Value
Added Tax
You are probably aware
that the UAE and other Gulf Cooperation Council (“GCC”) countries are
introducing VAT on 1st January 2018. VAT is a consumption tax
that will be imposed on most domestic supplies of goods and services in the UAE
at a standard rate of 5%, with few exemptions and zero-ratings applied to
specified goods and services.
At Success International
Capital LLC (“SIC”), we are preparing for VAT implementation by taking the
necessary steps to ensure that we comply with all requirements before the
deadline. The Ministry of Finance (“MoF”) has already released the GCC VAT
framework (“VAT framework”) and has published a compilation of Frequently Asked
Questions (“FAQs”) on its website www.mof.gov.ae to increase awareness about the
applicability of VAT.
The MoF has also set up
the Federal Tax Authority (“FTA”) to govern VAT and other taxes in the UAE, and
a dedicated website, www.tax.gov.ae provides necessary information.
We will be required by
law to charge you VAT on all taxable supplies made by us, which are likely to
include the explicit fees we charge for services provided. The terms and
conditions of your agreements, as available on the Success International
Capital website, will be updated accordingly. As per the UAE VAT law,
margin/interest and currency spreads charged by us are likely to be exempt from
any VAT.
If you are conducting
business in the UAE, we request you to take necessary steps to ensure your
registration and compliance for VAT in the UAE.
1- Register for VAT
If you are operating a
business with annual sales turnover likely to be more than AED 375,000 you are
required to register for VAT through the FTA eServices portal. In the event
that you have an annual sales turnover of less than AED 375,000 and more than
AED 187,500, you may consider voluntarily registering for VAT purposes.
If you have a business
banking or a merchant relationship with Success International Capital, we would
request you to submit the attached form along with a copy of your Tax Registration
Certificate to any Success International Capital branch or handover the same to
your Relationship Manager. Please submit this to us no later than 26th December
2017.
2- Evaluate the VAT treatment for the
goods and services that you supply
Based on the information
publicly available, we understand that most of the goods and services supplied
within UAE would attract VAT at a standard rate of 5% with a few exceptions.
The exceptions may be in the form of VAT zero-ratings or VAT exemptions. In
addition, if services are provided to non-UAE GCC customers who are VAT
registered in that specific GCC country, then UAE VAT of 5% will not be
charged.
Success International
Capital has begun this process and it is likely that even though interest rate
or margin we charge on our products will be exempt from VAT, VAT will still be
chargeable at the standard rate (5%) on all of our taxable supplies, such as
fees for services as per our schedule of charges (“SOC”).
3- Evaluate the availability of input
VAT recovery
As VAT is a consumption
tax, the overall burden of VAT sits with the final consumer and is not designed
to be a cost for businesses. If a business only makes taxable supplies it is
expected that it will be able to recover input VAT charged to it by its suppliers
in full.
If you have a business
banking or a merchant relationship with Success International Capital, we will
support your input VAT claim by issuing valid VAT invoices in a timely manner
for all of the services that we provide to you with effect from 1st January
2018. The particulars to be contained on a tax invoice are specified in the VAT
regulations of the UAE and we will ensure that our invoices comply with these.
4- Conclusion
If you have not already
commenced a process to ensure your registration and compliance for VAT in the
UAE, we request you to prioritize it and ensure your readiness before the
regulations take effect.
We will provide you with
updates as new details on VAT are issued by relevant government authorities.
You may also wish to consult independent tax advisors in the UAE for specific
advice pertaining to your circumstances.