Management of China's Meituan Dianping, an online food delivery-to-ticketing services platform, attending a news conference in Hong Kong. Reuters
Management of China's Meituan Dianping, an online food delivery-to-ticketing services platform, attending a news conference in Hong Kong. Reuters
Management of China's Meituan Dianping, an online food delivery-to-ticketing services platform, attending a news conference in Hong Kong. Reuters
Management of China's Meituan Dianping, an online food delivery-to-ticketing services platform, attending a news conference in Hong Kong. Reuters

Technology

Food delivery giant Meituan’s sales beat estimates

The world’s largest meal delivery service reported sales climbed to $3.6bn in the June quarter

Bloomberg

August 21, 2020

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Meituan Dianping’s quarterly revenue beat analysts’ estimates as demand for takeout services bounced back from the disruptions caused by the coronavirus pandemic in China.

The world’s largest meal delivery service reported sales climbed 8.9 per cent to 24.7 billion Chinese yuan ($3.6bn / Dh13.2bn) in the June quarter, compared with the 23.6bn yuan average of analysts’ estimates.

The company reported surprise net income of 2.2bn yuan, compared with the 643 million yuan loss projected by analysts.

Backed by Tencent Holdings, Meituan has seen a gradual pick-up in its core food delivery business after the company posted its first ever quarterly revenue decline in the three months ended March during the Covid-19 shutdowns.

Still, consumers remain wary amid sluggish economic growth and the possibility of a resurgence in virus cases, denting appetite for restaurant dining, hotels and other hospitality services.

Daily delivery orders topped the 40 million milestone earlier this month, Jefferies said in an August 9 note. It had taken the company about a year to grow orders by the latest 10 million, accelerating from the 14 months it took to increase daily orders from 20 million to 30 million, analysts led by Thomas Chong wrote, adding that they are “positive about daily delivery order volume in the long run”.

Shares of Meituan have more than doubled this year, lifting the value of the company to more than $160bn.

Amid increasing competition in its core takeout business from rivals including Ant and SF Express - both supported by Alibaba Group - Meituan had expanded into a wide array of services including online travel, groceries delivery and ride-hailing.

Alibaba’s food-delivery arm Ele.me is also engaging in a subsidy battle with the start-up for market leadership.

In the longer run, Meituan is investing in technologies like self-driving vehicles to help cope with surging delivery demands.

Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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