Economies of countries across the globe have seen a negative impact from the spread of coronavirus (COVID-19), and it is very likely that the situation won’t get better any time soon. Governments, including in the UAE, have introduced stimulus packages that are beneficial for SMEs in order to reduce costs associated with doing business and also to provide deferment for tax payments during a crucial time wherein businesses require necessary liquidity.
In United Arab Emirates, it offered stimulus worth billions of dirhams together with more than a hundred financial and economic incentives in order to support businesses and the community. There’s a visible impact on hospitality, entertainment, tourism, and travel sectors as they’re experiencing a plunge in clients and customers. There’s a possibility of massive drops in other sectors also such as shipping, logistics, and real estate as consumers nowadays are preferring a reduction in rentals. As for imports, there’s also a temporary freeze.
In the UAE, there are a couple of business and taxation considerations that are important for businesses in managing working capital, as well as ensuring minimal disruption to the business. When it comes to taxation, efforts are already being placed by the government in order for businesses to recover input VAT as soon as possible. Take note: the more VAT a business recovers, the more it will be able to use cash optimally.
The focus of businesses has to be placed on the tracking of refund claims that are not yet filed by their specialists with the UAE tax authority, the Federal Tax Authority (FTA). The government recently announced measures, as mentioned earlier, in fast-tracking VAT refunds which can help enterprises operating within the region with more cash. Understanding how the authorities have been proactive and a leader in initiatives such as these, it is safe to assume that claims for VAT refunds in UAE will be processed faster.
A business should make sure that tax compliances are being managed without any disruption, most especially when the employees are all working from home. An organization needs anything but a fine for non-compliance to statutory obligations. Appropriate tools are to be utilized by a business to ensure that the data necessary in filing for VAT refunds are extracted from a system accessible to key team members.
A seamless process of data extraction with a robust review mechanism is best in place in order for a business to prevent unnecessary messes, which can eventually result in penalties down the line. The concept, maker-checker, can serve a critical role when it comes to the finalization of tax working, as well as web regular discussions over web exchanges or calls.
Payment of taxes as well as the filing of tax returns in UAE has already been deferred by the UAE FTA, but businesses are still required to be ready with the filing and payments even with staff members working remotely. If you want to ensure your business is fully compliant with all relevant taxation regulations set forth by the tax authorities, it is best to seek the help of experts or outsource your tax obligations to a reliable, established third-party service provider like a regulated tax agent in UAE.
It is recommended by tax specialists based in UAE for a business to explore the possibility of submitting a request for an administrative exception to the FTA in order to increase the length of the tax period to quarterly from monthly or six months from quarterly, subject to conditions. With a longer tax period, a business will be given a welcomed extension for credit terms in terms of tax payments.
Other strategies a business can take to optimize tax in UAE include the usage of bank guarantees which are for imports of goods that are meant to be reexported, setup of a bonded warehouse that is intended for excise goods which are imported, seeking of a customs duty refund for all sold imported goods locally.
On the side of the business, its efforts should be focused on preserving cash that it has left, collecting receivables as quickly as possible, as well as limiting costs. Constant interaction with clients and customers during this stage would prove to be essential in understanding the cash position of a business and identifying ways in collecting money. If your business offers a discount if the client makes an early payment, that can be very helpful in sustaining the business.
With countries across the globe experiencing an economic downturn, now is the best time in seeking the help of specialists especially in taxation. Call us here in VAT Registration Dubai to consult with regulated tax agents in UAE.