The new list of designated zones

Continuing the lines of the Cabinet Decision (59) of 2017 on Designated Zones, the UAE Federal Tax Authority (FTA) announced that it has granted the following free zones as designated zones last June 18, 2018:

1. Al Ain International Airport Free Zone in Abu Dhabi
2. Al Butain International Airport Free Zone in Abu Dhabi
3. International Humanitarian City, Jebel Ali in Dubai

Businesses registered and situated within these designated zones are eligible to the special provisions for supplies of goods under the UAE VAT law.

Should you want to discuss this article in further details and you want to know the impact in your business or planning to set-up a business in a free zone, please get in touch with some of our VAT consultants in Dubai.

VAT treatment on various compensation-type payments

The Federal Tax Authority (FTA) issued a Public Clarification VATP001 in order to provide guidance on the VAT treatment of compensation-type payments such as compensation for the loss, settlement of a dispute, payment made for damaged goods, penalty or fine. The said Public Clarification states that if there is a payment for the consideration for supply, a VAT is due on such payment.

In determining whether a payment is consideration for any supply, it is necessary to consider the contractual and legal arrangements in full to determine the reason for the payment.

Eligible goods for the profit margin scheme

The Public Clarification VATP002 provides a list of goods that are eligible to the profit margin scheme. The FTA also clarified that only those particular goods which has previously been subject to VAT before the supply in question are included in the profit margin scheme.

As a result of this Public Clarification, stock on hand of the used goods that have been purchased or acquired before the effective date of Federal Decree-Law No. (8) on Value Added Tax (VAT law), or which have not previously been subject to VAT for some reasons, are not qualified to be sold under the profit margin scheme. Hence, the VAT is due on the full selling price of such goods.

VAT treatment on labor accommodation

Based on FTA’s Public Clarification VATP003, a clear distinction is required in determining whether the labor accommodation is a supply of residential property or a serviced accommodation. VATP003 states that the services for the supply of residential property are exempt from VAT (or zero-rated if it is related to first supply of residential property). On other hand, a serviced accommodation is subject to 5% VAT.

All suppliers need to check the extent on which the additional services have been supplied related to the accommodation in order to determine the nature of the supply. Some additional services like telephone, internet access, room cleaning, catering, and laundry service could be counted as indicators for service accommodation. Whereas, if the cleaning of communal areas, maintenance services of the property, pest control, utilities or access to the facilities have been supplied, the same could be considered as supply of residential property.

The Department of Health in Abu Dhabi (“DOH”) has come up with a fresh policy and guidelines around using Artificial Intelligence (“AI”) in the healthcare sector, with the objective of urging its implementation in a safe and secure manner.

As per the policy AI is defined as “the mimicking of human thought and cognitive processes to solve complex problems automatically”… “such as machine learning, distributed intelligent systems, [and] expert systems”.

Though the policy still doesn’t address many key points, most of the vital requirements of an effective AI in healthcare framework are taken care of. The DOH has developed guidelines and a regulatory framework, which will be able to administer the following elements of AI implementation in healthcare:

• Making sure of the safety of its usage and implementation with responsibility;
• Maintaining privacy and security;
• Ensuring transparency and also oversight;
• Making sure that the implications are ethical.

The new policy would be applicable to:

• All of the licensed healthcare professionals and providers in Abu Dhabi
• National and those international end-users who are locally based and who use, or want to use, Abu Dhabi-based residents or patient (both clinical and non-clinical) data in AI field, directly or indirectly;
• Pharmaceutical manufacturing companies based in UAE;
• All the healthcare insurers based in Abu Dhabi;
• All the licensed healthcare researchers in Abu Dhabi who are doing some form of human subject research; and
• All patients in Abu Dhabi.

The policy also lays the guidelines for the minimum acceptable requirements for AI (and its tools) introduced in Abu Dhabi. This includes all the certifications done by recognized international agencies, auditable validation statements and compliance with ADSSSA guidelines.

In addition, all the users of AI except the patients need to ensure the following:

• Have clear governance on implementation and usage of AI
• Lay guidelines and clear boundaries around the sharing and access of patient information so as to safeguard privacy and ownership of this information
• Conduct timely audits to check the AI functionality and how is it being reported to DOH
• Comply with all the regulatory requirements listed by UAE and DOH, including the guidelines that govern e-health, data protection, exchanges regarding health information, information security, and also AI.

The policy also proves that DOH’s recognizes the important role of AI and the benefits it can give if it is properly used in the healthcare sector. To encourage the application of AI in the healthcare arena, there is a need to have a clear regulatory framework. By implementing such a framework, the organizations can develop compliance structures that are needed to ensure a compliant adoption of AI into the healthcare industry.

Our team will keep you posted about any new implementation frameworks that are expected from the DOH. If you have any queries or need any assistance regarding the new AI policy or UAE healthcare industry report, our professional experts would be more than happy to help.

Do you know which is one of the fastest growing industry sectors in India? It’s the tourism industry. The hotels combined with travel industry went over $137 billion by 2016 end. However, the beginning of GST has impacted this industry in India in a big way. The Goods and Services Tax (GST) made its way in India on July 1, 2017, and since then all the experts and economists have been discussing the probable impacts of this new tax on the country’s economy and also on various businesses. But a deep-dive on the existing trends in the Indian tourism sector prove that there has been a positive impact and an upward turn after GST was implemented.

So let’s see how GST has helped this industry to further thrive. One reason why GST has shown a positive impact is that it has reduced the costs that customers have to bear and therefore, it makes their holidays more affordable. The main aim of GST has been to consolidate various taxes into one single tax amount, which in turn helps in decreasing the transaction costs related to tourism. The owners of various organisations and businesses earlier thought that GST would make things tougher for them. However, there surely are some challenges that come along the many positive consequences of implementing GST in the tourism industry.

The major benefit that GST brings is that the hospitality industry gets the benefit of homogeneous and uniform tax rates. Utilizing the input tax credit (ITC) has enhanced in a big way, thus simplifying and improving things. Many additional services such as complimentary food were also earlier being taxed under VAT. As per the new GST structure, these kinds of services would be taxed as bundled services. The hotels also gain because the end cost that the customers pay is going to come down. This works as a huge benefit for the hotels because they can attract more guests or tourists and hence grow their business. This in turn also increases the total revenue collection done by the government.

To do a reality check, major hotels in India follow a policy of dynamic pricing. Wondering what that means? The hotels basically fix the rates or tariffs manually depending on the total number of guests they are expecting in a particular season. Hence, we see fluctuating tariffs from in different seasons. The GST rates vary as per the tariff levels of various hotels, and thus, these hotels would need to ensure that the billing software they use, is updating the tax rates depending on the overall room tariff over the distribution channels including the travel agencies and the online aggregators. This helps the consumers in the long run and also maintains the transparency around hotel tariffs.