Tax Flash: Tax planning to assist with cashflows in uncertain times
Tax planning to assist with cashflows in uncertain time
As economic uncertainty redirects towards a reexamination of working capital positions and cashflow management, the Tax function has a significant role to play.
Value added tax (VAT) is still comparatively new in the United Arab Emirates (UAE) and many businesses may still be navigating a learning curve. Now is a timely opportunity to revisit the positions adopted upon VAT implementation prior to 1 January 2018. We can assist you in ensuring that not only have you addressed your risk, but perhaps more importantly optimized any upside potential:
- VAT refund positions can be carried forward to offset future liabilities or claimed in cash. We can support you in pursuing a refund claim payment by reviewing your claims in advance of a review by the federal Tax Authority (FTA), which can sometimes extend into a full audit.
- The VAT Law allows monthly or quarterly filings. If you are a net VAT payer, is there an advantage to moving onto a quarterly schedule? Equally, if you are commonly in refund, monthly filings make more sense. We can assist you in making that decision and navigating your way through the eligibility rules and application procedures. Not only could this impact cashflow, but also compliance cost.
- VAT grouping can also be used to eliminate the need to recognize, report and pay VAT on related party dealings, where the complex eligibility rules are satisfied. It may also lead to lower compliance costs through a single consolidated filing and in some cases, a higher input tax recovery rate for VAT on expenses.
- We can also discuss how you can allocate your time appropriately to balance invoicing, payment and receipt to optimize these relativities from a VAT perspective (in some instances, payment can be received from debtors before VAT is paid to the FTA). These conversations are unique to your situation and need to be considered in the light of commercial imperatives.
- Finally, we can assist you in ensuring that you maximize the benefits open to you under the VAT legislation arising from matters such as bad debts, contract variations, and cancellations/no shows, as well as assess the impact of any liquidated damages or other commercial penalties that may be payable.
International tax, corporate and other taxes
What it does
UAE multinational groups, holding companies and funds with an international tax footprint can consider a number of ways to potentially improve their cash tax position:
- Identify reclaims of withholding tax available under double tax treaties, domestic laws and EU directives. Withholding taxes may be applied to dividends, interest, royalties and intragroup fees, and the rates can be significant, with some countries applying withholding tax at rates in excess of 30%.
- It may be possible to secure withholding tax reliefs “at source” as opposed to by way of reclaim. This means the correct rate is applied at the outset, increasing cash payments received, as opposed to waiting for a reclaim.
- Consider the availability of tax and other incentives and allowances for current and prior periods. As many will be aware, the Dubai government has announced a range of economic stimulus measures that should be explored. A number of new measures are being introduced by governments globally to relieve tax payers and push back filing and payment deadlines.
- We can assist you in reviewing your overall international tax position and transfer pricing policies of the group from an effective tax rate and cash tax perspective to identify tax inefficiencies, cash traps and any unutilized tax attributes or allowances. Cash traps may occur where, due to tax, legal or accounting constraints, an entity cannot pay dividends even though it has the cash to do so.
- We can also assist you in exploring your eligibility for the customs duty rebate and other related measures recently announced by the Dubai government as part of its economic stimulus package.
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