How Vat Will Affect The Newly Registered Companies In The Light Of Expo 2020
Dubai was selected as the titleholder to host The World Expo 2020 with the theme 'Connecting Minds, Creating the Future'. As of now, a total of 190 countries have confirmed their participation in the mega event. The international business exhibition is going to be hosted by Dubai from 20th October 2021 to 10th April 2021.
The organising committee of the Expo 2020 reiterates that the theme 'Connecting Minds, Creating the Future' resonates the powerful spirit of partnership and co-operation that has been the driving force behind the UAE's success in the creation of new paths of growth and revolution.
It’s a matter of great euphoria that the Expo 2020 will be a golden chance for many businesses to nurture as well as exposure.
THE IMPACT OF EXPO 2020 DUBAI
The official participants of the grand event are different countries and intergovernmental organizations which are invited by the government. The transactions associated with Expo 2020 are subject to UAE VAT. The UAE VAT Law that are applicable to a UAE company will also be applicable to the official participants of the event and the Bureau Expo 2020 Dubai will be the governing body for the refund scheme.
Provisions applicable to the participants in Expo 2020
- The participants should register for VAT if the value of their taxable supplies or import (for commercial or non-commercial purposes) in the UAE exceeds or anticipated to exceed the mandatory threshold limit of AED 375,000/-
- The participants registered for VAT should issue proper tax invoice against taxable supplies at the Expo 2020 Dubai
- The registered participants should file VAT Return on a periodic basis to the Federal Tax Authority (FTA) as directed.
- The registered participants are subject to all other provisions of UAE VAT and should comply with the laws of the land.
Article 54 of the Federal Decree-Law no 8 of 2017 on Value Added Tax states that a person may only recover VAT incurred in the UAE on Goods and Services, where the Goods and Services are used or intended to be used for making taxable supplies.
The VAT is not recoverable if the incurred expenses do not relate to any taxable supplies made by the person.
Nevertheless, the FTA has announced certain guidelines to the official participants of 2020 Expo Dubai in relation to VAT, which may provide some relaxation to the participants.
Precautions need to be taken by the Newly Registered Companies with the introduction of VAT
Expo 2020 is a 6 months continuous event. So, the newly registered companies need to have complete planning with reference to the following aspects: -
- The expected revenue during the event
- The continuity of business after the Expo, i.e. the permanent business opening in Dubai, UAE
- Proper budgeting and planning
- Managing of cash flow and selection of correct source of funds
When the companies have proper planning on the above scenarios, they can decide on tax registration and its accounting effect. So, the management will always have a strategic tax decision.
Special VAT refund scheme with Expo 2020 Dubai
The UAE Government has released Cabinet Decision No. (1) of 2019 related to the refund of VAT paid on goods and services connected with Expo 2020 Dubai, along with the User Guide to elucidate the details of its implementation. The highlights of the Scheme are as under.
Particulars of VAT refund scheme
Who is eligible for refund?
An Official Participant, holding a valid Expo 2020 trade license number and having no intention to use more than20% of the exhibition space or presentation for non-official or commercial purposes is eligible for a VAT refund.
What VAT is reclaimable?
- An Official Participant can reclaim the VAT taxed on the import and acquisition of specified goods and services, incurred in relation to construction, installation, decoration, operation and specified personal expenses of the staff.
- An Official Participant can reclaim the VAT taxed on goods and services relating to the actual operation of the office of the Official Participant, if the value of each Goods or Services for which a claim is made is not less than AED 200.
- An Official Participant can reclaim the VAT taxed on goods imported for personal use of the Official Participant’s Section Commissioner-General, Section Staff and the Beneficiaries.
- An Official Participant can reclaim the VAT taxed on goods and services connected directly with the operation of their exhibition space and any presentation within the premises of Expo 2020.
What is VAT refund process?
- VAT registered participants who are eligible for the refund scheme shall claim VAT Refund from the Federal Tax Authority.
- The unregistered participants shall approach the Bureau Expo 2020 Dubai. The participants must obtain a Certificate of Refund Entitlement (‘CRE’) which is mandatory from the Bureau to claim the VAT refund.
Upfront exemption on import of goods
Import of goods is subject to VAT under the reverse charge mechanism (RCM). A participant can avail upfront exemption by using the Bureau’s special Tax Registration Number in coordination with the Bureau.
Sale of goods
Sale of goods for which the refund has been claimed is allowed subject to payment of VAT and necessary consent from the Bureau.
Relaxation of tax liability on imports of goods
As per Article 48 of the Federal Decree-Law No 8 of 2017 on Value Added Tax states that: -
- If the Taxable Person imports taxable Goods or Services for his business purpose, he shall be responsible for all applicable Tax obligations and accounting for Due Tax in respect of these supplies.
- If the official participants import Goods or Services, they can be relieved from import VAT by using the special Tax Registration Number (TRN) issued by the bureau if they hold a Certificate of Refund Entitlement.
The official participants should not include goods in any refund application if they have obtained the special TRN.
Things to do by the Participating companies.
Proper Planning for Expo 2020
Conduct an impact assessment for your business in the light of Dubai Expo 2020. Plan how your products or services will reach the visitors in the Expo.
Focus on achieving Face-to-Face Contact
Face-to-face contact with relevant business owners, can often prove a refreshing change rather than e-mail or telephone-based sales. Creating solid relationships is what the business world is all about. Ensure that you and your team get the necessary training as early as possible if you lack proper interpersonal skills.
Interacting with participating companies
Your interaction with the participating companies will give you the opportunity to join the Expo buyer and supplier network. Create contacts and network within your given place which will lead to partnerships, ancillary services or new clients.
Work with a digital marketing firm to ensure a strong presence on international search engines and social media outlets to reach out other countries.
For the offline world, prepare your brochures and other marketing tools written or translated by a native speaker of the language which will be more impactful to the native speakers.
Payment and proper Management
Create relationships with logistics companies to ensure variety of payment methods to cater the needs of the different nationalities who can ship your goods around the world. Ensure that your network is so widened that not even a single visitor is left unattended.
Ensure proper Recruitment and Training for Dubai Expo 2020
You must ensure that you have the right number of trained staffs who are multilingual to care the different nationalities. This will give you a chance to create a good impression on the visitors.
VAT Compliance & VAT Filing
Make sure that you fulfil and follow the tax compliance and filing procedures properly to avoid any future issues. Be in touch with an expert who can advice you on this regard so that all your VAT related procedures will be smooth and you can be relaxed throughout.
How proper Accounting & Bookkeeping help participating companies ease their tax planning
A business may deal in multiple transactions that need to be traced and upheld at every step. Good accountants are more than just preparers as good bookkeeping makes tax preparation much easier. Proper maintenance of the Profit and Loss Statement, Payroll, Taxes, Sales and Purchases, Expenses, Bank statements, Cash flow analysis are highly important and must be exact as it ensures the goodwill and sustainability of the company. Keeping good books is a business necessity as it ensures you comply with the tax rules and make the payment in time saving your time and monetary loss.
Since the participating companies need to comply with the tax regulations of the country, proper accounting and bookkeeping will help them ease their tax planning.
How can CDA extend the support to the Participants?
CDA’s well qualified and professional tax team will ensure VAT compliances for your business when you take part in the Expo 2020 and support you in the following ways: -
- Help you in the procedure of Registration for VAT with the FTA
- Help you in the procedure of filing the periodic VAT return and refund application
- Provide you compliance support in filing the Certificate of Refund Entitlement
- Update you with the latest news related to UAE VAT relevant to Expo 2020
- Help you in the Deregistration Procedure for VAT after the Expo 2020
CDA is a team of Big 4 experienced professionals who have thorough insight into the market trends and the elasticities in the market. Our skilled experts can extend a wide range of services regarding your entry in to the Expo, and help you establish a better market position in the future.
We offer various Advisory Services to your business to make it follow the global standards. CDA team makes sure that your business complies with the tax regulations and is free from all tax burdens, and takes the rhythm to achieve your goal line.
CDA Accounting & Bookkeeping Services LLC also efficiently handles CFO Services, Auditing Services, Accounting & Bookkeeping Services in Dubai, Accounting Software services, Due Diligence Services, and Tax Filing & VAT Consultancy services on time according to the convenience of our good clients.
Feel free to contact us. Our experts will give you one-hour Free Consultation to drive away your reservations!