NARISAH VIAY

NEW JAFZA OFFSHORE REGULATIONS

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New JAFZA Offshore RegulationsThe Jebel Ali Free Zone Authority (JAFZA) recently published new Regulations for Jebel Ali Offshore Companies, which will replace the current regulations that were introduced in 2003. The implementation date for the new Regulations are not implemented yet but it will be announced soon.New regulations with several benefits for international businesses and investors. Some key factors with the new regulations are as below;
  • Residence Visas
Article 31.2, members of an Offshore Company (such as Directors and Shareholders) may apply for a residence visa if the company owns property in any of JAFZA’s freehold areas, and the approval of such application is subject to the Authority’s eligibility requirements.
  • Re-domiciliation of Company
Article 111, Foreign Companies can be re-domiciled as a JAFZA offshore Company, or Offshore Company be transferred to a foreign company.
  • Conversion of Company
Article 118.1, an offshore company can be converted to a Free Zone Company, to be able to conduct business and trade in the UAE.
  • Directorship
Article 33.1 An offshore Company will now only require one Director instead of two. Nominee Director is also allowed.
  • Variation in Rights of Shares
Article 19, an offshore company may subject to the consent of the Registrar, can create different classes of shares, by providing the different classes of shares in its articles of association.
  • Resolution Requirements
A minimum of 75% of shareholders are now required to pass a resolution, increased from the previous requirement of a simple majority.
  • Permitted Activities
According to the New Offshore Regulations, an Offshore Company is also permitted to hold a lease of property for use as its registered office in any of the designated freehold area in the UAE, own a stake in another operating company within the UAE and own property in one of the designated freehold areas. For more information towards offshore company and company Set up with Jebel Ali Free Zone Authority, please feel free to contact our Corporate Services team at mail@affiniax.com.

IMPLEMENTATION OF CBCR IN UAE

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Preamble

United Arab Emirates committed to the implementation of ‘minimum standards’ to prevent Base Erosion Profit Shifting (BEPS) by joining OECD’s Inclusive Framework on BEPS on 16th May 2018.

Minimum Standards on BEPS & UAE’s progress

  • Action 5: Countering Harmful Tax Practices More Effectively, Considering Transparency and Substance.
    • UAE Progress: Application of a VAT system including setting up of a central administrative authority for taxation, i.e. Federal Tax Authority, has allowed UAE to make progress in this area.
  • Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances
    • UAE Progress: UAE Signed Multilateral Convention (MLI) on June 27, 2018 to implement Tax treaty related measures to prevent BEPS. On  May 29, 2019, the UAE deposited its instrument of ratification for the MLI to OECD.
  • Action 13: Transfer Pricing Documentation and Country-by-Country Reporting (“CbCR”)
    • UAE Progress: By implementing Cabinet Decision no. 32 on CBCR, in the month of July, the UAE has made significant progress in this area.
  • Action 14: Making Dispute Resolution Mechanisms More Effective
    • UAE’s approach remains to be seen.

Introduction of Country by Country Reporting in UAE

Implementation of Cabinet Decision no. 32 on County by Country Reporting is an important step for the implementation of Action 13 which is one of the four minimum standards. Through this resolution, the Ministry of Finance (MOF) has instructed Multinational companies, operating in the United Arab Emirates, to submit CBCR reports.

After Saudi Arabia and Qatar, UAE is the third country in the region to introduce CBCR in GCC. This step shall further enhance international confidence in the UAE’s financial sector.

Reporting Responsibility

The implementing regulation has specified responsibility of CBCR reporting or notification for the following entities as per the prescribed format and timelines:

  • The Ultimate Parent Entity of a Multinational Group which is a UAE resident for Tax purposes
  •  The Constituent Entity of a Multinational Group which is Resident in UAE for Tax purposes

Reporting Threshold

A consolidated revenue of the Multinational Group, equal or above AED 3.15 Billion, is required to report under this regulation. 

Mechanism

  • If the threshold is met, then either the Ultimate Parent Entity or the Constituent Entity must submit a report to the Ministry of Finance in the specified format. 
  • The above threshold will be applied at the end of the Fiscal Year of the Multinational Group.
  • The Ultimate Parent entity or its surrogate for Tax purposes will submit the CBC report within 1 year of the end of its Fiscal year.
  • Where the Constituent Entity in UAE is not the Ultimate Parent Entity or the Surrogate Entity, it shall notify the Ministry, the identity and Tax Residence of the Reporting Entity. This notification must be done before the end of the fiscal year of assessment.
  • The first reporting obligation has taken effect from January 1, 2019.
  • The submission will be done considering the format and definitions specified by Chapter 5 of the OECD guidelines.

Penalties

ViolationsPenalty
Failure to retain documentation for 5 years from the year of reportingAED 100,000
Failure to provide specified information to the MinistryAED 100,000

Failure to:

  • Submit the Report
  • Submit the notification within specified timeline
AED 1,000,000 plus AED 10,000 for each day of delay up to a maximum of AED 250,000
Failure to accurately report informationAED 50,000 to AED 500,000

 

Affiniax at your service

We can: 

  • conduct a detailed study whether your business shall be assessed under this resolution by the Ministry;
  • compile CBC report or Notification to the Ministry; and
  • assess your compliance of the general requirements of the regulation.

Why Affiniax

‘Affiniax Partners’ has been providing Professional Advisory Services to its clients for over 25 years. We have a team of Specialists in the region who can assist you for the optimization of your Business Processes. For more information, please contact us at mail@affiniax.com

Dubai International Financial Centre Introduces New Licensing Categories

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Dubai International Financial Centre (DIFC) is the leading financial capital in the Middle East, Africa and South Asia (MEASA) region.As one of Dubai’s independent free-zones, with its own legal and regulatory framework and judicial system, global financial exchange, tax-friendly regime, and a large business community, DIFC is persistent in supporting its businesses to grow by introducing new licensing categories under its operating Laws and Regulations.The newly introduced categories come with reduced license fees and allow more firms to start conducting business in the DIFC.
  1. Short Term License: Under this category, it is now possible for retail businesses and other non-financial companies to operate from DIFC at a competitive cost, depending on the duration of license required.
  2. Restricted License: This license is applicable to firms interested in developing or testing out new, innovative products and services in the DIFC. These initiatives are encouraged by DIFC as this would allow incubators and startups to flourish within the DIFC environment.
  3. Commercial Permissions License: This license would allow both DIFC and non-DIFC entities such as event companies, promotion companies, retail outlets, seminars and educational services to conduct their business activities within the DIFC for a competitive fee.
  4. Dual Licensing: This license will allow the firms which are under the license of Department of Economic Development (DED) such as law firms, audit consultancy firms, family businesses, holding companies and corporate service providers to operate in the DIFC with an affiliate
To know more, please contact our Corporate Services team at mail@affiniax.com.

THE BENEFITS OF MOVING TO A CLOUD ACCOUNTING PLATFORM IN THE UAE

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The benefits of moving to a cloud accounting platform in the UAEThe world we live in is rapidly moving towards digital for all aspects of business, one of the most aggressive moves is that of the accounting world. With your company’s financials at stake, what are the real benefits of moving to a cloud accounting platform? Here are the top reasons you should be considering a move to cloud based accounting.Reduced Capital ExpenditureThe move to cloud not only offers an operational cost option for the software. It also reduces the need for infrastructure to support it. Costly hardware and backup solutions are not required as they are now provided as a part of the software as a service offering. The scale of the infrastructures offered by the service providers will generally far exceed an in-house operation, so it will also increase your business’ accounting security and availability.Reduced Total CostNot only does your online accounting system reduce your capital expenditure, it actually reduces the overall cost. Cloud accounting solutions can enter the market on a freemium model (base levels of the software are offered free with the choice to upgrade for more advanced features) and can be up-scaled on users and requirements as necessary.There is now no need to invest in an all-encompassing system of which you will use a minor selection of the functions.ScalabilityA cloud-based system scales to fit your company. Entrepreneurs have a very cheap but limited system, this can grow to add users and functionalities as per the requirements of your business and team. The system will grow alongside your company and it will allow for the addition of functions and resources as required.Staffing efficiencyWith the use of technology, manual tasks can almost be eliminated. This opens a business’ options to allow outsourcing of technical and operational functions. Functions such as the capture of expenses receipts can now be eliminated by using application based functions on one’s phone. A simple photo is taken and it is assigned to the correct account. This means that no longer are you counting through endless receipts at the end of the month and you can easily ascertain the cost and value of each client’s activities.Real-time information updatingFrom your accountants to your C suite, the information is available as live. The system will allow you to build dashboards and reports which are tailored to the person using it. A C-level may want to see more of an overview whilst an accountant may need more transactional level information. With the connection of bank accounts to the systems you achieve real-time, live accurate data.Access from anywherePart of the success of cloud computing is the ability to access information from practically anywhere. The rise of smartphone adoption has allowed business officials access to key company information as long as they have a form of Wi-Fi connection.SecurityCloud solutions often face the issue of security and people often think that because a system is out of the office it is less secure. However, exactly the opposite is the truth. The following shows just a few of the key security enhancements that migration to cloud-based accounting will offer:
  • User authentication – two-step authentication for logins and transactions ensure that with the use of 2 personal devices only can you access the account.
  • Data encryption – industry-level encryption services ensure that information is delivered and translated to correct areas only.
  • Network security and data center – economies of scale allow a much higher level of infrastructure and the security that runs within it. This can offer governmental levels of security at a fraction of the price.
Immediate FixesMost softwares offer an uptime guarantee of >99%. Their vast teams ensure that updates, patches and fixes are completed before issues occur. They are also often very responsive to system improvements and thrive on critical feedback. The systems can literally change and improve in front of your eyes.Data Backup and RestorationOne of the largest investments in accounting is the backup of the data. If you do not have a backup of your software offsite you run the risk of losing your data. It is said that 60% of companies that complete data loss will be shut down within 6 months. With cloud accounting, you have servers based in environmentally perfect surroundings, these will be replicated in similar environments, often in other countries. Only severe disasters could disrupt these types of systems, and at this point, we probably wouldn’t be worried about our accounting.There are many benefits to promote the adoption of a cloud-based accounting system in the UAE and beyond. It is vital that you choose the right team to help you set up or migrate the services, and to see if it is a viable option in the first instance. Speak to one of our team to understand the benefits to you and your business and grow with the best.

OBTAINING TAX RESIDENCY CERTIFICATE FOR A COMPANY

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Why should I obtain a Tax Residency Certificate for my UAE company?Tax Residency Certificates are crucial in substantiating your UAE company’s tax residence in the UAE.They are particularly important where the shareholders and / or directors of the company have a non-UAE connection or international tax exposures, and in certain circumstances can be a powerful tax planning tool for companies who are able to obtain these certificates from the Ministry of Finance.Tax Residency Certificates are essential for the purposes of benefiting from the large number of double tax treaties in force between the UAE and other jurisdictions and confer a number of additional benefits to holders.You can also apply for Tax Residency Certificates as an individual, and these certificates can help reduce your tax exposures on certain international investments.How is it possible for a UAE company to obtain a Tax Residence Certificate from the Ministry of Finance?There are a number of requirements that your UAE company must meet for you to obtain a UAE Tax Residency Certificate from the Ministry of Finance.One requirement which has recently come into the spotlight is the need of a physical office space.Whilst in the third quarter of 2018 we still managed to obtain Tax Residency Certificates for companies operating from Flexi Desk offices (or similar facilities) across the various free zones in the UAE, the Ministry of Finance are now scrutinizing such cases in further detail.Due to various international jurisdictions’ stringent requirements on substance, amongst other considerations, when determining the tax residency of companies incorporated in foreign jurisdictions, the Ministry of Finance is now getting stricter when reviewing Tax Residency Certificate applications from companies and are generally requiring such companies to have a physical / permanent office space. We have witnessed a number of recent applications being rejected where companies simply maintain a Flexi Desk office or similar space.For more information on the benefits of obtaining Tax Residency Certificates and how we can assist you in obtaining this, please feel free to contact our Tax and Corporate Services team at mail@affiniax.com.

VAT: IMPACT ON BUSINESSES IN BAHRAIN

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One of our resident VAT experts, Adnan speaks about how VAT can have an impact on businesses in Bahrain by highlighting the following key points:-
  • Impact on Revenue
  • Procurement and Input Tax
  • Contracts & Policies
  • Record Keeping, IT & ERP Systems
  • Compliances
He also emphasized that Affiniax can help in the following ways :-
  • VAT impact assessments
  • Advise on tax-efficient structuring/
  • Drafting of Sample Tax Invoices & Tax Credit Notes
  • Registering and filing VAT returns

BAHRAIN VAT: LARGE FIRMS TO REGISTER BEFORE JANUARY 1, 2019

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As part of the first phase of VAT registrations, the Ministry of Finance in Bahrain has announced that companies with taxable revenue exceeding BHD5M per annum are required to register by 20th December 2018. The effective date of registration will be 01st January 2019.It is not clear whether applications received on or after 20th December 2018 will be penalized for late registration. It is recommended, however, to follow the deadlines to avoid any unnecessary complications.For the purpose of VAT registration, a new government entity has been established with the name of National Bureau for Taxation (NBT). NBT is now accepting applications for VAT registration.In the second phase of VAT registration, companies with Taxable revenue between BHD500,000 and BHD5 Million will be required to register by 20th June 2019 and the effective registration date will be 01st July 2019.In the third phase, companies with taxable revenue between BHD37,500 and BHD500,000 will be required to register by 20th December 2019 and the effective date of registration will be 01st January 2020.As such, persons with taxable revenue above BHD37,500 should prepare themselves from now to avoid any last minute delays. This is because updating Accounting, Financial, Human Resources and internal policies can be a time consuming process in light of the new VAT legislation.It is expected that more guidance will be announced in the coming days and weeks. The Executive regulations to the VAT Decree Law is expected to be announced by the mid of January which should allow much more clarity.

VAT IN UNITED ARAB EMIRATES: PROFIT MARGIN SCHEME

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The Federal Tax Authority (‘’FTA’’) issued a public clarification on Article 29 (VATP002) of the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax, few months ago. This has been further clarified by the FTA at an awareness session recently organised at the Abu Dhabi Chamber of Commerce and Industry in order to raise awareness among the taxable persons.Profit Margin Scheme is a scheme that may allow the Registrant, in any Tax Period, to calculate and charge tax based on the profit margin earned on the taxable supplies and not based on the value of these supplies.The profit margin is the difference between the purchase price of the Goods and the selling price of the Goods, and the profit margin shall be deemed to be inclusive of Tax.What kind of goods are eligible to be supplied under Profit Margin Scheme?
  • Second hand goods, meaning tangible moveable property that is suitable for further use as it is after repair;
  • Antiques i.e. goods that are over 50 years old;
  • Collectors’ items i.e. stamp, coins, currency and other pieces of scientific, historical or archaeological interest.
What are the key conditions to apply the Profit Margin Scheme?
  • Only those goods which have previously been subject to VAT before the supply in question may be subject to the profit margin scheme. As a result, used goods acquired prior to the implementation of VAT or goods which have not previously been subject to VAT for other reasons are not eligible to be sold under the Profit Margin Scheme. There needs to be sufficient evidence or information to justify that the good was subject to previously.
  • The goods must have been purchased from either:
    • A person who is not registered for VAT.
    • A registered business which has already applied Profit Margin Scheme on the same goods.
  • The taxable person made a supply of the goods where input tax was not recovered in accordance with Article 53 of Cabinet Decision No. 52 of 2017.
Under what cases the Profit Margin Scheme will not apply?
  • Used goods acquired prior to the implementation of VAT or goods which have not previously been subject to VAT for other reasons are not eligible to be sold under the Profit Margin Scheme.
  • Where a tax invoice or any other document mentioning an amount of VAT chargeable in respect of the supply has been issued.
  • Sufficient evidence or information is not available to justify that the goods have been subject to VAT previously.
How can we help?Further, we can help you assess the eligibility of Profit Margin Scheme on the goods under question and advise on the implications and provide guidance in relation to the documentary requirements which need to be maintained to ensure compliance.

9 KEY POINTS TO BECOMING A PROACTIVE ACCOUNTANT

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Key Points To Becoming A Proactive Accountant

As a business owner, we often feel if we had that something extra, something better and something clearer to make an informed decision. And that ‘SOMETHING’ often depends on the proactive approach from your Accountant. As a business owner and as a Chartered Accountant, I understand the limitations that we come across at both ends.

Our profession advocates constant training to be provided not only for technical aspects but also for strong interpersonal skills, organisational competence, and intellectual ability. So what are these characteristics? What makes someone stand out?

Here are 9 points that I think are important to understand the responsibility of a Proactive Accountant:

1. Stay updated all the time

Accountants must constantly stay up to date with the profession. Attending refreshers, going to conferences/ seminars, and in-house training is a must. Technological advancements are also evolving at a furious pace, so these also must be kept up with. Continual personal development is a must, not an option!

2. Story behind the numbers: The Bigger Picture

Providing a data-generated report is easy. Staying on top of all the figures and paperwork is more important. At the very least, they need to understand where these numbers are coming from and what does it mean for the business. Good accountants will have a much shorter list of targeted questions that are developed specifically to aid their understanding which allows them to focus on the big picture.

3. Importance of Time

Every business needs management reports at regular intervals, if not in real-time. If these reports come after 2 months, it is like a post-mortem report – you can read through it but cannot change anything.

4. Inter-dependability and Accountability at each level

It is important to make every effort to do the right thing. Every process in an organisation is linked to Accounts Department somehow. Accountants need to have exceptionally well people skills as they typically work in coordination with different departments within an organisation. They have the opportunity to work with different types of professionals and personalities. Therefore, they are required to be generous with what they know, sensitive to others’ needs, and supportive of their team’s goals. We all succeed when we work together as a Team.

5. Decision making, critical reasoning & analytical ability

Business owners want their accountants to be strong and helpful in decision-making; however, decision-making can be hard. There is always a tendency to put off decisions by procrastinating and concluding that you need more information, only to later conclude that you need even more information. A good accountant should always determine what is relevant and what is not.

6. Trust factor

The information that accountants work with is highly confidential in nature. This is why trust and professionalism are important traits that they must always abide by. Not only is this the right and ethical way to go about their businesses, but having a reputation for trustworthiness will win plaudits in the long run. I firmly believe that we trade on our knowledge and ability, but we only get these opportunities by demonstrating our commitment to client confidentiality.

7. Solutions seekers, not fault finders

Great leaders have the desire to help others succeed. Don’t find faults in the system; find a solution that helps the organisation to overcome an obstacle. Leadership characteristics can be taught, but leadership must be exhibited day in and day out.

8. Commitment

Companies are looking for motivated, dedicated individuals for long-term employment. There is no short-term solution, neither for business owners nor for accountants.

9. Enjoy what you do

This last one might appear strange, but I firmly believe that we all need to enjoy what we are doing. There is no fun in a 9-6 job unless you have a good working environment, surrounded by people who are happy and joyful. Work takes up so much of our time, and it is my opinion that mere monetary rewards will not keep someone in a career they do not enjoy. Whilst no one should expect to be smiling all day, every day, it is important we have some fun along the way.

The characteristics of a proactive accountant start with the basics of sound technical ability and a solid ethical foundation. These are considered as a baseline, and the Accountant needs to grow beyond the “rules and regulations” mind-set of our profession. Attaining and maintaining the characteristics mentioned above require a personal commitment but are crucial to the accountant’s long-term success. Have you got what it takes to be a good accountant?

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