VAT introduction in the UAE/GCC

Transcription

1 VAT introduction in the UAE/GCC Roundtable discussion Diamond polishers/ traders/ jewelers July 2017 Disclaimer: KPMG will not be responsible to any parties for any use of this presentation for any purposes whatsoever, as this is neither an advice nor a deliverable of any kind. 1

2 Agenda Key objectives of this session VAT overview and GCC progress VAT technical areas VAT impact and issues for DMCC member companies VAT implementation roadmap

3 Key objectives of this session

4 Key objectives To raise VAT awareness To understand the current developments in the introduction of VAT Law in the UAE To understand the potential impacts of VAT on your business To understand the VAT considerations/ issues related to specific sectors To guide you to get VAT ready 4

5 VAT overview and progress across the GCC 5

6 Current VAT developments The Unified GCC VAT treaty and draft VAT law has been released by KSA New FAQs released by UAE MoF GCC initiative Modelled on the EU s VAT regime Common GCC framework The GCC framework agreement will be the basis for national VAT laws across the GCC UAE VAT implementation Expected to go into effect in the UAE on 1 January 2018 Time for implementation is now only 6-months 6

7 What is VAT? VAT charged at each stage in the supply of goods and services Value Added Tax is a consumption tax and is collected on business transactions and imports VAT registered business that makes business use of the supply will receive a VAT credit VAT is ultimately borne by the final consumer There are many exceptions and complexities! VAT (or GST) now applies in over 166 countries at varying rates 7

8 Type of supply Input tax credit available? Taxable supply Standard-rated supply Proposed VAT rate 5% Zero-rated supply VAT rate 0% Yes Exempt supply under the VAT law No Non-taxable supply Outside the scope of VAT Not a supply or disregarded supply Cannot charge VAT on a non-taxable supply Depends 8

9 Examples of different types of supply As per MoF workshops Zero rated Exempt Standard rate Identified education services Identified healthcare services International transport of goods and services Newly constructed residential properties that are supplied for the first time (and within 3 years of their construction) Identified investment grade precious metals Supplies of identified sea, air and land means of transportation Exports of goods and services Financial services (margin-based) Residential properties Life insurance Bare land Local passenger transport Most goods and services Commercial Real estate Financial services (non-margin based) General insurance Basic foodstuff (UAE will adopt this approach as the impact would not be substantial) Local transport of Goods Non-essential medical services including cosmetic surgery Treatment of free zones is yet to be determined 9

10 VAT technical areas 10

11 VAT technical areas Registration threshold Time of supply GCC regulations Place of supply Compliance (VAT accounting/collection) VAT recovery (Tax invoices) Scope (Goods & services) Types of supplies (VAT rates) Taxable person 11

12 VAT impact on DMCC member companies 12

13 Possible VAT impact on diamond polishing companies SERVICE ORDER SERVICE ORDER INVOICE INVOICE Customers (Overseas) Zero-rated DMCC diamond polishing company Standard rated Customers (DMCC) SERVICE ORDER INVOICE Standard rated Customers (mainland UAE) Supply of services to overseas likely to be treated as an export Zero-rated Supply of services to DMCC Customers Taxable Standard Rated 13

14 Possible VAT impact on diamond polishing companies (contd) SERVICE ORDER SERVICE ORDER INVOICE INVOICE Customers (GCC countries which have NOT implemented VAT Law) Zero-rated DMCC diamond polishing company Reverse charge mechanism (RCM) Customers (GCC countries which have implemented VAT Law) Supply of services to GCC countries which have not implemented VAT Law Zero-rated Supply of services to GCC countries which have implemented VAT Law Taxable in the receiving country RCM 14

15 Possible VAT impact on diamond trading companies PURCHASE ORDER2 PURCHASE ORDER1 Manufacturers/ Suppliers (Overseas) INVOICE 1 INVOICE 2 DMCC diamond trading company Out of scope supply Buyer (Overseas) Distribution centre (Overseas) Supply of goods by way of drop shipment (re-invoicing) Out of scope supply 15

16 Possible VAT impact on diamond trading companies (contd) PURCHASE ORDER PURCHASE ORDER Customers (Overseas) INVOICE Zero-rated DMCC diamond trading company INVOICE Standard rated Customers (DMCC) Supply of goods to overseas countries Zero-rated Supply of services to DMCC Customers Taxable Standard Rated 16

17 Possible VAT impact on diamond trading companies (contd) PURCHASE ORDER2 PURCHASE ORDER1 Manufacturers/ Suppliers (Overseas) INVOICE 1 DMCC diamond trading company INVOICE 2 Out of scope supply UAE Distributor INVOICE 3 Standard rated Distribution centre (China) Supply of goods by way of drop shipment (re-invoicing) Supply of services to mainland UAE customers Customers (Mainland UAE) Out of scope supply Taxable Standard Rated 17

18 VAT considerations/ issues Treatment of FTZ entities is still unknown Identify whether your business will be allowed to register for VAT businesses making a taxable supply in excess of AED 375,000 have to register compulsorily and those between AED 187,500 AED 375,000 can register voluntarily for VAT VAT recovery / increased costs Entities may not be able to claim input tax credit if they are not eligible for registering for VAT 18

19 Additional VAT considerations/ issues Working capital impact Business process changes Recruitment and training Documentation requirements Transitional arrangements 19

20 VAT implementation roadmap 20

21 KPMG VAT implementation roadmap 1 Plan and analyze Project planning Awareness workshop Identify information requirements 2 Impact assessment Transaction mapping Calculate and prioritize VAT at risk IT impact assessment Legislation review and impact assessment Contract review Debrief meeting 3 Implementation Work plan development VAT Implementation support IT implementation support VAT technical training Debrief meeting 4 Post-implementation VAT review Pre go-live meeting Review VAT returns and resolving teething issues Review phase 2 & 3 deliverables 21

22 Q&A 22

23 Thank you Your KPMG VAT Contacts: Nilesh Ashar Partner Head of Tax KPMG Lower Gulf Ltd Clare Mccoll Partner Head of Indirect Tax KPMG Lower Gulf Ltd Ankur Jain Senior Manager VAT KPMG Lower Gulf Ltd Anika Goel Senior Associate VAT KPMG Lower Gulf Ltd T: M: E: nashar@kpmg.com T: M: E: cmccoll1@kpmg.com T: M: E: ajain23@kpmg.com T: M: E: agoel2@kpmg.com kpmg.com/socialmedia kpmg.com/app The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), The KPMG name and logo are registered trademarks or trademarks of KPMG International.