New shisha tobacco, e-cigarettes tax rule announced in UAE

His Highness Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance and Chairman of the FTA have issued a verdict by which the "Marking Tobacco and Tobacco merchandise Scheme" are enforced on tobacco pipe and electrically heated cigarettes as of November 1, 2019.

Digital Tax Stamps

The decision additionally determines the dates once "Digital Tax Stamps" are created accessible, moreover because of the standards for storage them. The authority has explained that the scheme facilitates inspections at native markets and customs ports to stop the sale of contraband merchandise and product wherever the liabilities weren't paid, and combat business fraud. Digital Tax Stamps are going to be placed on packages of tobacco merchandise and registered within the FTA information.

The stamps store digital data that may be scan with a special device to verify that every one taxes due on the same merchandise are paid.

Federal Tax Authority

In a press statement issued these days, the FTA declared that the finding supports its efforts, together with relevant entities, to gather taxes, combat nonpayment, and implement uniform procedures to confirm transparency, guarantee rights, and highlight the responsibilities of all taxable persons. The FTA call No. 2 of 2019 on Implementing the Marking Tobacco and Tobacco merchandise scheme consists of 5 articles. It determines first Nov 2019, because of the date once the Digital Tax Stamps are out there to order by importers or producers of selected excise product, that embody water pipe tobacco and electrically heated cigarettes.

The decision additionally stipulated that as of March 1, 2020, it'll be prohibited to import selected excise product not bearing the stamps into the UAE, then beginning June 1, 2020, it'll not be permissible to produce, transfer, store, or possess unmarked selected excise product in UAE.

As per the choice, Digital Tax Stamps should be firmly held on before being pasted to the selected excise product in accordance with a group of minimum-security needs. The person behind for storing the stamps shall be needed to produce info, data, and records as requested by the FTA so as to verify that the provisions of the article are enforced.

The FTA's press statement went on to clarify that the choice was a part of its strategy to expand the scope of the "Marking Tobacco and Tobacco merchandise Scheme" to cover all tobacco merchandise - foreign and domestically made and distributed - which can be electronically tracked from production till they reach the top client to make sure full compliance with excise obligations.

VAT Refund System for Tourists in UAE is at its Final Stage

According to the FTA (Federal Tax Authority) of UAE, a new system for returning VAT (value-added tax) to visitors and tourists is at its final stage. This new system depends on the advanced and latest integrated digital system, in order to set up a connection directly with sale points, along with all the port of entry in UAE – letting the global operator interrelate among retailers that are registered with the FTA, allowing tourists in UAE to submit refund requests. VAT advisors – 5% VAT was implemented by UAE on all goods in January, although the UAE Cabinet approved VAT refunds for visitors and tourists, the global operator hasn’t been named yet.

Also Read: FTA Clarification on Entertainment Tax

Conditions for Tax Refund

FTA outlined the basic conditions for tourists who are eligible for the tax refund, considering the Cabinet decision. Following are the conditions:

• The goods in question must be supplied to the tourists within the UAE borders.
• The tourist must have to leave the country within the given 90 days from the supply date – with the purchased supplies.
• The tourist must export the goods in question out of the UAE within the three months from the supply date.

The Cabinet decision also specifies that the tourists need to have goods purchased from the registered retailers, in order to get the tax refund approved. Also, the purchase process must be done according to the decision of FTA’s Chairman and the goods in question won’t be excluded from refund.

VAT correspondence – As it’s already mentioned above that VAT refund system for tourists in UAE is at its final stage, the FTA also declared that the retailers who meet the criteria will be free to register in the system and if any tourist wants to make a purchase with the intent to refund tax from a registered supplier, then the supplier must give them all the basic necessary documents that meet all the legal requirements. The tourist can then submit the claim directly with the system operator and can get the refund from the operator where the tourist had provided the adequate documents.

Read More: Federal Tax Authority of UAE Announces List of Designated Free Zones

Federal Tax Authority of UAE Announces List of Designated Free Zones

The FTA (Federal Tax Authority) of United Arab Emirates has declared three new UAE free zones – exempt from the VAT (value-added tax), which adds them to the VAT free designated zones list. After the latest edition, the designated zones in the UAE stand at 23. Considering the taxation services, VAT in UAE was implemented at the beginning of 2018; however, these areas are out of the UAE VAT scope. An area that fulfills the specific eligibility conditions according to the 2017’s Federal Decree Law #8 is considered as a designated zone and will be certainly regarded as out the VAT scope.

There are some newly added free zones to the list that are given below:

• International Humanitarian City – Jebel Ali, Dubai 
• Al Bateen Executive Airport Free Zone, Abu Dhabi
• Al Ain International Airport Free Zone 

Also, it’s been mentioned that there will not be any VAT applied to the transactions that take place within the designated zones.

VAT Implementation in UAE Designated Zones

As it’s already mentioned above that there are 23 designated zones in UAE – out of these 23, two are located in Sharjah, eight are located in Dubai, two are located in Umm Al Quwain (UAQ) and Fujairah, one in Ajman, three are in RAK (Ras Al Khaimah), and five are located in Abu Dhabi. 

Federal Tax Authority of UAE announces the list of designated zones – though, at this time, there are 10 free zones under-construction in UAE and more than 45 free zones across the UAE, which makes it highest in the world. There are almost 30 free zones in Dubai right now and the largest one is International Humanitarian City in Dubai.

Central Bank reported, UAE made 19.5% exports last year, as Dh225.5 billion worth exports were recorded by the UAE free zones in 2017. Plus, the exemption from VAT treatment is still expected to upsurge the export more in coming time. Companies that are located within the free zone can still avail VAT benefits for goods – products that are supplied not to be used inside the country since these transactions are out the VAT scope.

If new free zones that are under-construction meet the criteria, as suggested by the UAE VAT law, they might be added to the designated zones list. The UAE cabinet also highlighted that designated zones can be modified, added, and removed from the list. 

Read More: VAT Registered Businesses Must Display VAT Inclusive Prices

FTA-VAT Registered Businesses Must Display VAT Inclusive Prices

According to the Federal Tax Authority (FTA) of UAE, there would be Dh15000 fine on businesses – that fail to display their tax-inclusive prices. FTA mentioned businesses which are eligible for excise tax and VAT (value-added tax) and said, they must display the prices of their products along with the services they provide – in order to save themselves from the penalties and a massive fine. VAT consultancy UAE gives each and every information related to the VAT and penalties linked to it.

In a statement, the FTA urged consumers to know what their rights are, according to the law and mentioned that the prices displayed on goods must be inclusive of taxes and if they didn’t display tax-inclusive prices, then there would be a penalty of DH15000 on them - highlighting the VAT compliance and filing.

FTA also highlighted that the displayed price must be the total amount that customers will pay on getting the UAE tax invoice – including the total price and the tax which is charged from it. FTA also added that it would be considered as a violation if any firm or individual display price excluding the amount of tax – since this practice misleads the customers.

The Federal Tax Authority also urged businesses that are registered for excise tax and VAT to follow the tax laws so that they could avert administrative fines and penalties. The VAT survey started in UAE, at the beginning of 2018 - at 5% rate and the excise tax was implemented last year - at a rate of 50% on carbonated; 100 % on products like energy drinks and tobacco.

Read More: Federal Tax Authority–All Registered Firms Must Submit VAT Returns

No VAT Implementation in Kuwait Before 2021 – Here’s Why!

According to the budget committee of the parliament, finance ministry seems to be in need of expediting actions in order to excise tax on goods. The next session of parliament will start from October 2018, in which excise tax will be approved. Kuwait, which is no doubt one of the emerging countries won’t be implementing VAT (value-added tax) before 2021, however, it will introduce the excise tax, as it was already made clear in a recent statement which was posted on the website of assembly. Also, VAT in UAE was implemented at the beginning of this year.

Without elaborating, the statement said that according to the committee, the implementation of the VAT is going to be postponed ‘til 2021. The statement also said that for the finance ministry, there seemed to be a need of expediting some measure in order to excise tax on few products like; carbonated drinks, tobacco etc.

VAT Implementation — Gulf Arab Countries

Originally, six wealthy and affluent Gulf Arab countries that are well-known as they export oil have agreed on introducing VAT at a 5% rate including the top ones; United Arab Emirates (UAE) and Saudi Arabia. As it’s already mentioned above, VAT in UAE has been already implemented and the requirements for VAT registration in UAE have been also made public.  However, the remaining four countries delayed as there is domestic political opposition and many technical challenges are also involved in the new taxation. Plus, these four countries didn’t announce any official date when they will impose VAT.

As it’s already known to many that the most powerful and influential parliament in the region is in Kuwait, the desire of budget committee to delay VAT seems to be right, even though the officials of the cabinet have asked for a speedy taxation system as well as expenditure reforms.

Revenues from New Tax

If we talk about the revenues from the new tax, it could be extensive.  According to IMF’s (International Monetary Fund) estimation, VAT in the United Arab Emirates will profligate almost 1.5% of the gross domestic product. However, as it is already mentioned above that the state finances of Kuwait are amid the strongest and powerful ones in the region — within the last several months the price of oil has increased which clearly shows that the government of Kuwait has very little immediate need of other revenues.  Also, Gulf governments seemed to be agreed on introducing an excise tax on products like carbonated/sugary drinks and tobacco – raising much less money as compared to the VAT. On Monday, the finance minister of Kuwait said that according to his anticipation, the excise tax will be approved by the parliament in October, during its next session.

Read More: 10 Year Residency Visas for Investors and Specialists in UAE

10 Year Residency Visas for Investors and Specialists in UAE

Now investors in UAE can have 100% ownership of their companies. But the question arises - how? According to an announcement made by the Vice-President and Prime Minister of the UAE, Sheikh Mohammed bin Rashid Al Maktoum, specialists and investors, including engineers, doctors, and chartered accountants in UAE are soon going to receive the residency visas of UAE which will have the validity of up to 10 years. Also, their families will be receiving the similar validity for their visas as well. In the announcement, it was also mentioned that the students who have top performance in their universities will be also allowed to get residency visa scheme based on 10 years.

100% Ownership and Residency Visas

Sheikh Mohammed took Twitter to spread his word as he said that investors from all around the world can have a complete ownership of their organizations and companies in UAE and the system will allow high-performing students and investors to get 10-year residency visas, especially for technical, scientific, medical, and research fields. This system will also grant 5-year residency visas for the students who are currently studying in the UAE as well as 10-year visas for other extraordinary students. Also, the system aims to make UAE an ideal place for investors.

Sheikh Mohammed tweeted:

"The UAE will remain an incubator for innovators and a hub for investors."

Visa Extension ­to Ease Up Students Future

The decisions will be implemented by the end of the year as the Vice-President of the UAE has directed the bodies to do so. The existing residence visa scheme will be also reviewed by them in order to extend the visa validity duration of dependents including the families and especially students after they get their university studies completed so that they could easily start their future in UAE. This, at the same time, will also give them an opportunity to learn about their future practical options. However, UAE VAT registration will be a matter of concern for them.

In his tweet, Sheikh Mohammed said:

"Our open environment, tolerant values, infrastructure and flexible legislation constitute the best plan to attract global investments and exceptional talents. The UAE will remain a land of opportunities. It is the best environment to realize the dreams of humans and unleashes their exceptional potentialities."

What do business owners think about 10-year visa scheme in UAE?

The 10-year visa scheme is being hailed by many industry experts and business owners. According to the founder and chairman of Danube Group, Rizwan Sajan, this is a great move to build trust and confidence in the UAE, as he said:

"This (move) boosts the trust and confidence which we already have in the UAE. We are thankful to Sheikh Mohammed for this initiative, which will surely boost the economy."

Senior partner at Crowe Horwath, Atik Munshi said that this move is a fantastic development for attracting investments. He said:

"The 10-year visa is not only incredibly attractive but also has come at the right time when the UAE is looking to enhance its investor community. This will build up enormous confidence for the investors who want to make the UAE their home."

Read More: FTA-VAT Registered Businesses Must Display VAT Inclusive Prices