forming Corporate Tax groups and filing group Corporate Tax returns will reduce the compliance burden of taxpayers to a large extent for groups with multiple entities in the UAE
9. The consultation document proposes the introduction of a Transfer Pricing regime in line with the internationally recognised “arm’s length” principle. The proposed Transfer Pricing regulations would be applicable for transactions between related parties and connected persons. Taxpayers to whom the Transfer Pricing provisions apply would be required to submit a disclosure containing information regarding their transactions with related parties and connected persons. Also, taxpayers would be required to prepare and maintain a master file and a local file if the transactions meet the prescribed thresholds
10. Businesses shall have to obtain a Tax Registration Number. Timeline to pay the Corporate Tax and file the Corporate Tax return is 9 months from the end of the relevant tax period
11. Presently, a 0% withholding tax is proposed to apply to all types of domestic and cross-border payments. UAE businesses will not need to deduct taxes while making payments. Further, there will be no obligation to file withholding tax returns
12. How can AKW help?
    1. Phase 1 – Impact Assessment
       1. Assess the existing financial accounting, reporting, internal control, systems, and documentation processes
       2. Examine the current business model, organisational structure, revenue streams, costs, and assets
13. Conduct a gap analysis to identify the deficiencies and to provide recommendations to align the processes with meeting the Corporate Tax requirements
14. Review the Transfer Pricing impact and cross border transactions to assess the tax implications.
15. Identify the need for resource planning and the right level of tax expertise required by the companies
16. Phase 2 – Implementation and Transition Support
    1. Develop policies and procedure to ensure compliance with Corporate Tax Regulations
    2. Design implementation plan to include training, establishing systems, reporting, and process changes
17. Revise accounting policies to reflect cut off procedures with respect to revenue, cost, losses, and depreciation
18. Recommend changes to documentation and reporting including invoices, purchase orders and delivery notes
19. Ensure smooth transition and compliance with other applicable UAE Laws including Economic Substance Regulation, Country-by-Country Reporting, Ultimate Beneficial Owner declaration, Anti-Money Laundering, and Value Added Tax
20. Phase 3 – Annual Corporate Tax Filing (Post Implementation Support)
    1. Tax Registration for companies and forming Tax Group, where applicable, and obtain Tax Registration Number
    2. Prepare Tax Accounts and calculate the taxable income and tax payable
    3. Scrutinise and validate deductible expenses and prepare and submit tax returns before the due date
21. Conduct Transfer Pricing assessment and analyse the transactions
22. Coordinate with UAE Federal Tax Authority to seek clarifications and respond to queries and notices on tax filing
    1. Businesses will require time to prepare employees, customers, vendors, systems, policies and procedures to meet the requirements of Corporate Tax. It is pivotal for UAE companies to initiate an impact assessment followed by a structured implementation plan outlining the activities that must be undertaken during the adoption phase
    2. Three key challenges foreseen include:
       1. Preparation of Financial Statements and Tax Accounts
       2. Planning for Resource requirements and availability of qualified and experienced tax accountants
       3. Implementation including a gap analysis, systems review, internal education, training, and documentation
    3. To overcome the challenges, UAE businesses must recognize their internal strength and seek proper expert advice and assistance from external tax specialists. They must start early and prepare themselves to ensure readiness ahead of time.

1. The UAE government imposes an indirect tax known as the excise tax on products that are deemed damaging to the environment or human health. The main goal of the Excise Tax is to decrease the demand for these commodities, hence increasing government revenue that can be used to benefit the common person
2. With effect from October 1, 2017, the Excise Tax Federal Decree-Law No. (7) of 2017 introduced the UAE’s first excise tax on specific commodities. Later, in accordance with Cabinet Decision No. 52 of 2019, a few more products were included in the scope of excise duty with effect from the first day of December 2019. Through the FTA’s online site, all Taxable entities have the right to register for Excise Tax in the UAE
3. Goods subject to UAE Excise Tax
   
   1. Carbonated Drinks – Any aerated beverage
   2. Energy Drink – Any beverage that may contain stimulant substances that provide mental and physical stimulation, which are marketed or sold as an energy drink
   3. Tobacco and Tobacco Products – All items listed within Schedule 24 of GCC Common Customs Tariff, including electrically heated cigarettes
   4. Electronic Smoking Devices and Tools – All electronic smoking tools and devices, whether or not containing nicotine or tobacco
   5. Liquids used in Electronic Smoking Devices and Tools – All liquids used in such devices, whether or not containing nicotine or tobacco
   6. Sweetened Drinks – Any beverage to which a source of sugar or other sweetener is added, as determined under Standard 148 and Standard 995 of the GCC Standardization Organization
4. The below-mentioned groups are required to register for Excise Tax in the UAE
   
   1. Producers of Excise goods
   2. Importers of Excise goods
   3. Stockpilers of Excise goods
   4. Warehouse keepers are responsible for excise goods
5. We offer businesses in assessing the applicability of Excise tax on the products imported by them and assist with registering for Excise Tax in the UAE and to file monthly Excise Returns for the client
6. We offer assistance in assessing the effects of excise/selective tax on business operations, including determining if a product is subject to excise/selective tax, the effect on the tax’s valuation, determining the tax rate, etc
7. We also help with the application process for excise and selective tax registrations, periodic compliance checks, excise training, filing excise tax declarations and clarification requests, among other things

In order to double taxation, certain countries require the UAE company to furnish a Tax Residency Certificate or a Tax Domicile Certificate. Our team of experts review the case and assist companies in the UAE to successfully submit and apply for a Tax Residency Certificate