The UAE’s Federal Tax Authority (FTA) on Saturday clarified the procedure for companies that wish to import goods but are not registered for VAT.
Non-registered businesses planning to bring goods into the country are required to follow standard customs procedures and pay VAT through one of several approved methods, the FTA said in a statement carried on the Emirates News Agency (WAM).
Companies must complete an import declaration form for VAT payment (Form VAT301) and pay via the Government’s "e-Dirham" online payment service on the FTA website, supported by an e-Guarantee to provide guarantees – which could be either a freight forwarder or clearing company approved by the FTA, or a courier company that delivers the goods to the said importer.
The FTA said the procedure via its e-Services portal aims to ease the process for non-registered importers.
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Read more:
UAE's Federal Tax Authority calls on unregistered companies to comply with VAT to avoid fines
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When importing for re-export, transit or temporary admission, non-registered businesses are required to provide the previously obtained e-Guarantee reference number on the e-Services portal, the FTA statement said.
Businesses were advised to complete their VAT registration formalities before December 4, 2017, the FTA has previously said. However, there are still a number of companies that have yet to register for the new tax, which came into effect on January 1, 2018.
The UAE and other Arabian Gulf states are introducing taxes to shore up dwindling government income from oil.
The UAE expects to generate Dh12 billion in VAT revenue in 2018 and Dh20bn in the second year of implementation, according to government officials.
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
Key changes
Commission caps
For life insurance products with a savings component, Peter Hodgins of Clyde & Co said different caps apply to the saving and protection elements:
• For the saving component, a cap of 4.5 per cent of the annualised premium per year (which may not exceed 90 per cent of the annualised premium over the policy term).
• On the protection component, there is a cap of 10 per cent of the annualised premium per year (which may not exceed 160 per cent of the annualised premium over the policy term).
• Indemnity commission, the amount of commission that can be advanced to a product salesperson, can be 50 per cent of the annualised premium for the first year or 50 per cent of the total commissions on the policy calculated.
• The remaining commission after deduction of the indemnity commission is paid equally over the premium payment term.
• For pure protection products, which only offer a life insurance component, the maximum commission will be 10 per cent of the annualised premium multiplied by the length of the policy in years.
Disclosure
Customers must now be provided with a full illustration of the product they are buying to ensure they understand the potential returns on savings products as well as the effects of any charges. There is also a “free-look” period of 30 days, where insurers must provide a full refund if the buyer wishes to cancel the policy.
“The illustration should provide for at least two scenarios to illustrate the performance of the product,” said Mr Hodgins. “All illustrations are required to be signed by the customer.”
Another illustration must outline surrender charges to ensure they understand the costs of exiting a fixed-term product early.
Illustrations must also be kept updatedand insurers must provide information on the top five investment funds available annually, including at least five years' performance data.
“This may be segregated based on the risk appetite of the customer (in which case, the top five funds for each segment must be provided),” said Mr Hodgins.
Product providers must also disclose the ratio of protection benefit to savings benefits. If a protection benefit ratio is less than 10 per cent "the product must carry a warning stating that it has limited or no protection benefit" Mr Hodgins added.
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
