Dubai United Arab Emirates - Sunday, February 7th 2016 [ME NewsWire]
In June 2014, the long anticipated announcement came from the UAE Ministry of Finance about its plans to establish a corporate tax and VAT regime as part of its efforts to ‘[ensure] the sustainability of the federal government’s financial resources.’ (Ministry of Finance, 2014 annual report). The draft legislation has not yet been published and is yet to go through legislative process, and no implementation date has been set. Nevertheless, the Ministry of Finance’s intentions have been clearly set out in its 2014 annual report, indicating that the days of tax-free living in the UAE are coming to an end.
Against this backdrop, the Association of Chartered Certified Accountants (ACCA) and aafaq Islamic Finance recently hosted a panel to discuss about the impact of Value-Added Tax (VAT) on businesses in the UAE.
ACCA’s global head of taxation, Chas Roy Chowdhury was the keynote speaker. Addressing over 100 finance professionals, Chowdhury shared his views on how Europe has witnessed VAT since the 1970s as a truly renaissance taxation that was able to pass on the ultimate burden of tax on value adding supply chain to the final consumer.
Chaired by Chowdhury, the panel discussion featured views from Hisham Farouk, CEO for Grant Thortnon UAE; Farooq Ladha, International Tax Partner at Crowe Horwath UAE; Mujtaba Naseem, CFO & Deputy CEO for AAFAQ Islamic Finance; Shady Shaher Elborno, Head of Macro Strategy Research at Emirates NBD; and Tobias Lintvelt, Partner Transaction Tax/International Tax Services for EY UAE.
Key insights from the panel were that whilst there may be some concerns that the introduction of VAT in the UAE may intensify the cost of doing business in the country, the anticipated low rate of 5% should mitigate this. What will help businesses to prepare is early sight of the detail of the legislation so that organisations have time to build management and financial reporting systems to support the detail of the requirements. The panel felt that the simpler the system; the fewer exemptions and the greater the consistency there is across the GCC the easier it will be for all.
A key area that will be critical to the implementation of the VAT system will be the judicial system to support this specifically a clear appeals and enforcement system. This is likely to take some time to develop and implement.
It was also heard that the anticipated low rate of taxation is unlikely to deter foreign direct investment given the country’s overall inverstment attractiveness: its excellent infrastructure, geographical location and political and economic stability. Also foreign investors are typically familiar with these types of taxes.
The imminent arrival of corporation tax is understandably causing concern for small and medium enterprises (SMEs) in the UAE who have been used to operating tax-free. The panel highlighted the potential for tax reliefs and the likelihood of revenue threshold exemptions to be brought to support SMEs. In any event, SME’s prepardenss to adopt to a new tax reality is paramount.
There is a key role that professional bodies and advisory firms can play in building the knowledge, skills and awareness of those who will be impacted asd and when the detail of the legislation is finalised and made available.
Lindsay Degouve de Nuncques, head of ACCA Middle East commented “We believe that ACCA members possess the right competences to get GCC businesses in a state of readiness for any introduction of tax. ACCA members support compliance with tax laws as well as accounting and reporting on taxation according to the International Financial Reporting Standards (IFRS). The most vulnerable business community is the GCC SMEs. However given ACCA’s training model, we can work with SMEs to very quickly develop and recruit professionals to help mitigate the risk of tardiness.”
At the event, aafaq Islamic Finance was publicly recognised by the ACCA as providing outstanding training and development opportunities for their finance and accounting employees.
The ACCA Professional Development Employer certificate was presented to Mujtaba Naseem, CFO & Deputy CEO at AAFAQ Islamic Finance by the head of ACCA Middle East. The certificate is awarded to leading organisations that offer outstanding development opportunities for young accountants and demonstrate superior professional values, ethics and governance at the workplace.
“The strong work ethic, technical skills and competency of our employees are crucial in delivering value to our clients, including the esteemed UAE government organisations we provide services to. As such, we greatly value ACCA’s recognition of our commitment to the professional growth of our finance and accountancy employees. This is a very important milestone in the relationship we have with ACCA and we look forward to collaborating more with ACCA and host insightful events for the finance community in the UAE, like the successful one we held today.” Naseem said.
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Notes to Editors
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. It offers business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
ACCA supports its 178,000 members and 455,000 students in 181 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 95 offices and centres and more than 7,110 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.
Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. It believes that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. ACCA’s core values are aligned to the needs of employers in all sectors and it ensures that through its range of qualifications, it prepares accountants for business. ACCA seeks to open up the profession to people of all backgrounds and remove artificial barriers, innovating its qualifications and delivery to meet the diverse needs of trainee professionals and their employers. More information is here: www.accaglobal.com
About aafaq Islamic Finance
Founded in 2006, Aafaq Islamic Finance offers Islamic finance products and services compliant with the provisions of Islamic Sharia across the UAE region.
The company is one of the few fully independent finance companies in the country, and is listed at all major financial institutions that provide high-quality financial services.
Aafaq focuses on exploring opportunities in various business sectors in order to provide the highest returns for the shareholders.
It established strategic partnerships with the Ministry of Finance, the Ministry of Labour, the Department of Economic Development, the Dubai Multi Commodities Centre and many other institutions. More information is here: http://www.aafaq.ae:7777/en/
Marketing manager for ACCA Middle East
T: +971 554 9 663