- Newsletter
- June 9, 2017
Introduction
The Government of Singapore continuously strive to maintain the tag of the country as a global hub for investors and businesses. It has introduced its companies act last year and Ministry of Finance (MoF) of Singapore and Accounting and Corporate Regulatory Authority (ACRA) have conducted an in-depth review of the Companies Act, 2016. This revision culminated the formation of Companies (Amendment) Act, 2017 which address the concerns regarding increased administrative for small and medium scale companies. It was passed in the meeting of the Parliament on 10th March, 2017 and the presidential assent was granted on 29th March, 2017.
We shall highlight the major amendments in the following paragraphs. This article shall also cover deadlines prescribed for implementation of new guidelines and the objectives behind introducing the amended law.
Objectives
As per the statement made by the authorities the primary objectives for introduction of the new law are:
- Enhanced Transparency in the control and ownership of the business;
- Reduction in compliance and administrative cost for the companies;
- To give a push to Singapore’s competitiveness as a global business hub.
The Beneficiaries of amendments
Small and medium scale companies registered in the Republic of Singapore shall be finding these amendments most beneficial as reduce a lot of their administrative costs. Further, the foreign entities planning to change their domicile to Singapore shall see a new ray of hope by introduction of new guidelines.
Key Amendments and Deadlines
The following table shall highlight the major amendments and scheduled deadlines.
The companies and LLPs registered in Singapore, including foreign companies, are mandatorily required to maintain registers of registrable controllers as per the places prescribed in the law 31st March, 2017.
| Particulars | Provision | Deadline |
| Enhancing Transparency | The liquidator shall maintain the records of liquidated companies for a period of five years after liquidation.
The requirement was only two years under previous provision. |
31st March, 2017 |
| The option to destroy the company’s records in the event of winding up have been waived off. Earlier, the members
and the creditor of the company had the option to destroy the records earlier than the period provided in the law. |
31st March, 2017 | |
| All the companies who are struck off are required to maintain their records for at least five years | 31st March, 2017 | |
| The nominee directors are now required to disclose their status of nominee director and the details of the
nominators to the companies. A register of nominee director should also be maintained |
31st March, 2017 | |
| The issue and transfer of bearer shares and share warrants are not allowed for companies registered in
Singapore |
31st March, 2017 | |
| A register of members of the foreign company required to be maintained. | 31st March, 2017 | |
| The legal requirement of have a common seal have been waived off. | 31st March, 2017 | |
| Change of Domicile | The companies registered in foreign countries can now change their domicile to Singapore. There was no such provision under previous regulations. |
First half of 2017 |
| Conducting AGM and filing of Returns | All the listed and non listed companies shall now align their annual return filing with financial year.
Private companies are exempted from conducting AGM. It will reduce their administrative expenses. |
Early 2018 |
Bottom Line
The changes bought in by the new law are appreciable and shall attract more investors to the country.
Please feel free to contact us at [email protected] for making your company 100% compliant with the new regulation.
- VAT
- May 25, 2017
The GCC countries have already signed the treaty for implementation of VAT by 2018 and the preparation for successful implementation is already going on a war footing basis. The UAE and KSA are expected to introduce VAT with effect from 1 January 2018 and the rest shall follow within a couple of months. The lawmakers in all the GCC countries have already tightened their belts and the business in the region are also doing the same. In line with the same, the top delegation from finance ministries of the GCC nations met on 4 May, 2017 at the Bahrain to explore VAT and other related taxation issues.
The ministers of finance discussed the recommendations of the specialized technical committee about the unified agreements on VAT and selective taxation entered into by GCC nations. Payment of taxes will be a critical issue for implementation and the ministers have deliberated on the recommendations submitted by the Central Banks of member nations and officials of monetary agencies regarding linking the payment system in GCC. The recommendations made by the technical committees of the Financial and Economic Cooperation regarding the proposals made by member nations for promoting cross border trade and economic cooperation were also discussed in the meeting.
They have also discussed the recommendations made by the Customs Union Authority and the GCC capital market committee. Both bodies play a vital role in trade around the GCC and promoting economic integration is one of the key agenda of this meeting. The members explored the key issues for economic and developmental work in GCC nations.
- Newsletter
- May 25, 2017
The Singapore Parliament has on March 10, 2017 approved the Companies (Amendment) Bill 2017 with the objective of increasing the debt restructuring framework in the Country and is effective from March 30, 2017.
The act is one of the crucial reforms in Singapore’s Corporate law as it contains provisions as to cross border insolvency, schemes of arrangement and in the initial phase was reforms intended to implement recommendations made by the Insolvency Law Review Committee. Further, it is important to note that the act has adapted many points of the U.S. Bankruptcy Code, like cram-down powers, prepackaged restructuring plan.
Highlights:
- The scope of moratoriums available extended to holding companies (in appropriate circumstances) of the scheme company in addition to subsidiaries
- Exclusion of certain types of companies, and arrangements like netting or set-off
- Flexible new proof of debt procedure for schemes
- Requirement for the initial creditor support for a company to obtain a moratorium at the time of the new scheme or arrangement
- Priority status for rescue funding necessary for business to operate as a going concern
Before the enactment of the law, a company was able to apply for a judicial management order only in the circumstance of inability to pay its debts. However, under the new amendment a company can apply for judicial management even “is or is likely to become” unable to pay its debts. Also, the Act puts an obligation of the parties to explain as to appointment of judicial administrator would cause prejudice.
The Act provides for different procedure for submission, objection, and adjudication of creditor claims – which includes:
- filing of proof of creditor debts;
- permission to creditors who have filed proof of their debts to inspect and object to claims filed by other creditors;
- an adjudicator’s appointment nominated by the company to adjudicate the validity of every proof of debt;
- procedure for dispute adjudication relating to claims by an independent assessor agreed to by the parties or appointed by the court following the application of a party to the dispute.
The Act has modified the rules and the process to be followed for schemes of arrangement – and for the same many of the features prescribed in U.S. Bankruptcy Code’s has been adapted like the introduction of rescue financing provisions for schemes of arrangement. Also, the Act provides for procedures in reference to prepackaged schemes of arrangement.
The Act has adopted the UNCITRAL Model Law on Cross-Border Insolvency. The same provides for rules and procedures governing cross-border bankruptcy and insolvency cases that has now been enacted in 42 countries. Under the old law only Singapore Companies were allowed to make application for Judicial Management proceeding. A foreign company can apply for judicial management proceedings it has:
- its main interests in Singapore;
- substantial assets in Singapore and
- carries on business in Singapore or has a place of business there
Under the provisions of the Act,the court is authorised to approve a scheme of arrangement even in case of objection of creditors in following cases:
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- The creditors represent the majority and holds at least 75 percent in value of the claims in a class for which votes are actually cast votes in favor of a proposed scheme;
- The creditors represent the majority and holds at least 75 percent in value of the total claims against the debtor for which votes are actually cast votes in favor of a proposed scheme; and
- the scheme is “fair and equitable” and does not “discriminate unfairly” between two or more classes of creditors.
In conclusion:
The New Law reform is crucial as it will make Singapore as one of the international debt restructuring hubs. Due to easier procedure, the act will allow foreign companies to file management for judicial management in Singapore. Thus, the stakeholder needs to become familiar with Singapore’ new debt restructuring law to take advantage of the same.
- Newsletter
- May 25, 2017
Introduction
The ministry of corporate affairs of India has notified Section 234 of the Companies Act, 2013 which deals with the provisions for amalgamation or merger of an Indian company with a foreign company through their notification dated 13 April 2017. Further, insertion of Rule 25A to the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016 have opened doors for outbound mergers of Indian companies with foreign companies which was not allowed in previous company law legislation (Companies Act, 1956). This article shall highlight important provisions of newly notified law.
The Conditions
Prior approval from the Reserve Bank of India (RBI) will be required for merger of a foreign company, incorporated in notified jurisdictions with an Indian company and vice versa. In line with the same, the RBI has also released draft regulations for cross border mergers on 26th April 2017 and public comments on the same are invited till 9 May, 2017.
The valuation of the continuing entity should be done by member of a recognized professional body and a report should be prepared as per internationally accepted standards of accounting and valuation and shall be submitted to RBI.
Approvals from shareholders, creditors, national company law tribunal (NCLT), securities and exchange board of India (SEBI), Industry specific regulators and income tax authorities should be obtained as per provisions of Section 230-232.
The scheme drawn for the proposed merger and amalgamation may provide for payment in depository receipts, cash or partly in both to the shareholders of the merging company.
Permitted Jurisdictions
Rule 25 A states that an Indian company may merge with a foreign company incorporated in specified jurisdiction, after complying with the provisions of Companies Act, 2013 and the rules thereto. The specified jurisdictions are:
- A jurisdiction whose securities markets have signed the memorandum of understanding with the International Organization of Securities Commission’s or the SEBI.
- A jurisdiction whose central bank is a member of the Bank for International Settlements (BIS).
- A jurisdiction which is not identified as a jurisdiction combating with the financing of terrorism activities or having a strategic anti money laundering by the Financial Action Task Force (FATF).
- Any such jurisdiction which has not achieved specified sufficient progress or has not committed to the action plan with FATF to address the deficiencies.
Brief Procedure
- The company must be authorized through its Memorandum and Articles of Association to undergo cross border merger and amalgamation.
- Draft scheme for the merger should be prepared and approval of board of directors should be obtained.
- Once, the approval from the board is obtained, the company should seek approval from the RBI.
- After obtaining RBI approval the company should file an application with NCLT to call a meeting of shareholders and creditors (if any) to approve the scheme of merger and amalgamation. The NCLT have the right to approve or reject the company’s application.
- If the NCLT approves, company’s application to conduct the meeting the company should give notice to members/ creditors and it should also be published on company’s website, newspapers and the notice of the meeting should also be given to the SEBI and stock exchanges where company’s shares are listed.
- The notice should also be given to regulatory authorities e.g. income tax authorities, Registrar of Companies (RoC) and other sectoral regulatory authorities.
- The reports for result of meeting should be filed with NCLT within three days of the meeting. If the scheme is approved by majority stakeholders, the petition for compromise and arrangement shall be made within seven days of filing the report of result of meeting.
- The tribunal after verifying the compliance shall pass an order and make provision for the merger and amalgamation. The company should file a copy of this order with RoC within 30 days of receipt of order.
The Final Word
These recent developments shall pave the way for the companies seeking outbound merger. On the other hand, detailed approval requirements minimize the risk of frauds and money laundering and ensures the complete protection of stakeholder’s interests. These amendments shall be gladly received by corporate fraternity as it opens the door for spreading the wings internationally.
- Newsletter
- May 19, 2017
Introduction
The High Net Individuals, and Multinational enterprises and corporate are aggressively doing tax planning by engaging in complicated tax structuring to have less payout. Although the structure is legally acceptable, however the object of evading tax via them is not considered moral and is a question for discussion by various countries. In this regard, India has also been taking many steps for enforcement of General Anti Avoidance Rules (‘GAAR’), including amendments to the various bilateral tax treaties with various countries Mauritius, Singapore, Cyprus etc.
General Anti Avoidance Rules (‘GAAR’): Evolution
The General Anti Avoidance Rules (‘GAAR’) were originally proposed along with Direct tax code 2009, with the objective of targeting the transactions made to avoid or evade taxes. And was introduced by the Pranab Mukherjee, in Budget Session on 16 March 2012. GAAR was considered controversial as was containing provisions to seek tax with retrospectively from past overseas deal involving local assets. Therefore, due to negative publicity, including pressure from the group, its implementation was postponed for implementation over 3 years that is to 2016-17.
In year 2015 the tax proposal, postponed the implementation of GAAR for further two years to 2017-18 financial year, and with clarification that the same will not Apply to the investment made prior to March 31, 2017. With this background, thus, applicability and enforcement of the provisions of GAAR began from 1 April, 2017 in Financial Year 2017-18.
Chapter X – A of Income Tax Act, 1961:
The Chapter X-A of the Income Tax Act, 1961 (‘Act’), contains the provisions in relation to GAAR.
The said provisions follow the doctrine of “substance over form”as primary test that is irrespective of the legal structure to take into consideration following points for determining the taxes:
- the effect of transactions
- the intention of the parties, and
- purpose of arrangement.
The tax authorities are empowered by the act to deny any tax benefit, if the transactions or arrangements are for deriving the tax benefits and not having any commercial substance or consideration.
Also, the Section 96 of the Act provides for Secondary Tests:
- Creating rights, or obligations, which are not ordinarily created between persons dealing at arm’s length;
- the misuse, or abuse, of the provisions of this Act – directly or indirectly;
- lacks commercial substance or is deemed to lack commercial substance, in whole or in part; or
- is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bonafide purposes.
The Section 97 further defines the condition of lack of commercial substances – the substance or effect of the arrangement as a whole, is inconsistent and include the location of an asset or of a transaction and have no significant effect upon the business risks or net cash flows without any substantial commercial purpose.
The Rule 10UB of the Income Tax Rules, 1962 lay down the process for invoking the provisions of the GAAR in relation to any arrangement or transaction. The assessing officer provides an opportunity to the assesse for providing objection as to the applicability of the provisions of the GAAR. Thereafter, the tax officer is required to make a reference to the Commissioner of Income Tax in all the cases. And thereafter if the Commissioner considers on the facts and circumstance of the case, that the provisions of GAAR is applicable, a reference shall be made to the Approving Panel regarding the applicability of the provisions of GAAR. In other case if GAAR provisions are not warranted and the Commissioner shall issue direction to the Assessing Officer accordingly.
Thus, the section puts burden on the tax payer to the transaction or arrangement or part thereof was not entered into with the intention of tax benefit or avoidance.
Impermissible Transactions:
In case the tax authority considers a transaction or arrangement, to be impermissible – the consequence would be a denial of the tax benefit or treaty to the assesse.
- disregarding, combining or re-characterising
- Treating the arrangement as if never entered into
- Disregarding and Treating the accommodating party as one and the same
- deeming persons who are connected persons as same persons
- reallocating amongst the parties to arrangement
- treat the place of residence of any party to the arrangement
- the sit us of an asset or of a transaction
In other words, the Assessing officer lifts the veil to look through any arrangement by disregarding any corporate structure; or treat equity as debt, capital expenditure as revenue expenditure or vice versa.
Thus, in order to safeguard against the consequence – the assesse may follow Section 245N, Chapter XIX-B of the Act, which provides for an advance ruling for the arrangement being an impermissible avoidance arrangement or not, further such ruling can be sought either by a resident or a non-resident. It is pertinent to note that it must be taken prior to entering into any such arrangement as Advance Ruling is binding on both the assesse and the revenue.
In Conclusion:
The act provides that even if part of an arrangement or transaction if results in a tax benefit, the whole arrangement to be treated as ‘impermissible avoidance agreement’ resulting into, transactions to bealways prone and susceptible by the tax department. The act allows the tax official to deny the tax benefit, in case the deal is with purpose to evade taxes. Thus, the rules aim to improve transparency in tax matters and help curb tax evasion.
- Article
- May 17, 2017
Regulations apply to companies registered in the Dubai Creative Clusters Authority (DCCA) and came into force on 1 February 2017. The Regulations repeal and replace the Dubai Technology and Media Free Zone Private Companies Regulations 2003.
The Amendments:
-
- Shareholder increase – A company incorporated in the DCC may now be incorporated by up to 75 persons. The earlier regulations prescribed for a limit of 50.
- Constitution – New standard articles of association are to be issued, combining the previous memorandum and articles into a single constitutional document. All the existing companies will now be required to adopt the new document within a period of twelve month.
- Registration – The Registrar of Companies is to maintain a register of companies, containing details of all DCC companies. The Regulations envisage that, in due course, this register may be accessible to the public and certain information may be made available online.
- Consideration for share issues – The new Regulations provides for allotment of shares to be issued for consideration other than cash.
- Changes to share capital – More detailed provisions are included on changes to share capital, including new provisions to allow share buy-backs and treasury shares, and more detailed provisions in relation to dividends and distributions. The Regulations allow shares to be issued at a premium and contain provisions addressing how a premium is to be applied.
- Pledges – New provisions are included on share pledges, including registration, perfection, priority and release. The Registrar will maintain a Security Register, which may be made available to “interested persons”. The parties may agree in the pledge instrument to submit to the jurisdiction of the DIFC courts (rather than the onshore Dubai Courts). These is an welcome provisions for multinational companies and groups with DCC private company subsidiaries, enabling their shares to be included in financial security arrangements.
- Corporate governance – Clearer, modernized provisions are included in relation to company management and administration, including allowing for participation in both board and shareholding meetings by conference call.
- Branch offices – The Regulations consolidate previous regulations on the operation in the DCC of companies incorporated outside the DCC.
- Continuation of incorporation – The Regulations contain provisions which permit companies to move their place of incorporation into and out of the DCC.
- Future flexibility in form – The DCC Authority is now able to prescribe different types of company in addition to the FZ-LLC. This allows flexibility to respond to future market demand.
- Authorization: A requirement that only those persons acting under an express authority (usually pursuant to a duly authorised power of attorney, resolution of the board of directors or shareholders or pursuant to powers granted under the articles of association) may contract on behalf of the FZ-LLC company
- Director Duties: Additional duties for directors and officers including the duty to act honestly, in good faith and with a view to the best interests of the company, and a requirement to declare conflicts of interest.
- Manager Responsibilities: New provisions in respect of the role and responsibilities of the general manager. For instance, the manager is now liable for maintaining a register of shareholders and a register of officers and for the accuracy of their contents
Action to be taken by DCCA Registered Companies:
All companies and branches established within the DCC prior to the New DCCA Regulations will need to take steps to follow the New Regulations by no later than 1 February 2018.
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- Replace their existing memorandum and articles of association with a consolidated article of association, which will be prepared by the DCCA.
- The management to follow the new corporate governance procedures and best practices to facilitate compliance.
- Confirm that the company’s registers are maintained and up-to-date.
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Registers:
Register of Members : The law mandatorily requires the companies to maintain the following in electornic or any legible form:
- Register of Meetings & Minutes
- Register of directors and officers
Please feel free to contact us at [email protected] for making your company 100% compliant with the regulation.
- Newsletter
- April 27, 2017
Introduction
The insolvency and Bankruptcy Board of India (IBBI) via its notification dated 31st March 2017 have issued regulations for voluntary liquidation of corporate persons. These regulations came into force with effect from 1st April 2017. The Corporate persons shall include limited liability partnerships, companies, and other incorporated entities for these regulations.
Chapter V of the Insolvency and Bankruptcy Code, 2016 consolidates the bankruptcy, insolvency and liquidation laws for the companies. The Bankruptcy code attempt to shift the process of voluntary liquidation from the scope of the Companies Act, 2013. The newly effected regulations are a result of the same and are made by the board in the exercise of the powers conferred upon it through Section 59, 196, 208 read with 240 of the Insolvency and Bankruptcy Code, 2016. This article shall provide the major highlights of the newly effected regulations for voluntary liquidation of corporate persons.
Highlights
The regulation prescribes the entire process of liquidation right from the initiation to the dissolution of the corporate persons. The regulations provide that:
- A corporate person may opt to initiate a proceeding for its voluntary liquidation if it has not committed any default in payment of its debts.
- A declaration of solvency is need to be given by majority of directors/ designated partners of corporate person.
- A special resolution for voluntary liquidation will be required to be passed to obtain the approval of shareholders/ contributors of the corporate person within four weeks of declaration of solvency by the directors as mentioned in the above point. The process of voluntary liquidation shall be deemed to be initiated from the date of passing the special resolution.
- The corporate person is required to appoint an insolvency professional to act as a liquidator. The corporate person should not carry any business activity after the appointment. The regulations also provide the procedure for appointment and the eligibility criteria for the person to be appointed as an insolvency professional.
- The regulations also prescribe the manner for submitting the claims of operational and creditors, employees and other stakeholders
- The liquidator shall prepare a list of claims within 30 days of receipt of claims and prepare a list of stakeholders within 45 days of receipt of claims. After completing this, the liquidators shall realize the assets of the company, recover outstanding debtors and unpaid capital/ contribution. This money should be deposited in a separate bank account and shall be distributed to stakeholders within six months of its receipt.
- If the proceeds of receipts in the above point are not sufficient to pay off the debts of the corporate person, the liquidator shall make an application to the National Company Law Tribunal (NCLT) to pass the order the tribunal may deem fit.
- The liquidator shall complete the liquidation process within twelve months of commencement. If for any reason, the liquidation is not completed within the specified period, he should call for a meeting of contributories to present annual status report at the end of each year.
- Liquidator must submit his final report to the Registrar of Companies (RoC) and the IBBI and shall make an application to NCLT to dissolve the corporate person.
- The liquidator is also mandatorily required to preserve and maintain copy of reports, registers and books of accounts of the corporate person for minimum eight years after the dissolution.
Conclusion
The regulations are an innovative toward having separate code for voluntary liquidation of companies not having much operations. Closing a company in India is a lengthy and cumbersome process. The introduction Insolvency professionals is again a welcome move as they shall the experts in intricate issues involved in the process of dissolution of the company.
- Newsletter
- April 27, 2017
Introduction
Limited liability partnership (LLP) was introduced by Ministry of corporate affairs of India in 2008 as a tool for small businesses who want to have a corporate status and need flexibility in compliance requirements in comparison to companies registered under the Companies Act. However, initially the Foreign Direct Investment (FDI) in LLP’s was permitted only under the approval route and there were restrictions in obtaining external commercial borrowings (ECBs).
Later, in 2015 the Reserve Bank of India (RBI) allowed FDI under automatic route for LLP’s in some sectors where are no FDI linked performance conditions. However, there are still concerns about the restrictions on external commercial borrowings and conversion of existing company into an LLP through FDI was allowed only under the approval route.
Highlights
RBI via its FEMA notification dated 3rd March 2017 have amended Schedule 9 to FEMA notification no. FEMA 20/2000 – RB to make appreciable changes in existing scenario. We shall discuss the highlights of this newly issued notification in the coming paragraphs:
- An existing company can now be converted into LLP through FDI under automatic route in sectors where 100% FDI is permitted under the automatic route and subject to the condition that are zero FDI linked performance conditions.
- The foreign companies can now be appointed as Designated Partners (DPs) in LLPs after removal of mandatory condition which only allowed body corporate registered under Indian Companies Act to appoint a DP in LLP.
- The new amendments also waive the residency requirements to be fulfilled by individual DP’s of LLP that has received FDI. Now, the individual DP’s will only require to fulfill the residency requirements mentioned under the LLP Act.
- The LLP’s which have received FDI are mandatorily required to submit reports to the RBI in their annual return on foreign assets and liabilities by 15th Day of July every year.
Conclusion
The new notification will help Indian businesses to procure desired funds through FDI and boost the economic growth. Foreign entities looking for expansion may also find this a welcome step to have their presence in India in the form of LLP’s with relaxed provisions for FDI and ECB. It also bridges the existing gap between the RBI regulations and Indian Government’s policy on FDI.
- Newsletter
- April 27, 2017
Introduction
The Goods and Services Tax (GST) is soon going to be a reality in India and the government is taking effective steps to achieve its target implementation dated which is 1st July 2017 waiving the existing dual system of taxation of goods and services in the form of VAT, sales and service tax. It will subsume all existing indirect taxes in India. GST has been recognized as one of the most decisive tax reform in the history of tax reforms in India. The GST bill passed in Lok Sabha on 29th March 2017 ratifying the earlier one passed on 8th August 2016 and received nods of the upper house of parliament on 6th April 2017. We shall discuss the latest updates on GST in the coming paragraphs.
Recent Developments
- Four Supplementary bills viz. GST (compensation to States) Bill, 2017, Central GST (CGST) Bill, 2017, Integrated GST (IGST) Bill, 2017 and the union territory GST bill was approved by the GST council during its various meetings held in February and March 2017. These bills were later approved by the union cabinet chaired by the Prime minister of India on 22nd March 2017 before they are presented in the budget session of parliament.
- To involve taxpayers and provide regular updates about the developments, the ministry of finance launched a mobile app for tax payers and stakeholders on 24th February 2017.
- The Central Board of Excise and Customs (CBEC) will soon be renamed as Central Board of Indirect Taxes and Customs (CBIC) and the minister of finance has also approved reorganization of field formations. It shall be operational from 1st June 2017
- The union cabinet also given its nod to the amend the relevant existing legislation for smooth implementation of GST and to annul the Acts which will become irrelevant post implementation of GST.
- GST council has decided a four-tier tax rate viz. 5%, 12%, 18% and 28%, with lower tax rate for essential items and the highest for luxury goods and demerit goods like tobacco and aerated drinks. Council also approved a maximum cess of 15% for highest rate.
- A GST working group have been set up via CBEC order dated 24th March 2017 to examine sector specific issues to identify and address the peculiar issue relevant to sectors.
- The prime minister of India has announced a major public outreach program to enlighten the stakeholders about the provisions and benefits of GST.
Bottom Line
Implementation of GST is in the final stages of completion and it is visible from proactive efforts of governmental authorities. The GST council is already discussing the draft rules for Registration, valuation, input tax credit and transition towards GST. It is now high time for the industry as well as professionals to tighten their belts to ensure they are well prepared before the GST go live on papers.
- VAT
- April 27, 2017
The General authority for Zakat and taxes (GAZT), the regulatory body for taxation in Kingdom of Saudi Arabia (KSA) have recently updated some notable points on their website about Value Added Tax (VAT). It illuminates the stakeholders about various key facts about implementation of VAT.
Key Facts
- Website clearly states that the legislation for VAT in KSA is developed and shall be implemented with effect from 1st January 2018 as planned.
- The standard rate of VAT is 5% on most of the goods but certain essential items will be charged at zero rate or exempted from VAT.
- The authorities shall allow businesses to register for VAT in the second half of the year 2017. The businesses having annual turnover of SAR 375,000 will mandatorily be required to register for VAT. The businesses having annual turnover of SAR 187,500 shall have the option to register voluntarily for VAT.
- It clarifies that businesses will have to file regular VAT returns for VAT charged, VAT collected and the differences between the two. However, the frequency for filing returns have not yet been clarified.
- Book keeping requirements are mentioned but clarifications and technicalities are awaited regarding details of documents and financial statements to be maintained.
Bottom-line
The recently published FAQ’s signifies the strong intentions of KSA to achieve its target date of implementation of VAT in KSA from 1st January 2018. The GAZT is already working on the finalization of VAT policies, and practical issues related to governmental coordination and dealing with increased work load post implementation of VAT. The GAZT is also working on developing its own capabilities and conducting VAT awareness programs for stakeholders.
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