Almost after a year of VAT implementation, too many businesses and organizations in the UAE and Saudi Arabia still require assistance in setting up their tax treatment accurately, while enterprises in Bahrain would require being VAT-compliant from 1 January 2019.

The United Arab Emirates (UAE) and Kingdom of Saudi Arabia (KSA) have been first of the six Gulf Cooperation Council (GCC) member states who introduced VAT at a rate of 5% in January 2018. It’s been a year and there are still so many companies who are struggling to be compliant.

So, what were the reasons that these companies tripped in the UAE and Saudi Arabia? What could be the challenges for those functioning in Bahrain starting from January?

We have collated the top five key lessons that companies across the Gulf could go through while the VAT rollout process continues. In case you need help in VAT implementation in GCC, complying with VAT rules, or finding VAT consultants in Dubai, just get in touch with us.

1. Linking and validation is still a work-in-progress

Organizations have had issues while linking their tax registration number and also customs registration numbers to official systems so as to conclude and submit their final VAT return, for no fault or miss from their side.

As per the GCC’s VAT agreement, the VAT payable on imported goods in member states should be paid right at the first point of entry and is then transferred to the last destination state in the framework of the GCC Customs Union. But in practical sense, every member state has to build its own electronic tax system and then link it with the GCC tax information centre which operates through a central website. As all the GCC states have still not implemented VAT, the unified GCC tax information ‘hub’ is not connected to each local tax system yet. Provisionally, the UAE and KSA are considering the transactions between them as outside of the GCC.

Till such time when all the six GCC states bring in VAT, various transitional rules will remain in play and there would be a lot of local tax complexity. There is an impact on business, for example, in the ‘use and enjoyment rules’ as all the member states are considered as ‘non-GCC’ – which impacts the cashflow.

After the remaining four GCC states also announce VAT, businesses will have to readjust their tax treatment especially for inter-GCC transactions while complying with the unified GCC VAT agreement.

2. Know about your VAT from the accounting requirements

In the UAE and KSA, there have been confusions between VAT reporting requirements and the accounting rules.

Irrespective of the date of the sales invoice, the VAT liability is calculated based on the time period in which the related payment is given, or the products/services are delivered. The organization’s ERP systems should be checked accordingly to make sure that the charging VAT is correctly adopted.

3. Different tax treatments in different zones

There are different tax treatments in the UAE in various designated zones (DZs or free zones) and also in mainland entities. DZs are especially designed to give incentives to enterprises and be the tax-free zones for goods. They are thus outside of the UAE for the purposes of VAT.

This, however, does not mean that any business set up as a DZ or free zone entity will be exempt from VAT. It completely depends on how their business activities are managed inside the zone.

4. Consistent reporting is critical

The Emirate-level reporting guidelines are applied variably in the UAE, because of which some businesses at times wrongly account for VAT on the sales they make, based on where their customers are located. It is advised to work with local tax experts to make sure that you’re reporting as per the accurate requirements.

Companies could face administrative penalties if they violate the VAT law, like missing the payment of VAT or filing deadlines. The VAT return has to be filed with the tax authority before 28th (in the UAE) or before the last day (in KSA) of each month after the end of the tax period.

5. Business versus personal expenses

Some expenses undertaken for a business can be input as VAT recoverable; however, they should have been used for making taxable supplies (standard-rated or zero-rated). The input tax cannot be recovered if the company provides exempt supplies which are non-taxable.

The VAT law also has a Capital Assets Scheme which enables to recover the input tax paid while acquiring new assets. The initially-recovered input tax is finally adjusted based on the actual usage during a particular period.

The Dubai International Financial Centre (DIFC) has released a new set of real estate laws and regulations. Keeping with the regulatory developments in Dubai, DIFC has amended its Real Estate and Strata Law and Regulation Regimes.

The amendments to the Real Estate and Strata Law regimes came into effect on 14th November 2018. We have analysed these changes and have summarised them for your understanding. So, let us have a quick glance at the new real estate laws and regulations.

 A quick glance at the new laws and regulations

The Real Property Law (DIFC LAW NO. 10 OF 2018) repeals and replaces the Real Property 2007 Law (DIFC Law No. 4 of 2007). Likewise, The Strata Title Law (DIFC Law No. 11 of 2018) amended certain provisions of the Strata Title Law (DIFC Law no. 5 of 2007).

This Law applies to all Real Property within the jurisdiction of the DIFC. It includes land, buildings, and items placed in, on or under the land.

The changes implemented an updated property regime that ensures enhanced and better protection for the DIFC property owners and mortgage holders. Moreover, it also introduced an off-plan register and escrow requirements for developers. The new law ensures that the property purchasers acquire full disclosure on the developments and units being bought. The new law has made it mandatory for the developers to set up escrow accounts for the purposes of pooling amounts paid by the purchasers in an off-plan development.

The Strata Title Law further expands the scope of functions and powers of the Registrar of Real Property (RORP). The registrar now has the power to govern parties that breach their obligation in regards to the law.  In order to promote efficiency and impartially in matters of dispute, the new law will enable the DIFC Courts to hear directly from interested parties.

Now, let us look at the key changes introduced by the new laws and regulations.

Key changes introduced by the new laws and regulations in relation to leasing and transfer of interests

• For any DIFC property where the term of lease exceeds 6 months, it is mandatory to register the lease with the DIFC Registrar of Real Property by the lessor. (Earlier registration was mandatory only for properties with lease term more than one year).
• Where the properties are mortgaged, the freehold transfer fee needs to be paid within 50 days from the date of signing the memorandum of understanding between the two parties.
• The Real Property Regulations have further extended the scope of exemptions by providing total 8 exemptions from the payment of freehold transfer fee which is generally charged at 5% of the purchase price or market value.
• While transferring non-freehold interests, a new schedule of registration fees will apply.

Key changes introduced by the new laws and regulations in relation to strata law

• The new law made it mandatory to provide a copy of the proposed Strata Management Statement or Strata Management Statements disclosing the proposed management structure and rules along with additional details of the shared facilities as per the Principal Strata Schemes.
• The new legislation stressed the developer’s obligation to rectify construction defects in the off plan development. Developers are now responsible for repairing, rectifying or replacing all defective building works, materials, equipment and installations of non-structural nature within 1 year and structural nature within 10 years from the date of completion of the building.
• The new legislation also mentions a clear process for registering a lien in a case where the service charges are not paid by the registered owners by the due date. Moreover, if the service charges are unpaid, the person is not allowed to vote at a General Assembly.

The new real estate laws and regulations represent an updated DIFC’s real estate framework post 2007. However, we expect a few more amendments to the framework in the coming time.

If you seek further guidance on the new real estate laws and regulations, you can get in touch with IMC Group who are pioneers in advisory and consulting related to the real estate sector in the UAE. The professionals at IMC Group have requisite knowledge and expertise of the real estate projects in DIFC.

For further information, you can visit www.intuitconsultancy.com or email at [email protected].

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The good news is that professionals, managers, and executives will now have access to the basic employee benefits, which they couldn’t enjoy earlier. A very anticipated bill to make amends to the Singapore Employment Act (EA) was finally announced on October 2, 2018, in the parliament.

One of the biggest proposed changes is about expanding the core provisions of the EA to all professionals, managers, and executives (PME), irrespective of their salary slabs. As of now, the PMEs who have an earning of over S$4,500 per month are not covered under the EA, and the companies or employers have been determining their employment terms majorly through contracts. However, PMEs would now be permitted to get the basic statutory benefits like annual leave, leave for medical reasons and hospitalization, and also protection against unjust or unfair dismissal.

The changes are also slated to impact some major employment practices such as termination of employment, managing disciplinary action, making and keeping of HR records, administering statutory employee benefits, giving allowable salary deductions and automatic transfer of employees due to some business re-organisation.

This bill also includes the below-mentioned major changes:

• Raise in Salary Limit for any Additional EA Protections: The salary limit or cap for employees (except workmen and PMEs) who enjoy additional protection and all the other benefits under Part IV of the EA, like overtime and rest days, would be now enhanced from S$2,500 per month to S$2,600 per month.
• Statutory Annual Leave which is Applicable to all Employees: The annual leave requirements listed in the EA have been extended and are now applicable to all the employees without any exceptions. Earlier only those people covered under Part IV were permitted to enjoy statutory annual leave.
• Augmentation of Dispute Resolution Services: The specific forum which hears the wrongful or unjust dismissal claims would be now changed to the Employment Claims Tribunal. Earlier the Ministry of Manpower took care of it.
• New Definition of “Dismissal”: As per the new definition of Dismissal, it will now include “the resignation of an employee if the employee can show, on a balance of probabilities that the employee did not resign voluntarily but was forced to do so because of any conduct or omission, or course of conduct or omissions, engaged in by the employer.”
• The compulsion to Present Additional Information on the Retrenchment of Employees: Employers have to, if ordered by the Commissioner of Labour, furnish all needed information regarding the retrenchment of any employee. As of now, the employers or organizations having 10 or more employees have to mandatorily notify the Ministry of Manpower in case five or more employees are retrenched in a period of six months.

The bill is forecasted to be put into effect in April next year. Employers and organizations should get ready for all the changes by revisiting their policies and also the contracts for all employees.