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KSA VAT: WHAT ARE ZERO RATED SERVICES AND HOW CAN I ENSURE THAT I AM NOT CHARGING TOO MUCH TAX?

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The tax treatment of services provided by registrants under the UAE VAT and KSA VAT legislation is often a complex area, with both sets of tax laws providing strict rules on when such services can be subject to the zero rate of VAT. In KSA, in particular, the law requires suppliers to assess a number of factors prior to zero-rating services. Article 33 of the KSA VAT Implementing Regulations set out the conditions in which services can be subject to the zero rate of VAT. To qualify for zero rating, all the below conditions must be satisfied;
  • The supply of services must not take place in any GCC Member State* under the ‘special cases’ set out in the VAT laws,
  • The supplier must not have any evidence that the customer is resident in any GCC Member State and must have evidence that the customer is resident outside the GCC Member States,
  • The benefit of the services must not be received by the customer or any other person when that person is situated in KSA,
  • The services must not be related to any tangible goods or property (including real estate) situated within the GCC Member States,
  • The supplier must intend for the services provided to be consumed by the customer outside the GCC Member States, and
  • The supplier must have no evidence that the benefit of the services will be enjoyed within the GCC Member States.
* Note that, as the GCC states have not fully implemented the terms of the Unified Agreement on VAT, for the time being the term ‘GCC Member States’ solely refers to KSA for the purposes of the above. i.e. if the supplier has evidence that the customer is resident outside KSA, for the purposes of point 2 above he will be treated as having evidence that the customer is resident outside the GCC Member States for the purposes of the KSA VAT legislation. In practice, determining whether a service to a particular customer satisfies the above conditions for zero rating can be a complex affair. Service providers may need to consider matters including;
  1. Whether the non-resident customer has a presence in KSA, even if temporary, that may result in them not satisfying condition 3 above,
  2. Whether the services concern activities being undertaken in KSA, and
  3. Whether the ultimate recipient of the service is benefiting from the service in KSA.
In light of the above, certain service providers are adopting a strict approach whereby they are by default charging VAT at the standard rate irrespective of whether their services to a particular customer satisfy the above conditions. Such an approach can result in adverse consequences, and in particular, may impose an unnecessary KSA VAT burden for non-resident customers who may not be able to recover such VAT. It is important for suppliers to fully understand the conditions as set out by Article 33 to follow the correct VAT treatment of services provided to clients outside KSA. The GAZT is constantly issuing new guidance to assist registrants in determining the correct tax treatment of their supplies and you should seek advice if you are uncertain of the applicability of KSA VAT on your supplies as appropriate.

THE VALUE OF BUSINESS CONSULTING IN THE UAE?

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The True Value of Business Consulting in the UAE

Determining the value you can derive from business consulting is one of those things that often comes with hindsight and, on occasion, is overlooked or missed entirely. Having an expert specialist advise or guidance often leads to the right decisions being made on a day-to-day basis, and that can be mistaken for ‘business as usual’ rather than seeing its true benefit.

One way to highlight the real value of business consulting is to think of it in terms of dentistry (let’s think way outside the box here).

Some people are methodical and make regular appointments to visit their dentist for a checkup. During that checkup, they will look at the health and vitality of the teeth and gums and look for any hidden problems or potential future issues that can be resolved and removed before they happen. When bigger problems are present, remedial action can be taken, and they leave with the knowledge and comfort that they are likely to be incident free in the period until their next visit (and even if that is not the case, they know exactly where to go if something does happen)

At the other end of the scale are those who will only visit the dentist once the pain of a problem has reached the point that they can’t continue to operate without remedial action right now. This is often painful, disruptive, and, more often than not, extremely costly, as the actions required to get back on track are far more extensive and potentially difficult to administer.

This principle fits well with business consultancy. Having highly skilled business professionals give your business a check-up on a regular basis helps anticipate and tackle problems of all shapes and sizes on the go. If you consider the cost of remedial action at the dentist to be high, compare that to having to perform a root canal on your corporate finances or poor due diligence, and you start to appreciate the real value of consultancy as a regular input rather than an emergency procedure.

Business consultancy from Affinax covers a broad spectrum of key aspects that absolutely must be delivered with the utmost accuracy and professionalism. Whether you are valuing your business or a potential investment through to drafting commercial agreements or even winding up an organisation, make sure you are best placed to make effective and correct decisions. Few of us are lucky enough to have experience in every aspect of business and commerce, and even larger corporations don’t always have the core competencies on their staff full-time.

Why not speak to the professionals at Affinax and explore their scope of services and what benefits they can deliver to help you maintain a vibrant, healthy smile in your business?

What is the Cost of Outsourcing the Accounting and Finance Function / Department?

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Cost of Outsourcing Accounting Services in UAE

Understanding the cost of outsourcing can be confusing. In a field where there are so many options, it is difficult to determine the cost of the accounts and what actually defines this outgoing. Here are six factors that can help you determine the cost of an accountant and why.

1) Transactions

On a pure labor cost basis, the number of transactions your business conducts will dictate a portion of the price with an accountancy firm. Quite simply, if your business conducts a few transactions throughout the year, it will cost less than a business that has thousands of transactions.

An important role of an accountant is to account for the business incomings and outgoings on an accrual basis. This shows you, and others, what financial transactions have occurred, how, and where?

2) Total Revenues

Much like the number of transactions, the value of transactions and, therefore, revenue will have an impact on the cost. Large transactions can often be more complex, but more importantly, they carry risks.

It is vital to ensure that if your business is conducting high-value transactions, the outsourced accountancy firm has the capability and experience to align with your business. This can come with a price.

3) Complexity of Business

An accountant’s cost is also affected by the complexity of your business. A single office in a single location will have a very different price to the one that is read across several jurisdictions, for instance. The makeup of a business complexity can follow a few guidelines:-

  • Entities:
    • How many entities does your company have?
    • Is it a single company dealing only with customers, or is it a holding company with many entities serving different functions below?
  • Jurisdictions:
    • Where are the business (es) based?
    • What activities are they carrying out?
    • Is your business based locally, regionally, globally, or offshore?
  • Bank Accounts:
    • How many bank accounts are to be served?
    • The number and type of transactions will be monitored.
  • d) Business Model: Various businesses have inherent complications. A single-owned proprietorship conducting consultancy services will be much simpler compared to a contracting business having continuous contracting services.

4) International Accounting Standards

An accountant’s cost can also change based on their ability to conform to International Best Practices. It is important here to align your business with your accountant. An accountancy firm is only as good as its employees, and often they would have gained their certifications from abroad first. What is the make-up of the company, and to what best practices do they adhere? A big four company will cost you more but has the strength to back and certify your accounts to global standards. Do you need the auditing power of a big four company, or will a base-level to international mid-tier group perform the task effectively?

5) Analytical And Management Support

If you cannot measure something, how can you improve? It is very important to ensure that your accounting firm can give you the reports you need. These vary from business to business and from C-level to C-level. Everyone wants something different based on what is important to them.

The difference in cost can also change with this factor. Many low to mid-tier firms will not have the ability to customize reports for your business. They will use accounting software and will pull out reports in that standard. The more effective firms will tailor it to exactly what you need.

However, the cost of getting the exact figure you need can be outweighed by its significance to your business. Getting improper or ineffective reports can affect your decision-making ability and the future of your business.

6) Experience

When choosing an accounting firm in the UAE, you must understand the experience of that company. Aligning your company, its jurisdiction, and its activity to the skill set of the accountant is vital.

When evaluating the company, you can ask for references or details of the company that has similar stature and activities to yours. Most accountants will give you a list of the big companies that they have worked for or worked with, but it is important with alignment to your business – the answer is no. Choose a company with experience in your field, your location(s), and a proven track record of success.

The cost of experience can be high. For an accountant, landing a multinational can affect its own pricing model. Make sure you align your business with the correct skill set to attain the best results.

IS THERE A LINK BETWEEN A CORPORATE CULTURE BASED ON SHARED VISION AND VALUES AND ORGANISATIONAL PERFORMANCE?

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Business Setup with International Free Zone Authority (IFZA), Fujairah
I have been pondering over this question for many years and now believe that more and more companies are beginning to recognize the importance of strong corporate culture based on shared vision and values of all stakeholders (more importantly of their own employees) in achieving the bottom line. Even though the idea of vision and values has been explored extensively by numerous academicians and business leaders, and the impact or consequences of developing effective values and vision are well documented, I am surprised to observe that many organisations fail to develop a vision and values that are lived and are resonated with everyone within an organisation. Furthermore, in recent years, the question about increased investments in people processes has become topical and it is argued that building intellectual capital of employees based on the shared vision and value is connected to a better degree of employee’s alignment with their organisation, and hence is crucial to any organisation’s success story. Most organizations, in response to the needs of the global competitive environment, require their managers and executives to deliver products and services that are in line with external or environmental requirements, stakeholder expectation and to be profitable while all the time working to appease a diverse community of consumers worldwide. Many argue that the enhanced organisation’s performance can become a reality once the leader becomes a visionary leader and cultivates the strategic intent of the organizations. And for many businesses, leadership with vision as a core component is the answer or at least the most important piece of the Jigsaw puzzle. However, in my opinion, for a vision and corporate values to have an impact on the organisation’s performance, having a visionary leader is just a starting point. The real impact should come once the corporate vision and values are fully integrated and shared among all employees of an organisation, which forms the basis of the organisation’s culture. Similar to a shared vision, building a values-driven culture where employees find an alignment between their personal values and the organization’s values is the key to organizational success. In my opinion, employees should be included in the development process of core corporate vision and values. This will lead to improved internal communication, building a performance-enhancing corporate culture that facilitates leadership and employee’s alignment with the strategic goals of the organization and in the end the organisation’s bottom line.

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