VAT introduction in the UAE/GCC - DMCC€¦ · Disclaimer: KPMG will not be responsible to any...
Transcript of VAT introduction in the UAE/GCC - DMCC€¦ · Disclaimer: KPMG will not be responsible to any...
1© 2017 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”),
a Swiss entity. All rights reserved.
VAT introduction in the UAE/GCC
——
July 2017
Roundtable discussion – VAT impact on precious metals/ stones
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.
AgendaKey objectives
of this session
VAT overview
and GCC
progress
VAT technical
areas
VAT impact and
issues for DMCC
member
companies
VAT
implementation
roadmap
Key objectives of this session
4© 2017 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”), a Swiss entity. All rights reserved.
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
5© 2017 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”),
a Swiss entity. All rights reserved.
VAT overviewand progress across the GCC
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a Swiss entity. All rights reserved.
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
Current VAT developments
The Unified GCC VAT treaty and draft VAT law has been released by KSA
New FAQs released by UAE MoF
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a Swiss entity. All rights reserved.
VAT registered business that makes business use of the supply
will receive a VAT credit
There are many exceptions and complexities!
VAT charged at each stage in the supply of goods and services
VAT (or GST) now applies in over 166 countries at varying rates
VAT is ultimately borne by the final consumer
What is VAT?
Value Added Tax is a consumption tax and is collected on business transactions and imports
8© 2017 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”),
a Swiss entity. All rights reserved.
Exempt supply under the VAT law
Outside the scope of VAT
Not a supply or disregarded supply
Cannot charge VAT on a non-taxable supply
Taxable
supply Zero-rated supply
VAT rate 0%
Standard-rated supply
Proposed VAT rate 5%
Yes
Input tax credit
available?
Non-taxable
supply
No
Depends
Type of supply
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a Swiss entity. All rights reserved.
Zero rated Standard rate
Treatment of free zones is yet to be determined
― 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
― 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
Exempt
― Financial services (margin-based)
― Residential properties
― Life insurance
― Bare land
― Local passenger transport
As per MoF workshops
Examples of different types of supply
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a Swiss entity. All rights reserved.
VAT technical areas
11© 2017 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”), a Swiss entity. All rights reserved.
Time of
supply
Scope(Goods & services)
Types of supplies(VAT rates)
VAT recovery(Tax invoices)
GCC
regulations
Place of
supply
Compliance (VAT accounting/collection)
Registration
threshold
VAT technical areas
11© 2017 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”), a Swiss entity. All rights reserved.
Taxable person
12© 2017 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”),
a Swiss entity. All rights reserved.
VAT impact on DMCC member companies
13© 2017 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”),
a Swiss entity. All rights reserved.
Possible VAT impact on service companies
Customers (Overseas) Customers
(DMCC)
DMCC service provider
INVOICE INVOICE
SERVICE ORDERSERVICE ORDER
Zero-rated
Supply of services to overseas – likely to be treated as an export Zero-rated
Standard
rated
Supply of services to DMCC CustomersTaxable –
Standard Rated
Customers (mainland UAE)
INVOICE
SERVICE ORDER
Standard
rated
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a Swiss entity. All rights reserved.
Possible VAT impact on service companies (contd)
Customers (GCC countries which have NOT
implemented VAT Law)
Customers (GCC countries
which have implemented VAT
Law)
DMCC service provider
INVOICE INVOICE
SERVICE ORDERSERVICE ORDER
Reverse charge
mechanism
(RCM)
Supply of services to GCC countries which have implemented VAT Law
Zero-rated
Supply of services to GCC countries which have not implemented VAT Law Zero-rated
Taxable in the
receiving
country – RCM
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a Swiss entity. All rights reserved.
Possible VAT impact on trading companies
Manufacturers/ Suppliers
(Overseas)
Distribution centre(Overseas)
Buyer (Overseas)
DMCC Trading company
INVOICE 1 INVOICE 2
PURCHASE ORDER2 PURCHASE ORDER1
Supply of goods by way of drop shipment (re-invoicing)Out of scope
supply
Out of scope supply
16© 2017 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”),
a Swiss entity. All rights reserved.
Possible VAT impact on trading companies (contd)
Customers (Overseas) Customers
(DMCC)
DMCC Trading company
INVOICE INVOICE
PURCHASE ORDERPURCHASE ORDER
Zero-rated
Supply of goods to overseas countries Zero-rated
Standard
rated
Supply of services to DMCC CustomersTaxable –
Standard Rated
17© 2017 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”),
a Swiss entity. All rights reserved.
Possible VAT impact on trading companies (contd)
Customers (GCC countries
which have NOT
implemented VAT Law)
Customers (GCC countries
which have implemented VAT
Law)
DMCC Trading company
INVOICE INVOICE
PURCHASE ORDERPURCHASE ORDER
Zero-rated
Supply of goods to GCC countries which have NOT implemented VAT Law Zero-rated
Reverse
charge
mechanism
(RCM)
Supply of services to GCC countries which have implemented VAT Law RCM
18© 2017 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”),
a Swiss entity. All rights reserved.
Possible VAT impact on trading companies (contd)
Out of scope supply
Supply of goods by way of drop shipment (re-invoicing)Out of scope
supply
Manufacturers/ Suppliers
(Overseas)
Distribution centre(China)
UAE Distributor
DMCC Trading company
INVOICE 1INVOICE 2
PURCHASE ORDER2 PURCHASE ORDER1
Customers (Mainland UAE)
INVOICE 3
Standard
rated
Supply of services to mainland UAE customers Taxable –
Standard Rated
19© 2017 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”),
a Swiss entity. All rights reserved.
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
Only certain investment grade precious metals (gold, silver, of 99% purity) are
zero-rated. Businesses would need to identify whether the precious metals traded
by them fall within this category for being zero-rated
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a Swiss entity. All rights reserved.
Additional VAT considerations/ issues
Working capital impact
Business process changes
Recruitment and training
Documentation requirements
Transitional arrangements
21© 2017 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”),
a Swiss entity. All rights reserved.
VAT implementation roadmap
22© 2017 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”),
a Swiss entity. All rights reserved.
Plan and
analyze1 — Project planning— Awareness workshop— Identify information requirements
Implementation3— Work plan development— VAT Implementation support— IT implementation support— VAT technical training— Debrief meeting
Impact
assessment
— Transaction mapping— Calculate and prioritize VAT at risk— IT impact assessment — Legislation review and impact assessment— Contract review — Debrief meeting
2
Post-implementation
VAT review
— Pre go-live meeting — Review VAT returns and resolving teething
issues— Review phase 2 & 3 deliverables4
KPMG VAT implementation roadmap
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a Swiss entity. All rights reserved.
Q&A
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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.
© 2017 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”), a Swiss entity. All rights reserved.
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Thank youYour KPMG VAT Contacts:
Nilesh AsharPartner | Head of Tax
KPMG Lower Gulf Ltd
T: +971 4 424 8987
M: +971 56 683 3219
Clare MccollPartner | Head of Indirect Tax
KPMG Lower Gulf Ltd
T: +971 4 424 8959
M: +971 5 43072459
Ankur JainSenior Manager | VAT
KPMG Lower Gulf Ltd
T: +971 4 424 8960
M: +971 56 682 0488
Anika GoelSenior Associate | VAT
KPMG Lower Gulf Ltd
T: +971 4 356 9795
M: +971 56 558 3245