This column focuses on different treatments of tax law. If you are in a certain industry, what is the correct timing when invoicing? What information is mandatory on supplier invoices? You can continue to ask questions of this nature up to and including internal document management and compulsory filing with external parties.
By way of consequences, inevitably it is the stick, not the carrot, that delivers the greatest response. It is important to understand what penalties can be applied and the sum value of interest on those. This is because it is typically at a later time that problems are discovered.
Focusing on the carrot, let us reframe this as a positive business proposition. It is a useful exercise to revisit, line by line, component by component, your profit-and-loss statement to see if contributing elements are optimised.
One part often overlooked is tax. Not just corporate tax, but VAT – and depending on your business activities – excise and customs duties.
You can tell a lot about a chief executive's leadership by what draws their attention first.
“Sales is vanity, profit is sanity and cash flow is reality.” In uncertain times this adage is never more true.
Let’s start with sales. From an organisational viewpoint, the location of sales should cause you to consider having a separate entity for non-Gulf business. Depending on what and where you do it, this business might be exempt from corporate tax.
At the very least, you can elect to sit outside the UAE's VAT system having satisfied the relevant authorities that you comply with their conditions.
What would be lost in reclaimable VAT would be counterbalanced by not having to comply with rules of treatment for client and supplier invoices. Add to that reporting and the potential for disruptive external audits to normal internal operations.
Let us add another layer. As more rules are introduced to a tax regime, it requires more effort to manage the increased difficulty. Several regimes that are adding new or amending existing rules, often tugging operational practices in different directions, require an alternative management approach.
The worst outcome is when the rules of one tax regime are permitted to dictate the actions of another and do so incorrectly.
For example, I’ve worked with people who, for years, thought that VAT did not apply to their revenue. These businesses will discover that the people to whom they are filing their annual corporate tax return, detailing their revenue, are the same as those they are not reporting their VAT related revenue to.
If this is the position you find yourself in, admit the error. The relevant authorities will work with you to correct matters. Yes, with penalties, but having dealt with and settled your dues, the issue is considered resolved and everyone moves on.
The above are examples of what you might find when you review your sales processes. It’s not a comprehensive list. Let us move on to cost of goods and services. Does your business track the profitability of each piece of work it does at a consolidated level?
For a corporate tax perspective, you are interested in whether any of your suppliers are related or connected parties. This means understanding the different parties that make up your supply chain. While you are looking at that, take a look at your margins.
While we are talking about transfer pricing, what happens when a related party is not a direct supplier, but instead supplies one who is. Do the same rules of proving that transactions are being carried out at arm’s length apply?
I do not know. It’s possible that a business might be unaware that it’s happening. Given ignorance is no defence in law, that might not be sufficient, should it be discovered.
Would the value of such business matter? A one-off transaction of value verses multiple micro transactions.
Given the breadth of what constitutes a related party in the UAE, it might be easier than you think to find your organisation in this position.
Repeat the same exercise for your overheads. Line by line. Know your business.
David Daly is a partner at the Gulf Tax Accounting Group in the UAE
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
The specs
Engine: Turbocharged four-cylinder 2.7-litre
Power: 325hp
Torque: 500Nm
Transmission: 10-speed automatic
Price: From Dh189,700
On sale: now
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Ramy%3A%20Season%203%2C%20Episode%201
%3Cp%3E%3Cstrong%3ECreators%3A%20%3C%2Fstrong%3EAri%20Katcher%2C%20Ryan%20Welch%2C%20Ramy%20Youssef%0D%3Cbr%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3ERamy%20Youssef%2C%20Amr%20Waked%2C%20Mohammed%20Amer%0D%3Cbr%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%204%2F5%3C%2Fp%3E%0A
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
The specs
Engine: four-litre V6 and 3.5-litre V6 twin-turbo
Transmission: six-speed and 10-speed
Power: 271 and 409 horsepower
Torque: 385 and 650Nm
Price: from Dh229,900 to Dh355,000
UAE currency: the story behind the money in your pockets
Killing of Qassem Suleimani
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
AS%20WE%20EXIST
%3Cp%3EAuthor%3A%20Kaoutar%20Harchi%C2%A0%3C%2Fp%3E%0A%3Cp%3EPublisher%3A%20Other%20Press%3C%2Fp%3E%0A%3Cp%3EPages%3A%20176%3C%2Fp%3E%0A%3Cp%3EAvailable%3A%20Now%3C%2Fp%3E%0A
Joker: Folie a Deux
Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
Rating: 2/5
The biog
Favourite pet: cats. She has two: Eva and Bito
Favourite city: Cape Town, South Africa
Hobby: Running. "I like to think I’m artsy but I’m not".
Favourite move: Romantic comedies, specifically Return to me. "I cry every time".
Favourite spot in Abu Dhabi: Saadiyat beach
UAE currency: the story behind the money in your pockets
